Processa Pharmaceuticals Inc (PCSA) 2022 Q1 法說會逐字稿

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  • Operator

  • Greetings and welcome to Processa Pharmaceuticals' first-quarter 2022 earnings conference call and corporate update. (Operator Instructions) As a reminder, this conference is being recorded.

  • It is now my pleasure to introduce Jim Stanker, Chief Financial Officer. Thank you, sir. You may begin.

  • Jim Stanker - CFO

  • Thank you and welcome to Processa's first-quarter 2022 results and drug development update conference call. Joining me on the call today are our Chief Executive Officer, Dr. David Young; and our Chief Operating Officer, Mike Floyd.

  • Shortly before this call, we filed our first-quarter 2022 Form 10-Q. I want to remind everyone that a PowerPoint presentation will accompany Dr. Young's prepared remarks. To view the PowerPoint slides, please go to the investor relations section of the company's website or to our earnings press release and then click on the webcast link to follow along.

  • I will start our call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Act of 1934.

  • Although we believe expectations and assumptions reflected in those forward-looking statements are reasonable, we can make no assurances that such expectations will prove to be correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to the various risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in our annual report on Form 10-K.

  • Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statement to reflect subsequent knowledge, events or circumstances.

  • At this time, I will touch briefly on our published financial results, then turn it over to Dr. Young to provide an update on our drug development activities, which will be followed by Q&A.

  • We continue to manage our cash efficiently. And as of March 31, 2022, we had a cash balance of $14.3 million. We believe this will allow us to complete our three ongoing clinical trials and fund our operations into the third quarter of 2023. During the three months ended March 31, 2022, we spent cash on our clinical trials and in our operations of $1.8 million. This is significantly less than our GAAP net loss due to the effect of non-cash items like amortization and stock-based compensation.

  • For the three months ended March 31, 2022, we reported a net loss of $3.2 million or $0.20 a share, compared to a net loss of $2.1 million or $0.14 a share for the same period of 2021. The increase in our net loss relates primarily to increased clinical trial costs we incurred in our three ongoing trials. We anticipate clinical trial costs will continue to increase for the rest of the year as these trials continue and we fund development activities in our other drugs that we have in our pipeline as David will discuss.

  • Our net cash used in operating activities during the three months ended March 31, 2022, was $1.8 million compared to $2.2 million for the same period in 2021. While we experienced increased GAAP costs related to our clinical trials and operations, we continued to make use of equity incentives to reduce our cash outflow in compensating our executive team and certain other employees, and were able to utilize some of our prepaid expenses this quarter in our clinical trials.

  • During the three months ended March 31, 2022, we incurred research and development expenses totaling $2 million compared to $1.5 million for the same period in 2021. The increase in our R&D costs are primarily due to costs we incurred related to our active clinical trials during. The three months ended March 31, 2022, our G&A expenses totaled $1.2 million compared to $700,000 for the same period last year. The increase related primarily to increases in non-cash salary costs and other operating and consulting costs. We allocated $829,000 of non-cash compensation costs between our R&D and G&A activities.

  • As of March 31, 2022, we had 15.8 million common shares outstanding. As we had previously announced, in late March, we purchased 100,000 shares of our common stock from one of our licensees. We considered this to be an opportunist purchase.

  • That concludes my remarks. I will turn the call over to our CEO, David Young. David, please go ahead.

  • David Young - President & CEO

  • Thank you, Jim. Good afternoon. Thank you for joining us. Today, I plan to highlight what we've accomplished in the first quarter of 2022 in our drug development programs and share what you should be expecting over the next nine months.

  • I will be briefly summarizing slides 3 to 20. Slides 21 to 40 are pipeline background slides, the content which I have previously presented. As Jim stated, the slides are posted on our website if you want to study them more.

  • Let's go to our first slide, slide 3. Processa is a drug development company focused on improving the quality of life and/or survival of patients who have an unmet medical need condition. These are patients who either have no treatment option or need a better treatment option. Each of our five drugs within our pipeline addresses a different unmet medical need with a potential market size for each drug being $1 billion or more. This means that Processa is giving each of our investors, which includes the Processa staff, five independent opportunities or shots on goal to have a blockbuster drug.

  • It is one thing to state that we have five potential blockbusters, but more importantly, we are simultaneously developing all five drugs at various stages, but all are now going through our development process. This process is a regulatory science approach that we started to develop 30 years ago when we worked on two FDA contracts determining the best way to answer and provide the answer to a number of FDA clinical and scientific regulatory questions. Our contracts led to the development of a number of FDA guidances.

  • We now have multiple near-term milestones that we expect to achieve from March to August and at the end of the year. I will discuss these milestones as I briefly review each drug within our pipeline.

  • Next slide. To remind everyone, slide 4 describes the criteria that we have used to select the five drugs in our pipeline. Since I have already covered some of the slide, I would only like to point out one other key item on the slide, the second criteria in the red box stating efficacy evidence. And this means that there is some clinical evidence of efficacy in the targeted population for each of the five drugs or for a drug with very similar pharmacology.

  • Next slide. Now let's look at a summary of our pipeline. We have four drugs in clinical development. We have Next Generation Capecitabine, which we are rebranding of what we previously called 6422. We have 499, 12852, and 3117. And we have one drug in pre-IND stage.

  • Three of the drugs are for the treatment of cancer. The fourth, 499, is for the treatment of ulcerative necrobiosis lipoidica, a rare orphan disease. And the fifth, 12852, is for the treatment of gastroparesis, an unmet medical need where the present treatment options have serious adverse events associated with it.

  • Next slide. This slide provides you with the highlights of what we have achieved in the first quarter of 2022. We have moved closer to obtaining key data to assist us in our discussions with the FDA, the design of our pivotal trials and our NDA submission. For Next Generation Capecitabine, which we previously defined as 6422 program, we have amended the Phase 1B protocol to better understand the de novo formation of DPD associated with Next Generation Capecitabine, and began enrolling patients in the amended protocol.

  • For 499, we've expanded our outreach to identify potential ulcerative NL patients in order to complete enrollment for our interim and final analysis in a more timely manner.

  • For 12852, we've enrolled five patients for our gastroparesis trial so far.

  • And for 3117, we began developing assays to determine if we could identify potential biomarkers that would predict response to 3117 versus gemcitabine. In addition, we will continue our evaluation of potential development and regulatory paths, which will increase the probability for FDA approval.

  • Next slide. I would like first to give you an update on our Next Generation Capecitabine cancer program. As we have previously stated, the market for Next Generation Capecitabine in colorectal cancer is about $1 billion market. We expect Next Generation Capecitabine to be better than existing capecitabine with less dose-limiting side effects and potentially greater efficacy given the higher potency.

  • Next slide. From our Phase 1B trial to date, we have seen a decrease in the non-cancer-killing metabolites that cause dose-limiting side effects and we have seen an increase in the potency for 24 to 48 hours. However, these effects did not last for all seven days of chemotherapy treatment. The amended protocol determines, one, the 6422 regimens that will inhibit metabolism and increase potency for all seven days of chemotherapy; and two, maximum tolerated dose for Next Generation Capecitabine.

  • Next slide. This slide summarizes what we've accomplished in the first quarter of 2022 and what to expect from Processa over the next nine months for Next Generation Capecitabine. First, what have we achieved in Q1? One, we've amended the Phase 1B protocol. We were defining the 6422 regimens that will inhibit the formation of the non-cancer-killing metabolites that cause dose-limiting side effects and increase the potency of cancer-killing metabolites during all seven days of Next Generation Capecitabine chemotherapy.

  • Two, we've already begun enrolling patients in the amended protocol. And three, we hope to add clinical sites to the study to expedite the enrollment.

  • What do we expect to achieve the rest of the year? Well, in mid-2022, we should have identified the dosage regimen for 6422 and completed our initial evaluation of using an individualized/personalized treatment approach for Next Generation Capecitabine.

  • By the end of the year, we hope to preliminarily identify the maximum tolerated dose of Next Generation Capecitabine and the dosage regimen to be used in our Phase 2B or Phase 3 trial.

  • Next slide. Let me now review 499 for the treatment of ulcerative NL. As you may recall, this is a $1 billion rare-disease market in which natural healing of the opened ulcers during the first one to two years after onset occurs in probably less than 5% of ulcerative NL patients.

  • Next slide. There are no FDA-approved treatments and no standard of care because all off-label treatments have limited efficacy given the dose-limiting safety profile. The off-label use drugs includes the use of pentoxifylline, or as I often call it, PTX. PTX works in closing the ulcers of some patients, but side effects limit the dose that can be administered. 499 is the deuterated analog of a metabolite of PTX. 499 qualitatively has the same metabolites as PTX, but quantitatively has different amounts of the metabolites resulting in a better safety profile.

  • Next slide. This slide summarizes what we've accomplished with 499 in the first quarter of 2022 and what to expect over the next nine months. So again, what have we achieved in Q1? Although COVID has had a major impact on our enrollment, we have expanded our remedial patient identification enrollment efforts in Q1, such that we have one patient in screening now, one patient in pre-screening, and five patients have been identified that require a pre-screening evaluation to determine if they meet the basic requirements prior to moving into the screening procedure. Also, we are evaluating additional sites with the hope of bringing on more sites.

  • What do we expect to achieve over the next seven to eight months of 2022? Well, in mid-2022, we expect to have enrolled 5 to 10 patients in the Phase 2B trial to be used in our interim analysis. At the end of the year, we hope to have the topline data from the interim analysis reading out, and we hope to have completed enrollment for the trial.

  • We do plan to meet with the FDA in 2023, and depending on the results in the FDA meeting, initiate our Phase 3 trial at the end of '23.

  • Next slide. Quickly reviewing 12852 for the treatment of gastroparesis, this is a more selective and potent 5HT4 agonist than other 5HT4 agonist drugs used off-label to treat gastroparesis.

  • Next slide. Other 5HT4 agonist and the only drug approved to treat gastroparesis, metoclopramide, has serious dose-limiting side effects with black box warnings and limited use. Because of the higher potency and greater selectivity for the 5HT4 receptor, 12852 in preclinical and clinical studies requires a much, much lower dose of 12852 and has less side effects than these other drugs.

  • Next slide. So again, what have we achieved and what do we expect to achieve over the next nine months? We've enrolled five out of the total 24 patients planned for this trial so far. We expect to complete the enrollment of the study in the September-October timeframe with topline readout of the change in gastric emptying rates by the end of the year.

  • Next slide. The last drug that I will be reviewing today is the fourth drug for which we have an IND, 3117. This is a drug similar to gemcitabine, a cancer drug, which maximum sales of approximately $1 billion and used for a number of cancers as first- or second-line therapy, but with a treatment failure rate of 55% to 85% across the various cancers that it is used for.

  • Next slide. 3117 presently has an IND for the treatment of pancreatic cancer, and preliminary clinical studies have been completed. Some efficacy has already been demonstrated in different populations of pancreatic cancer patients.

  • Next slide. In Q1, we began developing assays for specific biological molecules that we will be evaluating as potential biomarkers for 3117. Our hypothesis is that some of these molecules will be able to protect a patient's response to 3117 and gemcitabine, thus giving us a way to select patients to be treated with 3117 preferentially over gemcitabine. The preliminary assay for initial evaluation should be completed mid-2022.

  • We expect to have developed our roadmap for the development of 3117 for a number of different cancers and targeted populations such that we can meet with the FDA at the end of this year to discuss the next clinical study for 3117.

  • Next slide. In conclusion, you can see that we have successfully moved Next Generation Capecitabine, 499, and 12852 forward, even with COVID having a serious effect on enrollment for 499. We expect by midyear and at the end of year to have key data on these three trials that will help us design the larger efficacy trials.

  • We also anticipate that all programs will have a roadmap for the various targeted populations along with the potential paths to approval. And lastly, we expect that our interactions and collaboration with the FDA will provide us with more insight into which development path for each drug has the highest probability of demonstrating an FDA-approvable benefit-risk profile.

  • The last slides are the pipeline background slides that have been presented before in some forum. I will not discuss these slides, but they are in the deck to provide more information.

  • This concludes my remarks. I'll now ask the operator to open the phone lines for Q&A. Operator, can you please poll for questions?

  • Operator

  • Certainly. (Operator Instructions) Robin Garner, Craig-Hallum Capital Group.

  • Robin Garner - Analyst

  • Hi there and thank you for taking my question. I wanted to ask about 3117. And given that gemcitabine is treated so broadly across different types of cancers, is there a smaller indication that you could begin an approach to that could start to create a shorter regulatory pathway for approval?

  • David Young - President & CEO

  • Thanks for the question, Robin. This is David. You are correct, it's used in a lot of different cancers. It depends what you mean by shorter. So if you're talking about timeframe, shorter in terms of timeframe, there are the subpopulations, for example, third-line therapy pancreatic cancer, first-line after adjuvant therapy and surgery. But those are smaller groups. And again, there's other cancers, biliary cancer, lung cancer, there's other cancers that this could be used for. But they're also smaller groups or the endpoint takes longer to obtain.

  • So it's kind of a balancing -- yeah, there may be smaller groups, but then it's harder to enroll and then that could take longer. And so it's a balancing act in terms of those smaller groups of patients. But there are -- and that's what we're evaluating. That's the roadmaps we're developing for each different type of cancer. And we'll evaluate the time it takes, the cost and everything, and then develop a plan and go to FDA. They'd be granting 3117 and hopefully work something out so that we can take the program that would be most likely to get approved in the shortest time, not just the shortest time. It is also the most likely to get approved.

  • Robin Garner - Analyst

  • Okay. Fully understand that distinction. Thank you.

  • I wanted to ask also about Next Gen Capecitabine. If we're expecting some interim data by mid this year, can you give us a preview as to what that might entail, and whether or not you believe you're close to that recommended Phase 2 dose?

  • David Young - President & CEO

  • Sure. That's a good question. I can tell you what we will be looking at. And again, I don't know if this helps yet, but I can tell you what we'll be looking at. We'll be looking at to see if the potency across all the dosing days of Next Generation Capecitabine if the potency has increased for Capecitabine. So that's the first thing we'll be looking at.

  • The second thing we'll be looking at -- and this is not in any order, this is two different things -- but second thing we'll be looking at is to look at the metabolism to those non-cancer-killing cell metabolites that are dose-limiting because of their side effects. So we'll be looking at both of those things.

  • What we expect to see is we expect to see a pattern, which will be able to predict what regimen will result in high-potency, low-side-effect metabolites. And that's the pattern we'll go forward with, and that pattern will be dependent on the dosage regimen of 6422.

  • Robin Garner - Analyst

  • Okay. Thank you very much for that. And if I may ask a third question, wanted to see if you could give us an update on 499, and if the efforts that you've made towards increasing enrollment have proven fruitful.

  • David Young - President & CEO

  • Yeah, so we had a lot of problems with 499 in terms of COVID. And the reason we had these problems is because some of these patients have had these ulcers for years and years and years. And they had a choice -- and over 60% of the patients are diabetic.

  • So they had a choice: go out and see their physician on a regular basis for the study and be exposed to COVID, which they've been living with this also for years and they've been fine; or stay home, wait until COVID got -- less COVID issues and then go out. I think what's happened is that a lot of the patients waited, and that's one thing.

  • The second thing is we expanded some of our efforts, as I said, like we've talked. The remedial -- we've done some remedial things like contact more patients, contact other physicians, contact groups, et cetera. And I think all of that helps. And we're only starting to see -- we started that actually in the fourth quarter -- only starting to see now the patients starting to come in, patients starting to contact us saying, oh, I think have an ulcer.

  • And of course, now we're going through a pre-screen to make sure it is an ulcer versus an erosion, and I think that's really helped. We have a better process in place to identify potential patients and then get them through the pre-screen, screening, and then into the study.

  • Robin Garner - Analyst

  • Okay. Thank you very much and congrats on the quarter.

  • David Young - President & CEO

  • Thank you.

  • Operator

  • Thank you. (Operator Instructions)

  • Naz Rahman, Maxim Group.

  • Naz Rahman - Analyst

  • Hi. Thanks for taking my question. Just a couple. On 499, you just mentioned screening. Could you comment on what percent of patients actually passed versus failed the screening process? Let's start there.

  • David Young - President & CEO

  • Yeah, I don't know the number off the top of my head, but it's a small percentage that passed -- initially. And the reason is initially, we did not have a pre-screen. So patients would call in and say, okay, I have NL. I've been told I have NL and I want to be in the study.

  • And then they would come in and we'd say, oh, you don't have an ulcer. You only have an erosion or an abrasion. It's not really an ulcer, and so you can't be in the study.

  • And so that's why it's hard to give you a number because we had some of those patients. Early on, we have those kind of patients. That's why at the end of the third quarter, we put in this pre-screening procedure where we could actually take a picture of their ulcer -- of what they think is an ulcer, and then see it and say, oh, yes, that does look like an ulcer. Come in to be now be screened.

  • And with that in place, we've been able to weed out those patients who really don't have ulcers. So it's kind of hard for me to say what the percentage is because we change the process in the middle to take better patients into the actual screening process.

  • Naz Rahman - Analyst

  • All right. So does this -- did you find that more digital or the initial digital screening process improves the screening rate?

  • David Young - President & CEO

  • We have found that the initial pictures improve the screening rate -- improves the number of patients being screened. Yeah, it does.

  • Naz Rahman - Analyst

  • Okay. So I guess, well, this question now applies to both 499 and 12852 and you touched on a little bit. But I guess at this point, what gives you confidence that you'll definitely have the necessary amount of patients enrolled to have data by yearend? Would you expect any additional delays or do you think you're at the point that you will definitely have data by yearend?

  • David Young - President & CEO

  • For (multiple speakers)

  • Naz Rahman - Analyst

  • I guess both 499 and 12852.

  • David Young - President & CEO

  • I'm sorry. For 499 and what?

  • Naz Rahman - Analyst

  • And 12852, for both trials.

  • David Young - President & CEO

  • And 12852? Is that what you said?

  • Naz Rahman - Analyst

  • 12852, yeah.

  • David Young - President & CEO

  • Yeah, okay.

  • Naz Rahman - Analyst

  • For both trials, yeah.

  • David Young - President & CEO

  • Yeah. So 12852, we've had -- I mean, we had five patients already. We've had a lot of patients come in, and a lot of those patients -- everyone has gastroparesis. It's just some failed because of other reasons. Because they had other co-morbidities, they couldn't be in the study, but we've had a lot of patients come in there.

  • And that's the one we're really confident is going to be enrolled. We expect that to be completing enrollment sometime in September and October, right? And they're only treated for 28 days. So therefore, we expect to get some results within the 28 days, and that will be at the end of the year. We're very confident about that one.

  • In terms of 499, I think it still depends on the issue of what happens with COVID for us. And if COVID comes back up, I think both studies will be hurt, there's no question about it.

  • How much? Again, I think 499 will be hurt more. 12852 will be hurt less because there's so many gastroparesis patients. I mean, there's hundreds and hundreds of thousands of those patients around in the US. So that's why it's a little easier to enroll. But I think if COVID comes back a little heavy, then we're going to be delayed a little bit.

  • Naz Rahman - Analyst

  • Got it. And on 3117, after you complete the biomarker assay development, when would you expect or when do you plan to have a meeting with the FDA? Do you have anything scheduled already regarding the assays?

  • David Young - President & CEO

  • So we're planning to meet with the FDA end of year, sometime in December. We're preparing our CAT, our roadmaps right now. We're preparing what the designs of the studies are -- will be right now with the different options depending on which route we take. And so that expectation is in the end of the year for the actual meeting.

  • In terms of the assays -- let me reword how we're looking at this. We are measuring macromolecules, which we will test to see if they are biomarkers. So we don't know if they're -- we call them biomarkers because they're potentially biomarkers. But they're just macromolecules that we'll be measuring and then seeing if they can be used as biomarkers.

  • I've got to be careful because some people when I say biomarkers, they think it's already been identified as a biomarker, and that's not true. These are macromolecules, which we will see if they can be used as biomarkers.

  • Naz Rahman - Analyst

  • Got it. Thanks for taking my questions.

  • David Young - President & CEO

  • Thanks, Naz.

  • Operator

  • Thank you.

  • Frank Brisebois, Oppenheimer.

  • Unidentified Analyst

  • Hi, this is Dan on for Frank. Thanks for taking the question. Just a quick one for me on 499. Given that you are seeing a lower prevalence than originally estimated, are you considering the possibility of potentially completing the trial with a lower number of patients? Are you planning any FDA interactions in the future to reduce the end number in the trial?

  • David Young - President & CEO

  • You're reading our mind. (laughter) Yes, we are. We've been, involved with rare drugs, super rare drugs, also are ultra-rare drugs before. And given the issues with enrolling those type of patients are very, very difficult, we've talked to the FDA about this problem. They understand the problem. We still have to prove safety and an efficacy statistically, but they -- previously, with other drugs for us and other people, they've given us a little bit more flexibility in doing that.

  • So it is possible that we may have to decrease the sample size. And hopefully, if, in fact, what KOLs say is that the placebo group is going to have a very low response, hopefully it is a low response. And if it's a low response, then -- closer-to-zero response it is, the smaller sample size. So that would be nice.

  • We just don't know yet. We won't know that until the interim and the final analysis, but -- because it's blinded. But I think there's a good chance right now that the placebo group could be close to zero. So that's what we are hoping that it does occur.

  • Unidentified Analyst

  • Thank you. That's very helpful. That's it for me.

  • David Young - President & CEO

  • Thanks, Dan.

  • Operator

  • Thank you. (Operator Instructions)

  • Thank you. That concludes our Q&A session. I will now hand the conference back to Dr. David Young for closing remarks. Please go ahead.

  • David Young - President & CEO

  • Thank you, operator. I just wanted to thank everybody for attending this earnings call. Hopefully, you can understand that -- where we're coming from in this and that we think there will be some very key milestones coming out and being reported in the next few months, as well as through the end of the year. We really see some multiple near-term milestones that will have a major, major impact on these programs both now, but also guide us better into what we should be doing for the Phase 3 programs.

  • Again, thank you very much for joining us and wish you the best. Thank you.

  • Operator

  • Thank you, ladies and gentlemen. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.