Processa Pharmaceuticals, Inc.

Greetings and welcome to Processor Pharmaceutical's first quarter 2022 earnings conference call and corporate update. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time. 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.

Thank you and welcome to PROCESS'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 Lloyd. 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 on the company's website or to our earnings press release and 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 27 of the Securities Act of 1933 and Section 21 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 31st, 2022, we spent cash on our clinical trials and in our operations of 1.8 million. This is significantly less than our gap net loss due to the effect of non-cash items like amortization and stock-based compensation. For the three months ended March 31st, 2022, we reported a net loss of 3.2 million or 20 cents a share compared to a net loss of 2.1 million or 14 cents a share for the same period of 2021. The increase in our net loss relates primarily to increase 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 31st, 2022 was 1.8 million compared to 2.2 million for the same period in 2021. While we experienced increased gap costs related to our clinical trials and operations, We continue to make use of equity incentives to reduce our cash outflow in compensating our executive team and certain other employees. And we're 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 31st, 2022, our G&A expenses totaled $1.2 million compared to $700,000 from 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 31st, 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.

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. 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 three. Procesa 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 Procesa is giving each of our investors, which includes the Procesa 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. More importantly, we are simultaneously developing all five drugs at various stages, but all are now going through our development process. This process is the 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 four 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. 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 capcitabine, 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 lapoidica, a rare orphan disease. And the fifth, 1,2852, is for the treatment of gastroparesis, an unmet medical need where the present treatment options have serious adverse events associated with them. 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 capcitabine, 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 capcitabine and began enrolling patients in the amended protocol. For 499, we've expanded our outreach to identify potential alternative 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 capcitabine cancer program. As we have previously stated, the market for next generation capcitabine in colorectal cancer is about a billion dollar market. We expect next generation capcitabine to be better than existing capcitabine 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 capsidomy. 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 capsidomy. First, what have we achieved in Q1? We've amended the Phase 1B protocol. We will be 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 cytobine 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 a dosage regimen for 6422 and completed our initial evaluation of using an individualized, personalized treatment approach for next-generation capcitabine. By the end of the year, we hope to preliminarily identify the maximum tolerated dose of next-generation capcitabine 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 open 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 their dose-limiting safety profile. The off-label used drugs include the use of pentoxyfilin, 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 five to 10 patients in the Phase IIb trial to be used in our interim analysis. At the end of the year, we hope to have the top-line 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 and the FDA meeting, initiate our Phase III trial at the end of 2023. Next slide. Quickly reviewing 12852 for the treatment of gastroparesis. This is a more selective and potent 5-HT4 agonist than other 5-HT4 agonist drugs used off-label to treat gastroparesis. Next slide. Other 5-HT4 agonists 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 5-HT4 receptor, 12A52 in preclinical and clinical studies requires a much, much lower dose of 12A52 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 enrollment of the study in the September-October timeframe. with top line readout of the change in gastric emptying rate 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 it's 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 predict 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 roadmaps 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 capcitabine 499 and 12852 forward. even with COVID having a serious effect on enrollment for 499. We expect by mid-year and at the end of the 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 form. I will not discuss these slides, but they are in the deck to provide more information. This concludes my remarks. I will now ask the operator to open the phone lines for Q&A. Can you please poll for questions?