| Organization and Summary of Significant Accounting Policies | Note 1 – Organization and Summary
of Significant Accounting Policies Business Activities and Organization We are a clinical stage
biopharmaceutical company focused on the development of drug products that are intended to improve the survival and/or quality
of life for patients who have a high unmet medical need condition or who have no alternative treatment. Our most advanced product
candidate, PCS499, is an oral tablet that is a deuterated analog of one of the major metabolites of pentoxifylline (PTX or Trental ® PCS499 Our
lead product, PCS499, is an oral tablet that is a deuterated analog of one of the major metabolites of pentoxifylline (PTX or Trental ® The
degeneration of tissue occurring at the NL lesion site may be caused by a number of pathophysiological changes which has made it
extremely difficult to develop effective treatments for this condition. Because PCS499 and
its metabolites affect a number of biological pathways, several of which could contribute to the pathophysiology associated with
NL, PCS499 may provide a novel treatment solution for NL, a condition for which there are currently no FDA-approved treatments. On June 18, 2018, the
FDA granted orphan-drug designation for PCS499 for the treatment of NL. On September 28, 2018, the IND for PCS499 in NL was made
effective by the FDA, such that we could move forward with a Phase 2A trial multicenter, open-label prospective trial designed
to determine the safety and tolerability of PCS499 in patients with NL. The study initially had a six-month treatment phase and
a six-month optional extension phase. In December 2019, we informed patients and sites that the study would conclude after the
treatment phase and there would no longer be an extension phase. The first enrolled NL patient in this Phase 2A clinical trial
was dosed on January 29, 2019 and the study completed enrollment on August 23, 2019. The last patient visit took place in February
2020. Due to COVID-19 related restrictions at certain sites, study closeout and database lock did not occur until October 2020.
We are currently finalizing the data results and clinical study report. The main objective of
the trial was to evaluate the safety and tolerability of PCS499 in patients with NL and to use the collected safety and efficacy
data to design future clinical trials. Based on toxicology studies and healthy human volunteer studies, Processa and the FDA agreed
that a PCS499 dose of 1.8 grams/day would be the highest dose administered to NL patients in this Phase 2A trial. As anticipated,
the PCS499 dose of 1.8 grams/day, 50% greater than the maximum tolerated dose of PTX, appeared to be well tolerated with no serious
adverse events reported. All adverse events reported in the study were mild in severity. As expected, gastrointestinal symptoms
were the most noted adverse events and reported in four patients, all of which were mild in severity and resolved within 1-2 weeks
of starting dosing. Two of the twelve patients
in the study presented with more severe ulcerated NL and had ulcers for more than two months prior to dosing. At baseline, the
reference ulcer in one of the two patients measured 3.5 cm 2 2 On March 25, 2020, we
met with the FDA and discussed the clinical program, as well as the nonclinical and clinical pharmacology plans to ultimately support
the submission of the PCS499 New Drug Application (NDA) in the U.S. for the treatment of ulcers in NL patients. With input from
the FDA, we will be designing the next trial as a randomized, placebo-controlled trial to evaluate the ability of PCS499 to completely
close ulcers in patients with NL. We initially planned to begin recruiting for the randomized, placebo-controlled trial in the
fourth quarter of 2020, but we now expect to begin recruiting patients in 2021 due to delays in fundraising efforts. This PCS499
NL study will be a randomized, placebo-controlled Phase 2B study to better understand the potential response of NL patients on
drug and on placebo. After obtaining the results from this Phase 2B study, we expect to meet with FDA to discuss our Phase 2B drug
and placebo response findings while further discussing the next steps to obtain approval. PCS12852 On August 19, 2020, we
entered into a License Agreement (“Yuhan License Agreement”) with Yuhan Corporation (“Yuhan”), pursuant
to which we acquired an exclusive license to develop, manufacture and commercialize PCS12852 (formerly known as YH12852) globally,
excluding South Korea. We accounted for the Yuhan
License Agreement as an asset acquisition since it did not meet the definition of a business, and therefore recorded the intangible
asset at fair value, equal to the consideration paid of $2 million in the form of 500,000 shares of our common stock (see Note
12). Because the intangible asset represents in-process research and development with no alternative future use, we immediately
expensed the fair value in the Statement of Operations. At September 30, 2020, only 250,000 shares had been issued. PCS12852 is a novel, potent
and highly selective 5-hydroxytryptamine 4 (5-HT4) receptor agonist. Other 5-HT receptor agonists with less 5-HT4 selectivity have
been shown to successfully treat gastrointestinal (GI) motility disorders such as chronic constipation, constipation-predominant
irritable bowel syndrome, functional dyspepsia and gastroparesis. Less selective 5-HT4 agonists, such as cisapride, have been either
removed from the market or not approved because of the cardiovascular side effects associated with the drugs binding to other receptors,
especially 5-HT receptors other than 5-HT4. We plan to meet with the
FDA in early 2021 to further define the clinical development program required for the PCS12852 product and discuss a Phase 2A proof
of concept randomized, placebo-controlled study for PCS12852 in a gastrointestinal (GI) motility dysfunction disorder (e.g., gastroparesis,
post-operative ileus also called gastrointestinal dysfunction (POGD), opioid induced constipation, chronic idiopathic constipation).
The purpose of the Phase 2A trial would be to better define a dosage regimen of PCS128552 that could be potentially efficacious
and safe in a larger pivotal study. The patients with these types of conditions have an abnormal pattern of GI motility in the
absence of mechanical obstruction. For example, gastroparesis is characterized by postprandial fullness (early satiety), nausea,
vomiting and bloating. It is known to occur in more than 4 million people in the US, but many still do not have
access to medications that work or can be tolerated by the patients. The only FDA-approved product for gastroparesis is a dopamine
D2 Antagonist metoclopramide (Gimoti®), which includes an FDA “Black Box” warning for tardive dyskinesia (TD),
a serious movement disorder that is often irreversible. Because of this adverse effect, the treatment is limited to no more than
12 weeks. POGD is characterized by nausea, vomiting, abdominal distension and/or delated passage of flatus or stool, following
surgery (most commonly with abdominal surgery). It is the most common cause of prolonged length of stay in hospital following GI
surgery, leading to an increase in healthcare costs. The only FDA-approved drug to treat POGD is a mu-opioid receptor antagonist
alvimopan (Entereg®), which is only available through a restricted program for short-term use due to the potential risk of
myocardial infarction with long-term use. Two clinical studies have
been previously conducted by Yuhan with PCS12852. In the first-in-human clinical trial (Protocol YH12852-101), the initial safety
and tolerability of PCS12852 were evaluated after single and multiple oral doses in healthy subjects. PCS12852 increased stool
frequency with faster onset when compared to prucalopride, an FDA approved drug for the treatment of chronic idiopathic constipation.
Compared to the group receiving prucalopride, the PCS12852 dose groups showed higher stool frequency for 24 hours following single
dosing and had faster onset of spontaneous bowel movements (SBMs) with comparable or relatively higher Bristol Stool Form Scale
score (lower stool consistency) for 24 hours following first dosing. In addition, based on an increase of ≥ 1 SBM/week from
baseline during 7-day multiple dosing, the PCS12852 dose group had a higher percent of patients with an increase than the prucalopride
group. All doses of PCS12852 were safe and well tolerated and no serious adverse events (SAE) occurred during the study. The most
frequently reported adverse events (AEs) were headache, nausea and diarrhea which were temporal, manageable, and reversible within
24 hours. There were no clinically significant changes in platelet aggregation or ECG parameters including no sign of QTc prolongation
in the study. The second study conducted was a Phase 1/2A clinical trial (Protocol YH12852-102) to evaluate the safety, tolerability,
pharmacokinetics and pharmacodynamics of PCS12852 immediate release (IR) formulation and delayed release (DR) formulation after
multiple oral dosing. PCS12852 was safe and well tolerated after single and multiple administrations. The most frequent AEs for
both the IR and DR formulations of PCS12852 were headache, nausea and diarrhea, but the incidences of these AEs were comparable
with those of the prucalopride 2 mg group. These AEs, which were transient and mostly mild in severity, are also commonly observed
with other 5-HT4 agonists. Both formulations of PCS12852 also showed pharmacologic activity as assessed using various pharmacodynamic
parameters for stool assessment. In this study, PCS12852 also showed an enhanced gastric emptying rate in patients assessed by
the Gastric Emptying Breath Test (GEBT). The change from baseline in gastric emptying rate increased in both 0.1 mg and 0.05 mg
PCS12852 groups and showed a statistically significant change from baseline in the 0.1 mg group. Yuhan had also conducted
extensive toxicological studies for the product that demonstrated that the product is safe for use and can be moved quickly into
Phase 2 studies. PCS6422 On August 23, 2020, we
entered into a License Agreement (“Elion License Agreement”) with Elion Oncology, Inc. (“Elion”), pursuant
to which we acquired an exclusive contingent license to develop, manufacture and commercialize PCS6422 globally. On October 6,
2020, in connection with the closing of our underwritten offering and listing on the Nasdaq Capital Market, the contingencies related
to this license were met. We have not accounted
for the Elion License Agreement at September 30, 2020 since the contingency was not met until we closed our underwritten public
offering and up-listed our common stock to the Nasdaq stock market, which occurred on October 6, 2020. We believe this license
agreement represents an asset acquisition since it did not meet the definition of a business, and we plan to record the intangible
asset acquired at fair value equal to the consideration paid of $3.3 million in the form of 825,000 shares of our common stock
and $100,000 cash. Because the intangible assets represent in-process research and development with no alternative future use,
we will immediately expense the fair value in the fourth quarter in our statement of operations. Elion acquired the eniluracil
(PCS6422) product from Fennec Pharmaceuticals (formerly known as Adherex Technologies) in 2016. PCS6422 is an oral, potent, selective,
and irreversible inhibitor of dihydropyrimidine dehydrogenase (DPD), the enzyme that rapidly metabolizes 5-FU, a common chemotherapy
drug, to inactive metabolites, such as α-fluoro-β-alanine (F-Bal). F-Bal is thought to cause the neurotoxicity and Hand–Foot
Syndrome (HFS) associated with 5-FU, and greater formation of F-Bal appears to be associated with a decrease in the antitumor activity
of 5-FU. HFS can affect daily living activities, quality of life, and requires dose interruptions/adjustments and even therapy
discontinuation resulting in suboptimal tumor effects. We believe that the inhibition of DPD by PCS6422 may significantly improve
exposure to 5-FU and reduce 5-FU side effects related to F-Bal. One dose of PCS6422 irreversibly blocks DPD activity for up to
two weeks until DPD levels recover via de novo synthesis of the DPD enzyme. Thus, we believe inhibition of tumor DPD will result
in higher 5-FU intra-tumoral concentration and potentially better tumor response along with the decrease in F-Bal. Fluoropyrimidines (e.g.,
5-FU) are still the cornerstone of treatment for many different types of cancers, either as monotherapy or in combination with
other chemotherapy agents by an estimated two million patients annually. Xeloda ® Elion evaluated the potential
for the combination of PCS6422 with capecitabine (Xeloda®, and, together with PCS6422, known as ECAPE) as a treatment of advanced
gastrointestinal (GI) tumors. Nonclinical efficacy data indicated that in colorectal cancer models, pretreatment with PCS6422 enhanced
the antitumor activity of capecitabine. PCS6422 increased the antitumor potency of capecitabine while not increasing the toxicity.
The antitumor efficacy of the combination of PCS6422 and capecitabine was tested in several xenograft animal models with human
breast, pancreatic and colorectal cancer cells. These preclinical xenograft models demonstrate that PCS6422 potentiates the antitumor
activity of capecitabine and significantly reduces the dose of capecitabine required to be efficacious. Elion met with the FDA
in 2019 and agreed upon the clinical development program required for the combination of PCS6422 and capecitabine as first-line
therapy for metastatic colorectal cancer when treatment with fluoropyrimidine therapy alone is preferred. Subsequently, an IND
has been granted safe to proceed by FDA on May 17, 2020, for the Phase 1B study. This Phase 1B study will evaluate the safety and
tolerability of several dose combinations of PCS6422 and capecitabine in advanced GI tumor patients and should be initiated in
the first half of 2021. Other DPD enzyme inhibitors (e.g. Gimeracil
used in Teysuno® approved only outside the US) act as competitive reversible inhibitors. These agents must be present when
5-FU or capecitabine are administered to inhibit 5-FU breakdown by DPD in order to improve the efficacy and safety profiles of
5-FU. Given the reversible nature of their effect on DPD, over time 5-FU metabolism to F-Bal will return, decreasing the amount
of 5-FU in the cancer cells and decreasing the potential cytotoxicity on the cancer cells. There is also evidence that administering
DPD inhibitors directly with 5-FU may also decrease the antitumor effect of the 5-FU. Because PCS6422 is an irreversible inactivator
of DPD, it can be dosed the day before capecitabine administration and its effect on DPD can last longer than the reversible DPD
inhibitors and beyond the time 5-FU exists in the cancer cell. We believe this can optimize the potential cytotoxic effect and
minimize the metabolism of 5-FU. Prior to Elion’s
involvement, two multicenter Phase 3 studies were conducted in patients with colorectal cancer (CRC) with PCS6422 administered
in 10-fold excess to 5-FU. Unfortunately, we believe the dose of PCS6422 during these trials was not optimal, and that PCS6422
was not administered early enough to irreversibly affect the DPD enzyme, thus the regimen tended to produce less antitumor benefit
than the control arm with the standard regimen of 5-FU/leucovorin (LV) without PCS6422. Later preclinical work suggested that when
PCS6422 was present at the same time as and in excess to 5-FU, it diminished the antitumor activity of 5-FU, which we believe supports
the proposal of exploring clinically dosing PCS6422 several hours before 5-FU to allow its clearance before the administration
of 5-FU. PCS11T On
May 24, 2020, we entered into an exclusive License Agreement with Aposense, Ltd., (“Aposense”), pursuant to which we
were granted a contingent license in Aposense’s patent rights and know-how to develop and commercialize their next generation
irinotecan cancer drug, PCS11T (formerly known as ATT-11T). The grant of license was conditioned on (i) our closing of an equity
financing and successful up-listing to Nasdaq which we completed on October 6, 2020 and (ii) Aposense obtaining the approval of
the Israel Innovation Authority for the consummation of the transactions contemplated by the agreement, which was obtained on August
24, 2020. We have not accounted
for the License Agreement with Aposense at September 30, 2020 since the contingency was not met until we closed our underwritten
public offering and up-listed our common stock to the Nasdaq stock market, which occurred on October 6, 2020. We believe this license
agreement represents an asset acquisition since it did not meet the definition of a business, and we plan to record the intangible
asset acquired at fair value equal to the consideration paid of $2.5 million in the form of 625,000 shares of our common stock.
Because the intangible assets represent in-process research and development with no alternative future use, we will immediately
expense the fair value in the fourth quarter in our statement of operations. PCS11T is a novel lipophilic
anti-cancer pro-drug that is being developed for the treatment of the same solid tumors as prescribed for irinotecan. This pro-drug
is a conjugate of a specific proprietary Aposense molecule connected to SN-38, the active metabolite of irinotecan. The proprietary
molecule in PCS11T has been designed to allow PCS11T to bind to cell membranes to form an inactive pro-drug depot on the cell with
SN-38 preferentially accumulating in the membrane of tumors cells and the tumor core. This unique characteristic may make the therapeutic
window of PCS11T wider than other irinotecan products such that the antitumor effect of PCS11T could occur at a much lower dose
with a milder adverse effect profile than irinotecan. Despite the widespread use of commercially marketed irinotecan products in
the treatment of metastatic colorectal cancer and other cancers resulting in peak annual sales of approximately $1.1 billion, irinotecan
has a narrow therapeutic window and includes an FDA “Black Box” warning for both neutropenia and severe diarrhea. There
is, therefore, a substantial unmet need to overcome the limitations of the current commercially marketed irinotecan products, improving
efficacy and reducing the severity of treatment emergent adverse events. We believe the potential wider therapeutic window of PCS11T
will likely lead to more patients responding with less side effects when on PCS11T compared to other irinotecan products. Pre-clinical studies conducted
to date showed that PCS11T demonstrated tumor eradication at much lower doses than irinotecan across various tumor xenograft models.
PCS11T does not affect acetyl choline esterase (AChE) activity in human and rat plasma in vitro, which would suggest that PCS11T
will show an improved safety profile, compared to irinotecan, which is known for its cholinergic-related side effects. We are currently planning
to manufacture the product at a GMP facility, conduct the toxicological studies required to file the IND and initiate the Phase
1B study in oncology patients with solid tumors in 2022-2023. PCS100 On
August 29, 2019, we entered into an exclusive license agreement with Akashi Therapeutics, Inc. (“Akashi”) to develop
and commercialize an anti-fibrotic, anti-inflammatory drug, PCS100 (formerly known as HT-100), which also promotes healthy muscle
fiber regeneration. In previous clinical trials in Duchenne Muscular Dystrophy (DMD), PCS100 showed promising improvement in the
muscle strength of non-ambulant pediatric patients. Although the FDA placed a full clinical hold on the DMD trial after a serious
adverse event in a pediatric patient, the FDA has partially removed the clinical hold and defined how PCS100 can resume clinical
trials in DMD. At the present time, we are evaluating the potential GMP manufacturing facilities and the potential indications
for PCS100. Basis of Presentation The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for interim financial information and with the instructions of the Securities
and Exchange Commission (“SEC”) on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not
include all the information and disclosures required by U.S. GAAP for complete financial statements. All material intercompany
accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation
of the Company’s financial position and of the results of operations and cash flows for the periods presented. These condensed
consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included
in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC. The results of operations for the
interim periods shown in this report are not necessarily indicative of the results that may be expected for any other interim period
or for the full year. Liquidity On October 6, 2020, we
closed an underwritten public offering of 4,800,000 shares of common stock for a public offering price of $4.00 per share. Net
proceeds from the offering were approximately $17.1 million. We believe these funds, along with our existing cash on that day will
provide us with sufficient capital to meet our anticipated operating and capital expenditure requirements into the fourth quarter
of 2022. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources
sooner than we currently expect. Our ultimate success depends on the outcome of our planned clinical trials and our research and
development activities, as disclosed above. We expect to incur additional losses in the future and we anticipate the need to raise
additional capital to fully implement our business plan if the cost of our planned clinical trials are greater than we expect or
they take longer than anticipated. We also expect to incur increased general and administrative expenses at least through 2022
due in part to planned increased research and development activities as we conduct a Phase 2B trial for PCS499, a Phase 1B trial
for PCS6422, and a Phase 2A clinical trial for PCS12852. In addition, there may be costs we incur as we develop these drug products
that we do not currently anticipate requiring us to need additional capital sooner than currently expected. Use of Estimates In preparing our condensed
consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of
the SEC, we make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying
notes. Estimates are used for, but not limited to: stock-based compensation, determining the fair value of acquired assets and
assumed liabilities, intangible assets, and income taxes. These estimates and assumptions are continuously evaluated and are based
on management’s experience and knowledge of the relevant facts and circumstances. While we believe the estimates to be reasonable,
actual results could differ materially from those estimates and could impact future results of operations and cash flows. Intangible Assets Intangible assets acquired
individually or with a group of other assets from others (other than in a business combination) are recognized at cost, including
transaction costs, and allocated to the individual assets acquired based on relative fair values and no goodwill is recognized.
Cost is measured based on cash consideration paid. If consideration given is in the form of non-cash assets, liabilities incurred,
or equity interests issued, measurement of cost is based on either the fair value of the consideration given or the fair value
of the assets (or net assets) acquired, whichever is more clearly evident and more reliably measurable. Costs of internally developing,
maintaining or restoring intangible assets that are not specifically identifiable, have indeterminate lives or are inherent in
a continuing business are expensed as incurred. Intangible assets purchased
from others for use in research and development activities and that have alternative future uses (in research and development projects
or otherwise) are capitalized in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Intangibles with a finite
useful life are amortized using the straight-line method unless the pattern in which the economic benefits of the intangible assets
are consumed or used up are reliably determinable. The useful life is the best estimate of the period over which the asset is expected
to contribute directly or indirectly to our future cash flows. The useful life is based on the duration of the expected use of
the asset by us and the legal, regulatory or contractual provisions that constrain the useful life and future cash flows of the
asset, including regulatory acceptance and approval, obsolescence, demand, competition and other economic factors. We evaluate
the remaining useful life of intangible assets each reporting period to determine whether any revision to the remaining useful
life is required. If the remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized
prospectively over the revised remaining useful life. If an income approach is used to measure the fair value of an intangible
asset, we consider the period of expected cash flows used to measure the fair value of the intangible asset, adjusted as appropriate
for company-specific factors discussed above, to determine the useful life for amortization purposes. If no regulatory, contractual,
competitive, economic or other factors limit the useful life of the intangible to us, the useful life is considered indefinite.
Intangibles with an indefinite useful life are not amortized until its useful life is determined to be no longer indefinite. If
the useful life is determined to be finite, the intangible is tested for impairment and the carrying amount is amortized over the
remaining useful life in accordance with intangibles subject to amortization. Indefinite-lived intangibles are tested for impairment
annually and more frequently if events or circumstances indicate that it is more-likely-than-not that the asset is impaired. Impairment of Long-Lived Assets and Intangibles
Other Than Goodwill We account for the impairment
of long-lived assets in accordance with ASC 360 , Property, Plant and Equipment Intangibles – Goodwill
and Other, Stock-based Compensation Stock-based compensation
expense is based on the grant-date fair value estimated in accordance with the provisions of ASC 718, Compensation-Stock Compensation Net Loss Per Share Basic net loss per share
is computed by dividing our net loss available to common stockholders by the weighted average number of shares of common stock
outstanding during the year. Diluted net loss per share is computed by dividing our net loss available to common stockholders by
the diluted weighted average number of shares of common stock during the period. Since we experienced a net loss for all periods
presented, basic and diluted net loss per share are the same. As such, diluted loss per share for the nine months ended September
30, 2020 and 2019 excludes the impact of 1,146,112 and 662,443 potentially dilutive common stock, respectively, related to outstanding
stock options and warrants and the conversion of our 2017 and 2019 Senior Notes and line of credit agreement since those shares
would have an anti-dilutive effect on loss per share. Recent Accounting Pronouncements From time to time, the
Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements.
Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).
We have implemented all new accounting pronouncements that are in effect and that may impact our condensed consolidated financial
statements. We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our
financial position or results of operations. |
