Processa Pharmaceuticals Inc (PCSA) 2020 Q3 法說會逐字稿

Good day, everyone, and welcome to the Processa Pharmaceuticals business update. (Operator Instructions)

It is now my pleasure to turn today's program over to Jim Stanker. Please go ahead, sir.

Thank you, operator. With me on our first earnings call are Dr. David Young, our Chief Executive Officer; Mike Floyd, our Chief Operating Officer; Dr. Sian Bigora, our Chief Development Officer; Wendy Guy, our Chief Administrative Officer; and Patrick Lin, our Chief Business and Strategy Officer.

Before we begin, I'd like to remind everyone that a PowerPoint presentation will accompany Dr. Young's prepared remarks. To review the PowerPoint slides, please go to the earnings press release and click on the webcast link to follow along.

Now I'd like to begin the 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 statements 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 expectations will prove to be correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties.

For a discussion of such risks and uncertainties which would 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, those contained in subsequently filed quarterly reports on Form 10-Q as well as in other reports we file from time to time with the Securities and Exchange Commission.

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 briefly touch on our published financial results then turn it over to Dr. Young for an operational update, which will be followed by a Q&A.

We reported a net loss of $3.1 million or $0.55 per share for the third quarter of 2020 compared to a net loss of $863,000 or $0.16 per share for the same period of 2019. Our net loss for the 9 months ended September 30, 2020, was $4.7 million compared to a net loss of $2.6 million for the same period of 2019. The increase in our net loss was due primarily to a $2 million charge we recorded for purchased in-process research and development related to the license agreement for PCS12852 we entered into with the Yuhan Corporation.

During the third quarter of 2020, we incurred research and development expenses totaling $533,000 compared to $585,000 for the same period in 2019. And for the 9 months ended September 30, 2020, we incurred research and development expenses of $1.5 million compared to $1.8 million for the same period in 2019. R&D costs incurred in both the 3- and 9-month periods were for the continued development and testing of PCS499. The decrease was primarily due to lower employee costs and development activities as our Phase IIa trial for PCS499 is being finalized.

During the third quarter of 2020, our general and administrative expenses were $423,000 compared to $419,000 for the third quarter of 2019. And on a year-to-date basis, we incurred $1.282 million of general and administrative expenses during the first 9 months of 2020 compared to $1.22 million for the same period in 2019.

As of September 30, 2020, we had cash of $325,000. But as you know, on October 6, 2020, we closed a $19.2 million gross proceeds public offering of common stock from which we received net proceeds of $17 million after deducting underwriter discounts and commissions and other offering-related costs.

Simultaneous with closing the offering, we also uplisted our common stock from the OTCQB to the NASDAQ capital market. Following the close of the offering and related transactions, we had just a little over 13 million common shares outstanding.

That concludes my remarks. I will now turn it over to our CEO, David Young. David, please go ahead.

Good evening. Thank you for joining us today. Over the last 10 months, we've transformed Processa from a one-drug clinical-stage company to a company that has 5 drugs in its pipeline. 3 of the drugs are clinical-stage drugs, which I will discuss today; and 2 are in the IND-enabling chemistry and toxicology stage.

In the month of August alone, we in-licensed 2 of the 3 drugs which make up our clinical pipeline. The drugs are named 6422, targeting cancer patients; and 12852, targeting patients with gastroparesis. Both groups of patients seek better treatment options.

Each of these indications have a $1 billion or greater total addressable market, which complements 499, our drug to treat ulcerative necrobiosis lipoidica or ulcerative NL for short. Ulcerative NL also has a $1 billion addressable market. That means over the last 10 months, we have 3 shots on goal, each with a $1 billion market, we more than tripled our potential total addressable market, and we uplisted to NASDAQ as well as raised $19.2 million.

So what are we planning next? In order to understand how we expect -- what we expect to do, let me briefly review our approach, which is [different from] other biotech companies, and then describe quickly our clinical pipeline.

As you can see from this slide, it briefly summarizes Processa's business model. First, Processa applies a regulatory science approach that Sian Bigora, our Chief Development Officer, and I have developed over the last 30 years. The approach is something we develop based on our experience in teaching FDA reviewers, working on 2 FDA contracts in which we conducted studies to support FDA regulatory decisions and guidances and our involvement with over 30 FDA approvals and over 100 FDA meetings.

Second, we are a capital-efficient company. Third, we have a development team, management team and a Board of Directors who have a history of obtaining FDA approvals and creating value. Fourth, we have defined a specific criteria for drugs to be part of our pipeline. And finally, given all of this, after our uplist and capital raise, we're ready to move forward on our 3 clinical-stage drugs, with 3 clinical trials in 3 separate markets with key milestones expected over the next 12 to 18 months.

So what is our drug pipeline criteria given we're a drug development company and not a drug discovery company? First off, the drug must treat patients who have a high unmet medical need condition. Second, in order to improve the probability of success and derisk the development process, there must be evidence of efficacy for the drug or a drug with similar pharmacology in our target population of patients. Third, our evaluation of the drug must indicate that our regulatory science approach would be useful in increasing the probability of success and the return on investment. Fourth, we must be able to see a capital-efficient approach to developing the drug to approval. And finally, we only want drugs with potentially a high return on investment, which is related to the cash, spend, time to approval, probability of success, potential market and the potential competition.

This next slide discusses what happens typically with biotech companies. One reason for our strict pipeline criteria is that we don't do the whole gamut of stage 1, 2 and 3. Our approach is focused in on stage 2 and 3. More importantly, we're able to anticipate what FDA requires to approve a drug in a specific indication, and we know the best way to approach FDA's reviewers in our discussions. It is important to note that as we move a drug through the clinical development program in stage 2, each study should provide information to help in the design of future studies so that we are increasing the probability of FDA approval and, therefore, increasing the value of each drug as well as Processa itself.

This slide briefly lists our pipeline criteria on the left. On the right are our 5 pipeline drugs. Prior companies have spent hundreds of millions of dollars on completing studies for these different drugs. Processa will be using these studies when possible to more efficiently develop each drug. The top 3 drugs in orange, blue and green are the 3 drugs in our clinical pipeline. I'll be identifying them just by their numbers. We expect our planned clinical studies for these 3 drugs to further clinically validate their efficacy and safety.

The first clinical-stage drug that I'll briefly discuss is 6422, which inhibits an enzyme called the dihydropyrimidine dehydrogenase, or DPD. In order to understand how 6422 works, let me describe how Xeloda and 5-FU work. These 2 drugs have been the cornerstones of cancer chemotherapy for more than 20 years. Xeloda is administered orally and forms 5-FU. Neither Xeloda nor 5-FU themselves kill the cancer cells. What happens is that approximately 20% of the 5-FU is metabolized to metabolites that kill cells such as cancer cells. These metabolites are represented by the green box and the arrow on the left.

If you look at the right, the red symbolizes the metabolites that are formed when the other 80% of 5-FU is metabolized by the enzyme DPD. These metabolites can cause side effects, such as hand-foot syndrome or HFS. These side effects can be significant enough that patients have to stop taking the cancer drug or reduce the dose, not ideal for cancer chemotherapy.

What 6422 does is it irreversibly inhibits DPD enzyme such that the metabolism to the right is blocked, so none of those metabolites are formed as long as the DPD is 100% inhibited. This eliminates the side effects associated with the metabolite. And instead, the 5-FU metabolite is pushed to the left, forming mainly the antitumor metabolite and increasing the tumor and cell-killing effect of Xeloda and 5-FU. Only after new DPD enzymes are synthesized de novo in the body do we see DPD activity come back and the metabolites to the right are again then -- are then again formed.

So what is our target population for the combination of 6422 and Xeloda? In the U.S., hundreds of thousands of patients receive Xeloda load and 5-FU as first-line cancer chemotherapy in such cancers as colorectal cancer, breast cancer. In addition, 50% to 70% of the patients receiving Xeloda and 5-FU develop the side effects such as HFS. To give you a sense of the potential market for 6422, Xeloda peak sales in 2013 was approximately $1.6 billion.

Wouldn't it be great if we had a drug that could increase the percent of patients who have progression-free survival and increases survival time, as shown in the blue oblong circle on the right? Or maybe even we -- or maybe we have a drug which decreases the side effects and severity of side effects. Well, we believe that 6422 combined with Xeloda can achieve both.

Having personally worked on 5-FU and Xeloda in the past, adding 6422 combined with Xeloda to our pipeline and expanding our development in oncology was an easy decision given the significant impact that 6422 may have on improving the efficacy and safety of Xeloda.

There are additional reasons why we're so excited about 6422 that I should also emphasize. First, 6422 has had 1,500 human exposures in cancer patients. But I believe that we finally figured out how to optimize the dosage regimen in 6422 and Xeloda. We've been able to determine that we can optimize the dosage regimen and increase efficacy and decrease side effects. Second, it's not just Xeloda. There are other major chemotherapy drugs that had the same issue with DPD -- with the DPD enzyme. Therefore, 6422 is a platform that could be used with other anticancer drugs.

The next 2 slides briefly describe how 6422 could decrease the side effects and improve the efficacy. This slide shows how giving 6422 decreases the HFS type of side effects that we saw on the right side of our Xeloda metabolism diagram. You can see where the red circle encompasses the HFS side effects from Xeloda and 5-FU. And the Blue Circle is the HFS side effects when 6422 is given with 5-FU. The side effects are almost nonexistent when 6422 is given with 5-FU, different than they give Xeloda or 5-FU by itself.

In this slide, looking at the line going straight down, patients were resistant to Xeloda, and their cancer progressed during the first 70 days on drug. When these patients were switched to 6422 and 5FU, the patients began to have progression-free survival as seen in the plot that looks like a staircase, with a median progression-free survival of 140 days and some patients up to 100 -- up to 300 days.

So what is the next step? And what are the upcoming milestones? We have already received IND clearance from the FDA to do a Phase Ib oncology trial. The trial will look at the dosage regimen of Xeloda on a high safe dose 6422 to determine the maximum tolerated dose of Xeloda that can be administered. It will evaluate the side effects and the efficacy. We expect to initiate sites and begin dosing our first patient in the first or second quarter of 2021. We plan to announce interim results in the third or fourth quarter of '21, and we expect to end the Phase Ib trial in the second half of '22.

Let's now look the next drug, 499. As you'll see on this slide, 499 is an analog of an active metabolite of an approved drug called pentoxifylline. Qualitatively, it forms the same metabolites as pentoxifylline in the human body; but quantitatively, there are different amounts of the metabolites.

Since 499 and its metabolites have a variety of pharmacological properties, as seen in the blue light boxes -- in the light blue boxes on the right, the differing amounts of these metabolites results in the body responding to 499 and its metabolites slightly different than pentoxifylline and its metabolites. In fact, 499 has less side effects than pentoxifylline, allowing us to give 50% more drug to patients than pentoxifylline. Given pentoxifylline is being used in an orphan indication called NL, we looked at the diverse pharmacology of 499 and found that higher doses of 499 might be able to be given in these patients. And the diverse pharmacology could be an advantage to these NL patients.

This slide actually represents at the bottom boxes what the pharmacological properties are of 499 and its metabolites. If you look at the top boxes, the 7 boxes at the top represent the pathophysiological changes that occur in NL. If you look at the red arrows, the red arrows tell you where the pharmacological properties of 499 actually affect the pathophysiological changes. And what you can see is that the 6 pharmacological targets of 499 affect 6 out of the 7 pathophysiological changes that occur in NL. Right now, physicians typically treat 1 of the pathophysiological changes of NL at a time, while 499 would treat 6 all at one time.

So what is NL? In NL patients, the skin and tissue below the skin becomes necrotic with open ulcers forming in approximately 30% of the patients. There is no FDA-approved treatment or cure for any form of NL. So just like 6422, this is a $1 billion potential market. There are approximately 22,000 to 55,000 patients in the U.S. with the ulcerated form of NL. If you look at the left picture on the right side of the slide, you see the black necrotic tissue on the shin. It actually is not just necrotic on the surface, but it also can be necrotic in all the tissue below the surface.

Unfortunately, we estimate that the natural closing of these ulcers during the first 1 to 2 years after onset incurs in much less than 10% of the patients, and patients can have the ulcers for years and years and years. There is some evidence that patients who can tolerate the highest doses of pentoxifylline may respond with complete closure. The reason more patients do not take pentoxifylline is that patients often cannot tolerate the highest dose, and some patients actually need a higher dose than the maximum pentoxifylline dose allowed.

In our first NL patient study, a dose of 499 which was 50% greater than the highest dose of pentoxifylline was well tolerated in all our patients. And in the 2 patients who had ulcers, the ulcers completely closed while they were on 499.

Now what are we doing going forward? Well, we talked with the FDA, we negotiated with them, and the FDA has agreed that if we have a single positive Phase III trial, given this disease and given there is no other treatments, then we could potentially get approval. Given that, we've designed a Phase IIb trial to give us data to help us design a single Phase III trial and increase the probability of getting approval. The key value-adding upcoming milestones are dosing the first patient starting in the first half of '21; interim results in the second half of 2021, probably just after we report out the interim results of 6422; and completion of the study in 2022. Like 6422, if our next 499 study is positive, it will significantly increase the probability of obtaining FDA approval, which would translate into an increase in value of Processa.

Moving to the third and final drug in our clinical pipeline, let's look at 12852. 12852 is a novel, potent and highly selective 5-HT4 receptor agonist. As shown in the top table, 12852 is more selective and potent than other 5-HT4 drugs, which have been shown to be successfully treat -- be able to treat GI motility disorders, such as gastroparesis and various constipation conditions. In addition, 12852, as seen in the bottom table, has less cardiovascular side effects compared to other 5-HT4 drugs, which are less selective than -- to 5-HT4 and have either been removed from the market or not approved.

So what's our target population? Our first population that we will be targeting for 12852 is the unmet medical need condition and $1 billion market of gastroparesis. Gastroparesis is a condition where the stomach has significant problems moving food down the GI tract such that there is an abnormally long delay in gastric emptying after eating. The result is patients have symptoms such as nausea, vomiting, bloating and many other symptoms that can significantly affect the patient's quality of life.

There are 2 major types of drugs which have been shown to significantly help patients with gastroparesis. They are 5-HT4 agonists, like 1,852 or cisapride; and the only FDA-approved treatment for gastroparesis, which are dopamine 2 receptor antagonists, which is metoclopramide.

As you can see from the table at the bottom, the less-specific 5-HT4 drugs, such as cisapride, and the metoclopramide types of drugs are efficacious. But the side effects associated with them could be significant, so significant that, for example, cisapride was pulled off the market given the cardiovascular side effects associated with the drug binding to receptors other than 5-HT4.

So what's the evidence that 12852 will work in gastroparesis? Our first piece of evidence was a monkey study where 12852 had a faster gastric emptying rate compared to placebo or vehicle. The red circle describes that, where the top represents the -- what happened when they had placebo or vehicle, and the bottom line represents what happens with 12852. As you can see, the emptying rate was much faster for the bottom.

This is a little different slide. This is a slide in constipation patients. The gastric emptying rate was faster for 12852, which are the green circles at the top; and the black circles on the bottom represent no drug being given, so baseline. As you can see, the top are actually higher. So actually -- this actually represents the actual rate. So the rate was faster than just the baseline of no drug.

So what do we do? What are we going to do moving forward? We intend to meet with the FDA in early '21 to further define the clinical development program, and we expect to initiate a Phase II trial in gastroparesis in the second half of '21, with an interim analysis expected sometime in the first half of '22. The Phase IIa trial completion is expected to be in the second half of '22.

In summary, I've put together the time line and deliverables over the next 12 to 18 months and through 2022 for all of the drugs in our clinical pipeline. During this time, we expect to increase the probability to obtain FDA approval with positive interim results in 2021 and final results in 2022, which potentially and hopefully will increase the value of Processa.

So before we open up for Q&A, I would like to also mention that we are fortunate to have brought together an experienced development team, which has successfully obtained FDA approvals with almost every division in the FDA, and the management team and Board of Directors that have created significant value for shareholders in previous companies. Most recently, we were fortunate to add Michael Floyd as the company's Chief Operation Officer; and add Khalid Islam to our Board of Directors. Both of these individuals have been critical to the success of their former companies, and we expect no less with us.

In closing, given the key milestones we will be achieving over the next 12 to 18 months, including 3 trials starting the first half of '21 as well as interim results for 6422, 499 and 12852, we are excited about the near-term opportunity of increasing shareholder value.

That concludes my remarks. I will now ask the operator to open the phone lines for Q&A. Operator, can you please poll for questions? Thank you.

(Operator Instructions) And we'll take our first question from Robin Garner.

Congratulations on an outstanding quarter with so many milestones in Q3. The first question, I wanted to ask about 12852 and if you could elaborate on any aspects of the trial design or any FDA guidance that might be provided or have been provided for this new indication.

This is David Young. Thanks, Robin. Yes, I can tell you a little bit about it. So as you know, as we said, we are going to be moving into gastroparesis. Fortunately, we know something about gastroparesis given our former lives and working in the indication a little bit. There's also FDA guidance on gastroparesis, which gives us a lot of guidance in terms of how we should move forward, which is also very helpful.

In terms of the design, again, we're following very -- something very similar to the guidance and what other people have done. Typically, in the Phase IIa types of studies, there are about 20 to 60 patients, and so we'll be -- probably be in some -- in that range, too.

Unfortunately, we have not met with the FDA yet. And we are preparing now to meet with the FDA. We'll be meeting with them, hopefully in the first half of the year, hopefully in the first quarter, but we'll see, and then move on from there in order to dose patients.

Great. You also provided a little bit of information about the addressable market for PCS6422. Can you elaborate more on the assumptions that go into that $1 billion estimate?

Sure. Well, right now, there are approximately 145,000 new colorectal cancer patients per year in the U.S., and there are approximately 50,000 deaths per year in the U.S. from colorectal cancer, all right? The prevalence of colorectal cancer in the U.S., however, is about 1.35 million.

So our assumption was, if you take -- if look at the patients who really receive Xeloda, they're usually stage 3 or stage 4. And that represents a little over 25% -- or approximately 25% of the patients. And so if you look at 25% of the 1.35 million patients, that adds up to about 340,000, 350,000 patients. And then if you look next at terms of which patients are Xeloda resistant, and Xeloda-resistant patients are -- typically, around 25% of the patients are Xeloda resistant. So if you then take 25% of the 3,000 -- 340,000, that ends up to be about 85,000 patients. So we believe we'll probably be treating around 85,000 patients -- of Xeloda patients who are resistant.

In addition, if you look at a different way, if you look at the patients who have the side effects, the HFS side effects, which often prevents them from continuing dosing or they have to lower their dose, that's about 65% of the patients. So that's about 219,000 patients who were on Xeloda and 5-FU and have the HFS side effects that required them to drop the dose or stop dosing. And that's another population of patients.

So we think there's going to be somewhere between 84,000 to 200,000 patients that we'll be treating. We can't talk really about the price yet because we're not there. But if you look at the typical prices that are existing for cancer drugs, then you're typically talking about anywhere from $15,000 to $50,000. And so if you take a $20,000 number, that will kind of give you the ballpark.

Great. I'm glad I asked that question. I wanted to move on to PCS499 for a moment. The study is coming up quickly, so I'd like to ask about the number of sites that you have recruited thus far, how many you expect to have in total and what your thoughts are on the time to complete enrollment.

Okay. So I'll talk briefly about the time that we see going on. Then I'm going to pass it to Sian Bigora, our Chief Development Officer. But time-wise, we're expecting to enroll the patients in the first half of 2021, interim analysis at the end of 2021 and then completion of the study sometime in the early part of 2020 -- in the second half of 2022 and that will be -- again, it probably be in the early time frame of that year of 2022. So we'll have a report sometime at the end. But in terms of the actual sites and where we are right at that site, Sian, could you address this question, please?

Yes. David, this is Sian. We have identified 11 sites of the PCS 499 study. Those sites are all in the process of being activated with an expectation that they will be up in Q1 of next year. And the -- we believe it will take 12 months to enroll the patients into the study.

Let me add something to this because everybody is right now going through the COVID pandemic. And I think it's important for everybody to realize that our attempt and belief is that we can do this in the present situation. If the pandemic becomes worse and it becomes a bigger issue in the United States, then we're not sure what's going to happen. We're not sure how -- anything is going to happen for all of us. But let me just put that little disclaimer there, just in case, given what's going on with the pandemic and the increase in the COVID cases right now.

David and Sian, just my final question, and thanks for answering all of them. Do you have any additional guidance for forward-looking spend?

I'm going to pass that to our CFO, Jim?

Sure. So thanks, Robin. So we anticipate the proceeds from the offering are going to be sufficient for us to finish the 3 trials and to fund our operations through the fourth quarter of 2022. We think that our funding gets us through kind of the high-value milestones in the 3 pipeline programs we have. And that success in any one of those could create significant value for us. We're in the process of planning the trials for these drugs to start in 2021. And we're currently finalizing, as Sian and David already talked about, the logistics and the financial aspects. But we anticipate that we're going to spend about $6 million on clinical trials in 2021 and a little over $3 million in 2022. But these are estimates, so they will change as we finalize the matters related to it.

We'll take our next question from [Eden Usanov].

Congratulations on this remarkable quarter. I'll start from 499 asset. So could you help us just understand how the deuteration of pentoxifylline may help PCS499 to improve the clinical efficacy?

Sure. So what happens is that the deuteration on 499 changes how it's metabolized because it's a heavy hydrogen. And so it's a little different than pentoxifylline. And that change in the metabolism, actually a quantitative change, not a qualitative change. So what we're seeing is that we're actually able to get 50% more drug of 499, the pentoxifylline. Given we can give more drug, it's tolerated better. One of our concerns well, okay, if it's tolerated better, does that mean the efficacy is lower? The efficacious metabolites and molecules decrease. Well, in fact, we don't find that.

In fact, we are finding that in the 2 patients that we did in our study -- Phase IIa study who had also ulcers -- who had 2 -- Phase II ulcers, their ulcer is completely closed. So every patient was -- to tolerate the drug, about 50% higher dose, and we had all the ulcers close in the -- than the only 2 patients that had the ulcers. So we believe that's a sign that this balance of the metabolites is going into a direction that's making it safer, but keeping the efficacy and then we're increasing the dose. So actually, the metabolites are even higher [than we're] increasing the dose. So it's kind of changing the balance of side effect metabolite to more efficacious metabolites.

I appreciate this detailed answer. Pentoxifylline is, I think off-label, used for ulcerative necrobiosis lipoidica. And in your opinion, how many patients in the U.S. are actually using pentoxifylline right now in the U.S.?

Yes, it is off-label. We actually don't know that. We have talked to our KOLs, and they will tell us of specific cases that they've had, where they have given the drug to men or women who had NL, and they saw the ulcer completely clear. And then they tell us cases that they gave -- pentoxifylline to NL patients and they can tolerate it. And then they'll tell us patient cases, well, they could tolerate, but they didn't clear. So we wanted to increase the dose, but we can't decrease the dose because of the side effects. So we have those 3 different situations. We don't really know how many patients are receiving and how many patients are actually responding. We just know this from our KOLs that we have these 3 classes.

And one interesting thing is if you look at the necrobiosis NL reviews, pentoxifylline is one of the first drugs that they'll talk about as a potential use. But physicians who use it like it, and they tell us, we'd like the super pentoxifylline. And that's what we've seen 499 is. Because of the shift in metabolism, we think it's a super pentoxifylline, which we can give more, decrease side effects and increase efficacy?

And do you have any pricing assumptions around 499? Obviously, very cheap generic off-label, but what would be your pricing assumptions regarding 499 for NL indication?

Yes. We've done a little bit of initial analysis of that. And it's really hard to say right now because it really depends on how fast or expeditiously the ulcer goes away? Does it stay away? All this appears to occur in our patients who have taken it so far. It goes away quickly and it stays away, but we don't know how that's going to happen to everybody. But in our initial analysis, we think the price is going to be somewhere between $30,000 and $50,000 per patient per year.

Okay. So it's kind of a little bit discount to cancer, cancer drug?

Yes.

All right. Let's move to 6422. So it was previously started in a number of, I think, Phase II, Phase III studies. So why do you think the Phase III studies previously failed?

Okay. So this is where we have the benefit of people looking at this with cancer experience as well as myself, having worked with 5-FU and Xeloda before, in former life. So in looking at all this, what we are -- what we actually were able to see is that the timing of the dose of giving 6422 versus the oral 5-FU as well as the amount of 6422, given 5-FU, doesn't seem to be correct. So everybody was actually choosing a suboptimal regimen for 6422 versus 5-FU when they combine them together.

There were studies done by actually the former companies where there was hints of something else occurring. That if they would have chosen a different type of dose or chose a different interval or chose a regimen, which had an interval between giving 6422 and 5-FU, or 6422 and Xeloda, they would get better results. And that's what we think is the key. And it makes sense given the research I did in the late '70s and '80s on 5-FU metabolism. Maybe 100% makes sense. So we're able, where in a sense, I won't say optimizing. We're modifying the dosing regimen and the relative timing between 6422 and Xeloda.

I appreciate that. All right and another question I have on 12852. So generally, GI trials are pretty long trials. And I was just wondering what is the long-term strategy of developing this asset? And how long do you think it will take until approval? I know maybe it's a little bit preliminary to even think about it, but just for our modeling purposes.

Yes. In terms of the -- you're 100% correct. We've been in the GI area before. We've worked on GI drugs before. And the studies are large, they're very large studies. You can enroll them fast, but they're so large, it takes some time. So it will take some time to enroll the bigger studies.

But the study we're doing now, it's not a big study. It's not a long study. So we'll get some information quickly. And again, within -- in sometime in 2022, early 2022, we'll get the preliminary results or interim results. And in the end of 2022, we'll get the final results. So that study in itself can be done quickly. But the final Phase III study that has to be done, you're correct. That takes a longer time. It takes a little bit more work. The issue there really is discussions with the FDA.

If you look at gastroparesis, they're -- all the drugs that are used for gastroparesis now have these serious side effects, where from tardive dyskinesia, neurological effects, all these types of effects. So a lot depends on what we communicate to FDA and talk to FDA and convince them of the most efficient way to develop it. So right now, it's kind of hard for me to say how much time, how long it's going to take when we're going to have an approval or submission. It's very difficult at this time.

But all I can say is, we're used to doing this. We're a team that -- our DNA is to adapt and to work with FDA. And so that's what we've done for the last 30 years, and that's what we'll do here, too. We will adapt as necessary in order to move going forward.

And that actually brings me to my last question regarding your business development plans. Do you plan -- I know you licensed all of that, but do you plan to out-license those assets to a large biopharma at some point of development? And if you do, where do you think will be the right time for that?

Good question. We are looking at all the options, and we're considering all the options. One of the things that we are looking at first, before we license it probably to a big pharma in the U.S., is that we will probably be looking to out-license it ex U.S. first. That will probably be our first step. Right now, one of the things that we have -- we are evaluating continually is how much value we're adding, and what does that value translate to somebody who wants to license it? But also, are they going to be able to license it and get it all the way to approval? Because we know if it's positive, we can get it to approval quickly. We know we can be efficient doing it.

And so there's a balance there. There's a balance of figuring out, is it better in our hands? Is it better than somebody else's hands? And so it's kind of hard for us to say what exactly is going to happen. But I can tell you, we are going to be considering licensing ex U.S. And as soon as we get some more data from these studies at the 3 studies we're talking about, we'll consider them even more. So it will take a little time, but we hope to be potentially out-licensing at least ex U.S. at some point in time.

We'll take our next question from Cosme Ordoñez.

I have a follow-up question on 6422. With regard to the effects that David was explaining, it's known from the literature that eniluracil, given about 24 hours before you actually administer 5-FU leucovorin, can't definitely enhance the effects, and we all have read that publication. But there is a mention as well of the ratio of eniluracil to 5-FU, which is important to control. And of course, with the inhibition of PPD, you get less of that ball and some of the toxic metabolites, which will improve safety (inaudible) a little bit of color how the design the upcoming clinical trials will nail this perfect sequence of treatment, chronological sequence and the eniluracil 5-FU ratio to try to improve the safety and efficacy profile of Xeloda.

Also, if the trial is going to have an open-label design, you might be able to pay safety data right away. So we understand that there is an interim analysis later on next year, but would the company know if there is an improvement on the safety profile of the treatment as the clinical data becomes available? And finally, given all of the new developments in cancer therapies. Is there any internal analysis by the team of what the future will be for eniluracil 5-FU combination in the treatment of cancer, given the event of all the new advances?

Okay. Let's see if I -- I'll try to get some -- I mean, I can tell that you understand that you know about the 6422. And yes, there's data supporting the new regimen, 100%. There's data supporting a new dose and new timing, 100% correct, I 100% agree with you on that. The study that we'll be doing that the FDA has given us clearance on is a typical dose escalation type of study where you tried to determine the highest dose you can give to patients in order to reach the dose-limiting toxicities and then you drop off a little bit, a 3 plus 3 kind of cohort study.

So that's what they're allowing us to do right now. So we will do that, and we'll be actually monitoring all the safety and efficacy, et cetera, in multiple cycles. So it is the typical approach that we would take if it was, for example, a brand-new cancer drug, right? But it's not a brand-new cancer drug.

Regarding the timing of the drug and being able to figure out the safety and tolerability relative to dose and relative to timing, we're really just changing the Xeloda dose because we, otherwise, with too many variables we're changing at one time. So we're changing the Xeloda dose. We're giving them what we believe is a safe dose of 6422, and we're going to be maximizing the Xeloda dose instead. The FDA liked that approach because they didn't want to be -- us to be changing too many things at once. Because then there's too many variables, you have too much of a matrix to figure out. So we'll be changing the Xeloda dose and increase the Xeloda does until we get that dose 1 in toxicity.

In terms of the -- where we're going, to us, this is the first of many drugs that we'll be looking at. If this comes out positive, like we're confident it will be, then easily, we can move to other drugs that use -- that are metabolized by the DPD enzyme, which would then allow us to develop in another drug and another, et cetera. So this is -- to us, this is a franchise which we can build off of, but this is the start with the franchise. And this is where we need to go first.

And to better understand how the effect on DPD occurs, how long it occurs? Is there ways to monitor that occurrence, and when the de novo synthesis comes back? That becomes very important in terms of cycles, right, and in terms of dosing. So there's a lot of things that are to be done in the Phase Ib study, a lot of pharmacokinetics, a lot of that monitoring of the patient to give us a lot of information and data to figure out the best way to dose this 6422 with Xeloda, which will then help us with 5-FU and other drugs still.

Excellent, excellent. David, one follow-up question. So in the dose-escalating study, I guess, for patients in the different cohorts, the ratios would be different with regard to eniluracil versus 5-FU. So internally have you assessed the possibility that you may have different safety profiles in those cohorts given this important metric?

Yes. We realized that. And that's one reason we're following the pharmacokinetics of 6422, it's metabolized as well as the pharmacokinetic to 5-FU and its metabolites as well as DPD. So we're following all of this in order to get all the balance of data to figure out what's happening with each patient, and to figure out when we can give the next dose, when's the optimal time? Are there things that we should be monitoring, et cetera, et cetera. Yes, absolutely.

Yes. And I assume that the FDA, of course, is aware of all the studies that were done at GlaxoSmithKline. So that helps?

Correct. Correct. They are very aware.

Yes. So the last question was with regard to the future competitive landscape. As new biologics are introduced and cell therapies and so forth, how does Xeloda and eniluracil 5-FU combination stands over the course of time? What are your assessments and modeling for the future?

Yes. No, that's a good question. So when I were in the early and late '70s and early '80s, on my committee, on me dissertation committee was Charles Heidelberger. He was the founder of -- he developed 5-FU, all right? And I studied the 5-FU metabolism cancer patients for about 4, 5 years, right? At that time, it was developed in the '50s. And then at that time, it was -- everybody said, "Oh, 5-FU is going to go away pretty soon. It's going to go and somebody else -- new cancer drugs will be better." Never happened, since the '70s.

5-FU and Xeloda, which is the oral form of 5-FU, is still there. So I believe, yes, there will still be other drugs. No question. But these other drugs will actually be targeted to specific patient population. It's not going to be generally used. Well, 5-FU is generally used a load -- it's more generally used of -- even the first-line and second-line and third-line therapy. I believe that 6422, and Xeloda or 6422, and 5-FU or 6422 and then any other (inaudible) will actually be able to be targeted to, in some ways, even make it more optimal. That's my hypothesis.

I think that it'll occur given my understanding of the metabolism of 5-FU and Xeloda. And if we can monitor that, we've got something. It's a franchise that's going to be enormous. It's going to be individualizing patient treatment.

We'll take our next question from [Hogan Malone].

And I do apologize. It looks like [Hogan] has disconnected. There appear to be no further questions on the line at this time. I'll return the program to our speakers for any closing remarks.

I just want to thank everybody for joining us. As you see over the last 9, 10 months, the whole team has been very active. The very fortunate thing is we have a great -- we have a great team to work with. And everybody enjoys working together and everybody is willing to sacrifice, and so we appreciate everybody's support. Thank you.

And thank you, everyone, for joining us for the Processa call.

As a reminder, management will be conducting one-on-one investor meetings at the Craig-Hallum and Benchmark conferences next week. Also, the company will be conducting additional investor meetings in December. Please contact Investor Relations if you're interested in the meeting. You may now disconnect.

Thank you, operator. Bye-bye.