# Processa Pharmaceuticals, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Processa Pharmaceuticals, Inc.](/companies/pcsa.md) (CIK 1533743)
- Form: 10-Q
- Filed: 2024-10-30
- Accepted by EDGAR: Oct 30, 2024, 16:05 ET
- Period: 2024-09-30
- Accession: 0001493152-24-043058
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1533743/000149315224043058/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1533743/000149315224043058/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$3.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$9.3m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$3.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$9.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.03 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$3.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$1.03 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$3.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 3,275,998 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 2,909,941 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$9.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $3.2k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $2.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $4.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $4.9m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $1.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $1.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $3.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,883 characters.

### Forward Looking Statements

*This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited operating history, limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining, enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which is available on the SEC’s website at www.sec.gov. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.*

*For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, references to the “Company,” “we,” “us” or “our” refer to the operations of Processa Pharmaceuticals, Inc. and its direct and indirect subsidiaries for the periods described herein.*

### Overview

We are a clinical-stage biopharmaceutical company focused on utilizing our Regulatory Science Approach, which includes the principles associated with FDA’s Project Optimus Oncology initiative and the related FDA Draft Guidance, in the development of Next Generation Chemotherapy (“NGC”) oncology drug products. Our mission is to provide better treatment options than those that presently exist by extending a patient’s survival and/or improving a patient’s quality of life. This is achieved by improving upon FDA-approved, widely used oncology drugs or the cancer-killing metabolites of these drugs by altering how they are metabolized and/or distributed in the body, including how they are distributed to the actual cancer cells.

Our Regulatory Science Approach was conceived in the early 1990s when the founders of Processa and other faculty at the University of Maryland worked with the FDA to develop multiple FDA Guidance Documents. Regulatory science is the science of developing new tools, standards, and approaches to assess the safety, efficacy, quality, and performance of all FDA-regulated products. Over the last 30 years, two of our founders, Dr. David Young and Dr. Sian Bigora, have expanded the original regulatory science concept by adding focused 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 identifies the scientific information that the FDA requires to determine whether the benefit outweighs the risk of a drug in a specific population of patients and at a specific dosage regimen for a specific drug product. The studies are designed to obtain the necessary scientific information to support the regulatory decision.

Recently, the FDA has taken steps to define some of the regulatory science required for the FDA approval of oncology products. Through the FDA’s Project Optimus Oncology Initiative and the related Draft Guidance on determining the “optimal” dosage regimen for an oncology drug, the FDA has chosen to make the development of oncology drugs more science-based than in the past. Since the principles of the FDA’s Project Optimus and the related Draft Guidance have been used by our Regulatory Science Approach in a number of non-oncology drugs in the past, 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);
- greater possibility of drug approval by the FDA or other regulatory authorities; and
- greater ability to evaluate the benefit-risk of a drug compared to existing therapy, which allows prescribers to provide better treatment options for each patient.

Our strategic prioritization is to advance our pipeline of NGC proprietary small molecule oncology drugs. The NGC products are new chemical entities that change the metabolism, distribution and/or elimination of already FDA-approved cancer drugs, or their active metabolites, while maintaining the drug’s proven mechanism of action in killing cancer cells. We believe our NGC treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts – capecitabine, gemcitabine, and irinotecan.

### Our Drug Pipeline

Our pipeline currently consists of NGC-Cap, NGC-Gem and NGC-Iri (also identified as PCS6422, PCS3117 and PCS11T, respectively) and two non-oncology drugs (PCS12852 and PCS499). The non-oncology drugs are not included in the pipeline chart above, as we are seeking partners to continue their clinical and commercial development. A summary of each drug is provided below.

#### Next Generation Chemotherapy

Historically, much of oncology drug development has searched for novel or different ways to treat cancer. Our approach is to take three current FDA-approved cancer drugs, e.g. capecitabine, gemcitabine and irinotecan, and modify and improve how the human body metabolizes and/or distributes these NGC treatments compared to their presently approved counterpart chemotherapy drugs while maintaining the cancer-killing mechanism of action; thus, our reason for calling our drugs Next Generation Chemotherapy treatments. Part of the development includes determining the optimal dosage regimen based on the dose-response relationship as described in the FDA’s Project Optimus Initiative and Draft Optimal Dosage Regimen Oncology Guidance. To date, we have data that we believe suggests our NGC treatments are likely to have much better safety-efficacy profiles than the current widely used marketed counterpart drugs, not only potentially making the development and approval process more efficient, but also clearly differentiating our NGC treatments from the existing treatment. We believe our NGC treatments have the potential to extend the survival and/or quality of life for more patients diagnosed with cancer while decreasing the number of patients who are required to dose-adjust or discontinue treatment because of side effects or lack of response.

#### Next Generation Chemotherapy Pipeline

- Next Generation Capecitabine (“NGC-Cap”) is a combination of PCS6422 and a lower dose of the FDA-approved cancer drug capecitabine. PCS6422 is an orally administered irreversible inhibitor of the enzyme dihydropyrimidine dehydrogenase (“DPD”). DPD metabolizes 5-Fluorouracil (“5-FU”), the major metabolite of capecitabine and widely used itself as an intravenous chemotherapeutic agent in many types of cancer, to multiple metabolites classified as catabolites. These catabolites do not have any cancer-killing properties but frequently cause dose-limiting side effects that may require dose adjustments or discontinuation of therapy.

Capecitabine, as presently prescribed and FDA-approved, forms the cancer drug 5-FU which is then further metabolized to anabolites (which kill both cancer cells and normal duplicating cells) and catabolites (which cause side effects and have no cancer killing properties). When capecitabine is given in combination with PCS6422 in NGC-Cap, PCS6422 significantly changes the metabolism of 5-FU, which results in a change in the distribution of 5-FU within the body. Due to this change in metabolism and the overall metabolite profile of anabolites and catabolites, the side effect and efficacy profile of NGC-Cap has been found to be different from capecitabine given without PCS6422. Since the potency of NGC-Cap is also greater than FDA-approved capecitabine based on the 5-FU systemic exposure per mg of capecitabine administered, the amount of capecitabine anabolites formed from 1 mg of capecitabine administered in NGC-Cap will, therefore, be much greater than formed from the administration of 1 mg of existing capecitabine.

The Phase 1B trial in patients with advanced refractory gastrointestinal tract tumors demonstrated that the irreversible inhibition of DPD by PCS6422 could alter the metabolism, distribution and elimination of 5-FU, making NGC-Cap significantly (up to 50 times) more potent than capecitabine alone and potentially leading to higher levels of anabolites which can kill replicating cancer and normal cells. By administering NGC-Cap to cancer patients, the balance between anabolites and catabolites changes depending on the dosage regimens of PCS6422 and capecitabine used, making the efficacy-safety profile of NGC-Cap different than that of FDA-approved capecitabine and requiring further evaluation of the PCS6422 and capecitabine regimens to determine the optimal NGC-Cap regimens for patients.

In order for NGC-Cap to provide a safer and more efficacious profile for cancer patients compared to existing chemotherapy, understanding how the different regimens of PCS6422 and capecitabine may affect the systemic and tumor exposure to the anabolites, as well as the systemic exposure to the catabolites, is required. This can be achieved by following the timeline of DPD irreversible inhibition and the formation of new DPD using the plasma concentrations of 5-FU and its catabolites.

In an effort to better estimate the timeline of DPD inhibition and formation of new DPD, we modified the protocol for the Phase 1B trial and began enrolling patients in the amended Phase 1B trial in April 2022. On November 1, 2022, we announced that data from the Phase 1B trial identified multiple dosage regimens with potentially better safety and efficacy profiles than currently existing chemotherapy regimens. Since 5-FU exposure is dependent on both the PCS6422 regimen and the capecitabine regimen, safe regimens were identified as well as regimens that cause dose-limiting toxicities (“DLTs”). One of the early regimens in the Phase 1B trial did cause DLTs in two patients, one of whom died. No other DLTs were noted in the study. The Phase 1B trial has completed enrollment. Although the primary objective of the NGC-Cap Phase 1B trial in patients with advanced, progressive cancer was to evaluate safety, the Phase 1B trial showed that treatment with NGC-Cap resulted in both a much greater efficacy response rate and a longer period of progression-free survival than what has been reported for capecitabine. In all evaluable progressive disease patients receiving PCS6422 and seven days of capecitabine, partial response and stable disease were observed in 66.7% (8 out of 12) of the evaluable patients, including two with partial response and six with stable disease. The length of progression-free survival was approximately five to 11 months across these patients. By comparison, in the capecitabine product label, 301 metastatic colorectal cancer patients treated with monotherapy capecitabine had an overall response rate of approximately 21% and the time to progression of approximately 4.5 months. In addition, even with up to 10x greater exposure to its 5-FU cancer treatment metabolite than capecitabine, only one patient on NGC-Cap had a mild case of hand-foot syndrome, meaning the hand-foot syndrome rate in our Phase 1B trial was 6% versus the expected ~50% based upon published data. Other side effects, even with 10x greater exposure, were similar or better than seen with capecitabine as approved by FDA. Based on communications and meetings with the FDA, we submitted a new IND for the treatment of advanced and metastatic breast cancer and received IND clearance from the FDA on July 24, 2024. The Phase 2 trial has been initiated and will be a global multicenter, open-label, adaptive design 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. Our license agreement with Elion for NGC-Cap requires us to use commercially reasonable efforts, at our sole cost and expense, to research, develop and commercialize products in one or more countries, including meeting specific diligence milestones that include dosing a first patient with a product in a Phase 2 or 3 clinical trial on or before October 6, 2024. On October 2, 2024, the first patient in our Phase 2 trial of NGC-Cap was dosed.

17

- NGC-Gem is a cytidine analog similar to gemcitabine (Gemzar®), but different enough in chemical structure that some patients are more likely to respond to PCS3117 than gemcitabine. In addition, we believe those patients inherently resistant or who acquire resistance to gemcitabine are likely not to be resistant to NGC-Gem. The difference in response occurs because NGC-Gem is metabolized to its active metabolite through a different enzyme system than gemcitabine. The Phase 2A trial in patients with relapsed or refractory pancreatic cancer was completed by Ocuphire prior to us licensing NGC-Gem. We plan to meet with the FDA to discuss potential trial designs including implementation of the Project Optimus initiative as part of the design. Similar to NGC-Cap, we will need to obtain additional funding before we can begin any future trial for NGC-Gem.

|  |  |
| --- | --- |
|  | Our license agreement with Ocuphire Pharma, Inc. (“Ocuphire”) for NGC-Gem requires us to use commercially reasonable efforts, at our sole cost and expense to oversee such commercialization efforts, to research, develop and commercialize products in one or more countries, including meeting specific diligence milestones that consist of: (i) dosing a patient in a clinical trial prior to June 16, 2024; and (ii) dosing a patient in a pivotal clinical trial or in a clinical trial for a second indication of the drug prior to June 16, 2026. We are currently in discussions with Ocuphire to extend these deadlines. |
| ● | NGC-Iri is an analog of SN38 (SN38 is the active metabolite of irinotecan) and should have an improved safety/efficacy profile in every type of cancer that irinotecan is presently used. The manufacturing process and sites for drug substance and drug product are presently being evaluated and IND-enabling toxicology studies will then be initiated. A preclinical study in mouse xenograft models showed that after PCS11T administration, there was greater accumulation of SN-38 in the tumor compared with other tissues than after irinotecan or Onivyde® administration. Additionally, less SN-38 accumulated in non-cancer tissues, such as muscle, after NGC-Iri administration than after irinotecan or Onivyde® administration, supporting the potential for a better NGC-Iri safety profile. We are defining the potential paths to approval, which include defining the targeted patient population and the type of cancer. In 2025, we plan to expand the preclinical analysis, including additional preclinical efficacy and toxicity studies; evaluate manufacturing options for PCS11T; and conduct chemistry, manufacturing and control (CMC) activities and pre-IND enabling studies. |

We are focused on drug products that improve the survival and/or quality of life for patients by improving the safety and/or efficacy of the drug in a targeted patient population, while providing a more efficient and probable path to FDA approval and differentiating our drugs from those on the market or are currently being developed.

#### Other Drugs in Our Pipeline

In 2023, we completed our Phase 2A trial for PCS12852 in gastroparesis patients with positive results. Additionally, in February 2023, due primarily to the inability to identify and enroll patients in our rare disease Phase 2 trial for PCS499 in ulcerative Necrobiosis Lipoidica, we decided to cease further enrollment in the PCS499 trial and terminated the trial. We did not experience any safety concerns during the conduct of either the PCS12852 or PCS499 trial. We continue to evaluate options to monetize these non-core drug assets, which may include out-licensing or partnering these assets with one or more third parties. We are currently in discussions with Yuhan to amend our existing license agreement for PCS12852.

### Recent Developments

#### Reverse Stock Split

On January 22, 2024, we effected a 1-for-20 reverse stock split, reducing the number of our common shares issued on that date from 24,706,474 shares to 1,291,000 shares. There is no corresponding reduction in the number of authorized shares of common stock and no change in the par value per share. All share and per share amounts and conversion and exercise prices presented herein have been adjusted retroactively to reflect this change.

#### Public Offering

On January 30, 2024, we raised gross proceeds of $7.0 million (net proceeds of $6.3 million) from the sale of 476,000 shares of our common stock, pre-funded warrants to purchase up to 1,079,555 shares of our common stock and warrants to purchase 1,555,555 shares of our common stock in a public offering, as described in Note 2. Simultaneously with the closing of the sale, the pre-funded warrants were exercised in exchange for 1,079,555 shares of our common stock. We are using the net proceeds from this financing for continued research and development for NCG-Cap, and working capital and general corporate purposes.

#### ATM Offering

In May 2024, we filed with the SEC a registration statement on Form S-3 (Registration No. 333-279588) (the “Registration Statement”), including a base prospectus relating to the offering of up to $50,000,000 in the aggregate of the securities identified in the base prospectus from time to time in one or more offerings; and a prospectus supplement relating to the shares of our common stock that may be issued and sold under a sales agreement dated May 21, 2024 (the “Sales Agreement”) between us and A.G.P./Alliance Global Partners (the “Sales Agent”), through which we may issue and sell in a registered “at the market offering” shares of our common stock having an aggregate offering price of up to $2.4 million (subject to adjustment) from time to time through or to our Sales Agent (the “ATM Offering”). We expect to use net proceeds, if any, from the ATM Offering over time for continued research and development for our portfolio of drug candidates, especially our oncology products, and working capital and general corporate purposes. The shares under the ATM Offering will be sold and issued pursuant to the Registration Statement. On July 31, 2024, we received $931,000 in net proceeds from the sale of 374,190 shares of common stock under the ATM Offering.

#### New Chief Financial Officer

On July 16, 2024, Russell Skibsted was appointed as our Chief Financial Officer (“CFO”) after the retirement of our previous CFO. Mr. Skibsted has nearly 30 years of experience in the pharmaceutical industry, including expertise in financial management, global business development, capital markets, investor relations and operations. In connection with his employment, Mr. Skibsted will be paid an annual base salary of $400,000 and will be eligible for a $50,000 base salary increase upon a cumulative (one or multiple) financing of at least $15 million that he leads and substantially participates in. He is also eligible to participate in an executive bonus pool with a target bonus of 35% of his base compensation. In addition, the Compensation Committee awarded 28,000 RSUs to Mr. Skibsted, which vest accordingly: 14,000 RSUs vest on July 16, 2025; 7,000 RSUs vest upon Processa reaching a market capitalization (i.e. total value of Processa’s outstanding shares of stock at the then current market price) of at least $30 million; and 7,000 RSUs vest upon receipt of cumulative financing(s) of at least $15 million. He will also be eligible for other benefits as described in his employment agreement.

### Results of Operations

### Comparison of the three and nine months ended September 30, 2024 and 2023

The following table summarizes our net loss during the periods indicated:

| Operating Expenses | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development expenses | $2,287,525 | $1,151,740 | $1,135,785 | $5,556,694 | $4,478,793 | $1,077,901 |
| General and administrative expenses | 1,137,328 | 1,015,872 | 121,456 | 3,759,781 | 4,508,818 | (749,037) |
| **Operating Loss** | (3,424,853) | (2,167,612) |  | (9,316,475) | (8,987,611) |  |
| **Other Income, net** | 40,150 | 85,661 | (45,511) | 195,065 | 271,022 | (75,957) |
| **Net Operating Loss Before Income Tax Benefit** | (3,384,703) | (2,081,951) | (1,302,752) | (9,121,410) | (8,716,589) | (404,821) |
| **Income Tax Benefit** | - | - | - | - | - | - |
| **Net Loss** | $(3,384,703) | $(2,081,951) |  | $(9,121,410) | $(8,716,589) |  |

#### Revenues

We do not currently have any revenue under contract or any immediate sales prospects.

#### Research and Development Expenses

Our research and development costs are expensed as incurred. Research and development expenses include (i) program and testing related expenses including external consulting and professional fees related to the product testing and our development activities and (ii) internal research and development staff salaries and other payroll costs including stock-based compensation, payroll taxes and employee benefits.

Costs for the three- and nine-month periods for the periods ended September 30, 2024 and 2023 were as follows:

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Research and development salaries and benefits | $436,713 | $448,071 | $1,412,881 | $1,480,909 |
| Preclinical, clinical trial and other costs | 1,850,812 | 703,669 | 4,143,813 | 2,997,884 |
| Total | $2,287,525 | $1,151,740 | $5,556,694 | $4,478,793 |

During the three months ended September 30, 2024, our preclinical, clinical trial and other costs increased when compared to the same period in 2023. This was attributable to an increase of approximately $1.3 million for ongoing testing and related expenses related to our Phase 1B trial for NGC-Cap and the IND/initiation of our Phase 2 trial for NGC-Cap and offset by a decrease in professional fees of approximately $181,000, mostly attributable to a decrease in patent-related legal fees. During the same period in 2023, in addition to clinical trial costs for NGC-Cap, we were incurring closing costs in our clinical trial for PCS12852 and PCS499. We also had an approximately $11,000 increase in salaries and related costs during the three months ended September 30, 2024 when compared to the same period in 2023, due to one-time bonuses and increased salary rates for the research and development team in 2024. This was offset by a decrease in stock-based compensation of approximately $23,000.

During the nine months ended September 30, 2024, we had increases in testing and related expenses of approximately $1.5 million and in salaries and related costs of approximately $87,000, when compared to the same period in 2023. These increases were offset by decreases in professional fees of approximately $315,000 and in stock-based compensation of approximately $155,000. The reasons for the changes between the nine-month periods in 2024 and 2023 are the same as the reasons between the three-month periods in 2024 and 2023.

On July 24, 2024, we received approval of our IND for our Phase 2 trial for NGC-Cap in breast cancer. On October 2, 2024, we dosed the first patient in the study. As we continue this Phase 2 trial and complete our Phase 1B clinical trial for NGC-Cap, we anticipate our research and development costs will increase. We will also continue incurring nominal costs for NGC-Gem as we prepare to meet with the FDA to discuss potential study designs and for NGC-Iri as we prepare to further define the clinical development program, GMP CMC processes and the IND-enabling toxicology studies.

The funding necessary to bring a drug candidate to market is subject to numerous uncertainties. Once a drug candidate is identified, the further development of that drug candidate may be halted or abandoned at any time due to a number of factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand. For each of our drug candidate programs, we periodically assess the scientific progress and merits of the programs to determine if continued research and development is economically viable. Some programs may be terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization.

Our clinical trial cost accruals are based on estimates of patient enrollment and related costs at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses and expensed when the services are rendered.

#### General and Administrative Expenses

Our general and administrative expenses for the three months ended September 30, 2024 increased by approximately $121,000 to $1.1 million from $1.0 million for the three months ended September 30, 2023. This increase was due primarily as a result of an approximately $81,000 increase in employee stock-based compensation; an approximately $12,000 increase in professional fees, mostly attributable to an increase of legal and consulting fees; an approximately $21,000 increase in salaries and other payroll-related costs from increased salary rates, primarily paid to our executive officers; and a net increase of approximately $14,000 in travel, office and other miscellaneous expenses. We also received approximately $7,000 more in reimbursements from CorLyst during the three months ended September 30, 2024 when compared to the same period in 2023.

During the nine months ended September 30, 2024, our general and administrative expenses decreased by approximately $749,000 to $3.8 million from $4.5 million for the nine months ended September 30, 2023. This was due primarily to a decrease in professional fees of approximately $943,000 as a result of a non-recurring expense that was incurred during 2023 in connection with the stock purchase warrant granted to the placement agent for our registered direct offering in February 2023; and a decrease in employee stock-based compensation of approximately $167,000 in 2024. These decreases were primarily offset by increases in salaries and other payroll-related expenses of approximately $303,000 and in office and other related expenses of approximately $51,000. We also received approximately $7,000 less in reimbursements from CorLyst during the nine months ended September 30, 2024 when compared to the same period in 2023.

#### Other Income, net

Other income represents interest income of approximately $40,000 and $86,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $195,000 and $271,000 for the nine months ended September 30, 2024 and 2023, respectively.

#### Income Tax Benefit

We did not recognize any income tax benefit for the three or nine months ended September 30, 2024 or 2023.

### Cash Flows

The following table sets forth our sources and uses of cash and cash equivalents for the nine months ended September 30, 2024 and 2023:

| Net cash (used in) provided by: | Nine months ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | $(8,997,321) | $(5,939,478) |
| Investing activities | (3,244) | (2,776) |
| Financing activities | 7,185,832 | 6,299,331 |
| Net (decrease) increase in cash | $(1,814,733) | $357,077 |

#### Net cash used in operating activities

We used net cash in our operating activities of $8,997,321 and $5,939,478 during the nine months ended September 30, 2024 and 2023, respectively. The increase in cash used in operating activities was primarily attributable to increased costs related to closing our Phase 1B and commencing our Phase 2 trial for NGC-Cap, including the prepayment of expenses paid to our CRO for the Phase 2 trial; increased salaries and other payroll-related expenses; and professional fees during the nine months ended September 30, 2024.

As we continue our development of NGC-Cap and evaluate the other NGC drugs in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. We anticipate our clinical trial costs will increase when compared to prior periods since we have begun our Phase 2 clinical trial for NGC-Cap and our prior year activities related primarily to the completion of our Phase 1b trial for NGC-Cap.

#### Net cash used in investing activities

During the nine months ended September 30, 2024 and 2023, we used net cash in our investing activities of $3,244 and $2,776, respectively, to purchase property and equipment.

#### Net cash provided by financing activities

During the nine months ended September 30, 2024, we sold 476,000 shares of common stock, pre-funded warrants to purchase up to 1,079,555 shares of common stock in lieu of shares of common stock, all of which were exercised into shares of our common stock, and warrants to purchase up to 1,555,555 shares of our common stock pursuant to a public offering for net proceeds of $6.3 million. We also sold 374,190 shares of common stock under our ATM Offering for net proceeds of approximately $931,000. We used cash, classified as financing activities, of approximately $16,000 to pay income taxes owed on stock-based compensation, approximately $9,000 for the settlement of a stock award, and approximately $4,000 for payments owed under a financing lease obligation.

During the nine months ended September 30, 2023, we raised net proceeds of $6.4 million from the sale of 421,611 shares of our common stock.

### Liquidity

We do not have sufficient cash on hand or available to fund our operations for the next twelve months. During the nine months ended September 30, 2024, we began initiation activities for our Phase 2 trial for NGC-Cap in breast cancer. At September 30, 2024, we had cash and cash equivalents totaling $2.9 million. Based on our current business plans, we will need to obtain additional funding from the sale of equity and/or debt securities or complete a strategic transaction or other funding transactions in order to continue our Phase 2 trial of NGC-Cap and conduct future preclinical studies and clinical trials for other drugs in our portfolio.

Absent additional funding, our current cash and cash equivalents will not be sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financial statements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the related amount of cash to be used in operating activities during that period of time. Our ability to execute our longer-term operating plans, including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

We have incurred losses since inception, currently devoting substantially all of our efforts toward research and development of our next generation chemotherapy drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $84.5 million at September 30, 2024. During the nine months ended September 30, 2024, we generated a net loss of $9.1 million and used $9.0 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future.

We have financed our operations primarily through public equity issuances, including an offering we closed on January 30, 2024 in which we sold 476,000 shares of our common stock, pre-funded warrants to purchase up to 1,079,555 shares of our common stock, and warrants for the purchase of up to 1,555,555 shares of our common stock for net proceeds of $6.3 million, after deducting placement agent fees and offering-related expenses. Simultaneously with the closing of the sale, the pre-funded warrants were exercised in exchange for 1,079,555 shares of our common stock.

Further, in May 2024, we filed with the SEC a registration statement on Form S-3 (Registration No. 333-279588) (the “Registration Statement”), including a base prospectus relating to the offering of up to $50,000,000 in the aggregate of the securities identified in the base prospectus from time to time in one or more offerings; and a prospectus supplement relating to the shares of our common stock that may be issued and sold under a sales agreement dated May 21, 2024 (the “Sales Agreement”) between us and A.G.P./Alliance Global Partners (the “Sales Agent”), through which we may issue and sell in a registered “at the market offering” shares of our common stock having an aggregate offering price of up to $2.4 million (subject to adjustment) from time to time through or to our Sales Agent (the “ATM Offering”). We expect to use net proceeds, if any, from the ATM Offering over time for continued research and development for our portfolio of drug candidates, especially our oncology products, and working capital and general corporate purposes. The shares under the ATM Offering will be sold and issued pursuant to the Registration Statement. During the nine months ended September 30, 2024, we received $931,000 in net proceeds from the sale of 374,190 shares of common stock under the ATM Offering on July 31, 2024.

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. There can be no assurance that future funding will be available when needed.

### Contractual Obligations and Commitments

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

### Off Balance Sheet Arrangements

At September 30, 2024, we did not have any off-balance sheet arrangements.

### Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

There have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.

### Recently Issued Accounting Pronouncements

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

## Controls and procedures

As filed, 1,549 characters.

At September 30, 2024, management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of its disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at September 30, 2024 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

## Risk factors

As filed, 3,018 characters.

There have been no material changes to our risk factors as described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, other than the addition of the following risk factor:

***Our licenses are subject to termination by the licensor in certain circumstances.***

Our rights to practice the inventions claimed in the licensed patents and patent applications are subject to our licensors abiding by the terms of those licenses and not terminating them. Our licenses may be terminated by the licensor if we are in material breach of certain terms or conditions of the license agreement or in certain other circumstances. Our license agreements each include provisions that allow the licensor to terminate the license if (i) we breach any payment obligation or other material provision under the agreement and fail to cure the breach within a fixed time following written notice of termination; (ii) we or any of our affiliates, licensees or sublicensees directly or indirectly challenge the validity, enforceability, or extension of any of the licensed patents; or (iii) we declare bankruptcy or dissolve. The majority of license agreements require us to satisfy due diligence milestones that relate to the development of new products containing the licensed drug or the agreement may be terminated by such counterparty. Our rights under these licenses are subject to our continued compliance with the terms of the license, including the payment of royalties due under the licenses. Termination of any of these licenses could prevent us from marketing some or all of our products. Because of the complexity of our products and the patents we have licensed, determining the scope of the license and related royalty obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of such a dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some or all of our products.

As previously disclosed in our Current Report on Form 10-Q for the period ended March 31, 2024, on May 7, 2024, the Company received notification from Elion purporting to terminate the license agreement by and between us and Elion as a result of the Company’s alleged breach thereof. The Company believes that Elion’s claims are without merit and disputes that the license agreement has been validly terminated. We are now in litigation regarding our license agreement. The Company intends to enforce its rights under the license agreement and will pursue such other remedies as it determines are appropriate.

If we are unsuccessful or are unable to enforce our rights under the license agreement, our business and results of operations may be adversely affected.

Filed Oct 30, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-043058. Last ingested by Listed: Nov 5, 2026, 12:19 ET. No prices; not investment advice.