August 28, 2018
David Young
Chief Executive Officer
Processa Pharmaceuticals, Inc.
7380 Coca Cola Drive, Suite 106
Hanover, MD 21076
Re: Processa Pharmaceuticals, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2017
Filed April 16, 2018 (as amended on April 17, 2018)
Form 10-Q for the Quarterly Period Ended March 31, 2018
Filed May 21, 2018
File No. 333-184948
Dear Dr. Young:
We have reviewed your filings and have the following comments. In some
of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Annual Report on Form 10-K/A
Item 1. Business, page 3
1. Please expand your disclosure to explain how you identified NL and RIF in
head and neck
cancer patients as indications for which PCS-499 may result in clinical
efficacy. Please
also explain in terms a lay reader would understand what you mean that
your product
candidate is an "analog of an active metabolite," and disclose the drug
that is already
approved, the indication for which it was approved, and clarify whether
it was approved
by the FDA or another regulatory authority.
2. We note your statements that your lead product candidate compound has
been shown to
be "safe and tolerable," and "with a trend toward efficacy in diabetic
nephropathy."
David Young
FirstName LastNameDavid Young
Processa Pharmaceuticals, Inc.
Comapany NameProcessa Pharmaceuticals, Inc.
August 28, 2018
August 28, 2018 Page 2
Page 2
FirstName LastName
Safety and efficacy determinations are solely within the authority of
the FDA and
comparable regulatory authorities. Please confirm that in future
filings, you will revise
your disclosures to remove all references about your product
candidate's safety
and efficacy, including statements regarding preliminary indications
of efficacy (whether
for your planned indication or other indications).
3. We refer to your statement that your business strategy is to identify
drugs that can be
"quickly" developed within "2-4 years." Please expand your disclosure
to discuss the
regulatory pathways you intend to pursue for your lead and other
product candidates and
their requirements. If you intend to rely on studies of third parties
in seeking approval for
PCS-499, identify the parties who performed the studies.
Intellectual Property, page 4
4. Please revise your disclosure to discuss the patents you have licensed
relating to your
product candidate, including the jurisdiction, the type of patent
protection (e.g.,
composition of matter, use, or process), and the patent expiration
dates.
Asset Acquisitions by Licensing Agreements or Company Acquisitions, page 5
5. Please revise this section to discuss the material terms of your
CoNCERT agreement and
any other material license or collaboration agreements you may have at
the time,
including the nature and scope of the intellectual property
transferred, each parties' duties
and obligations, the term of the agreement, the royalty term, the
royalty rates, the
termination provisions and any potential milestone payments. We also
note the discussion
on page 68 concerning CoNCERT's right to have one Board observer
attend Promet's
Board meetings. If CoNCERT has that right with respect to Processa's
Board meetings,
please discuss it here.
Item 1A. Risk Factors, page 9
6. Please add a risk factor to discuss the material risks associated with
the fact that you do
not have an audit or compensation committee, and that (according to
the disclosure in
your Registration Statement on Form S-1 filed on July 30, 2018) only
one of your
directors is independent.
We depend on rights to certain pharmaceutical compounds that are or will be
licensed to us. ,
page 19
7. We note your disclosure in this risk factor that your drugs are
in-licensed from other
biotech or pharmaceutical companies and that you do not own the
patents that underlie
these licenses. Please specify the product candidates that you are
referring to as well as
the patents and the biotech or pharmaceutical companies from whom you
have licensed
such patents.
David Young
FirstName LastNameDavid Young
Processa Pharmaceuticals, Inc.
Comapany NameProcessa Pharmaceuticals, Inc.
August 28, 2018
Page 3
August 28, 2018 Page 3
FirstName LastName
There may be limitations on the effectiveness of our internal controls, page 26
8. We note your disclosure that you experienced a cybersecurity breach
that resulted in a
fraud loss where the probability of recovery of the loss is remote.
Please disclose when
the breach occurred and quantify the loss in this risk factor.
Item 10. Directors, Executive Officers and Key Employees, page 73
9. Please revise your disclosure to explain how Dr. Young helped Questcor
transition from
being nearly bankrupt to having a valuation of over $5 billion in his
role as an
independent director.
Form 10-Q for the Quarterly Period Ended March 31, 2018
Notes to Consolidated Financial Statements
Note 2 - Intangible Asset, page 12
10. You disclose that the $11 million intangible asset recorded as of
March 31, 2018 includes
$3 million of costs capitalized to record an offset to a deferred tax
liability related to the
exercise of your option to acquire an exclusive license from CoNCERT
related to patent
rights and know-how to develop and commercialize compounds and
products for CTP-
499. You also disclose on page 15 that this deferred tax liability was
created when
CoNCERT sold its license and know-how to you for stock in a
transaction under Section
351 of the Internal Revenue Code (Section 351 transaction) which
treats the acquisition of
the license and know-how as a tax-free exchange. Please provide us
with a detailed
analysis explaining how you determined that this transaction met the
requirements to be
considered a tax-free exchange under Section 351. In this regard, it
would appear that
under Section 351 an exchange would be considered tax free if (a) the
property was
exchanged solely for stock of the company and (b) immediately after
the exchange the
transferor controlled the company via 80% or more ownership of voting
stock. Based on
your beneficial ownership table on page 49 of your Form S-1 filed on
July 30, 2018, it
appears that CoNCERT owns only 5.4% of your outstanding shares.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
David Young
Processa Pharmaceuticals, Inc.
August 28, 2018
Page 4
You may contact Andi Carpenter at 202-551-3645 or Angela Connell at
202-551-3426 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Dorrie Yale at 202-551-8776 or Ada Sarmento at 202-551-3798 with any
other
questions.
Sincerely,
FirstName LastNameDavid Young
Division of
Corporation Finance
Comapany NameProcessa Pharmaceuticals, Inc.
Office of Healthcare
& Insurance
August 28, 2018 Page 4
cc: Neda A. Sharifi
FirstName LastName