August 28, 2018
David Young
Chief Executive Officer
Processa Pharmaceuticals, Inc.
7380 Coca Cola Drive, Suite 106
Hanover, MD 21076
Re: Processa Pharmaceuticals, Inc.
Registration Statement on Form S-1
Filed July 30, 2018
File No. 333-226428
Dear Dr. Young:
We have reviewed your registration statement 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 this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-1
Cover Page
1. We note your disclosure that your common stock is quoted on the OTC Pink
Market.
Please revise here, and make corresponding changes elsewhere in the
prospectus, to disclose a fixed price at which your shares will be sold
until your shares
are listed on a national securities exchange or quoted on the OTC
Bulletin Board, OTCQB
or OTCQX.
David Young
FirstName LastNameDavid Young
Processa Pharmaceuticals, Inc.
Comapany NameProcessa Pharmaceuticals, Inc.
August 28, 2018
August 28, 2018 Page 2
Page 2
FirstName LastName
Description of Business, page 1
2. Please provide more detail concerning the current stage of development
of PCS-499 in
this section such as whether PCS-499 is in the preclinical stage of
development and
whether you have conducted any clinical trials for PCS-499, filed any
regulatory
applications or had any pre-filing conferences with regulatory
agencies.
Prospectus Summary, page 1
3. Please revise your disclosure to briefly explain in terms a lay reader
would understand
what you mean that your product candidate is an "analog of an active
metabolite" of an
already approved drug. Please also disclose the drug that is already
approved, when it was
approved, the indication for which it was approved, and the fact that
it was approved by
the FDA as disclosed elsewhere in the prospectus.
4. We note your statement here, and elsewhere in the prospectus, that
your lead product
candidate compound has been shown to be "safe and tolerable" and "with
a trend toward
efficacy in diabetic nephropathy." Safety and efficacy determinations
are solely within
the authority of the FDA and comparable regulatory authorities. Please
revise your
disclosure to remove all references to your product candidate as being
effective, including
preliminary indications of efficacy (whether for your planned
indication or other
indications). Please make similar revisions regarding your statements
about your product
candidate's safety. In the "Description of Business" section, you may
present the objective
results of trials.
Risk Factors, page 1
5. Please expand this section to disclose that you do not own any patents
for your drug
candidate and you are dependent on a license. Please also disclose in
this section that you
have not initiated any clinical trials and your independent registered
public accounting
firm's doubt about your ability to continue as a going concern.
Risk Factors, page 6
6. Please add a risk factor to discuss the fact that you do not currently
have an audit or
compensation committee and that only one of your directors is
independent.
We depend on rights to certain pharmaceutical compounds that are or will be
licensed to us, page
15
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
August 28, 2018 Page 3
Page 3
FirstName LastName
There may be limitations on the effectiveness of our internal controls, page 19
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.
Our principal stockholders have significant influence over us, . . ., page 21
9. Please expand this risk factor to also discuss the combined ownership
of your 5%
stockholders in addition to your executive officers, directors, and
their affiliates.
Liquidity and Capital Resources, page 30
10. Please disclose how long you expect your business operations to
continue given your
current amount of cash and funds. If you expect that your business
operations cannot
continue given your current amount of cash and funds, please disclose
the amount of
additional financing necessary to continue operations.
Description of Business, page 37
11. We note your disclosure on page 37 regarding your team's prior
experience developing
drug products. Please revise your disclosure to provide balancing
language that the prior
experience of your team is not an indication of a similar result with
respect to Processa.
12. We refer to your statement that your business strategy is to identify
drugs that can be
"quickly" developed within "2-4 years." Please tell us why you believe
this time frame is
realistic given the lengthy and uncertain process of seeking
regulatory approval.
13. We note your statement that part of your business strategy is to
identify drugs that have
potential efficacy in patients with an unmet medical need, even if the
evidenice is
"anecdotal." Please revise this disclosure to explain how you would
consider anecdotal
information to serve as clinical evidence.
14. Please quantify your funding obligations under your CRO agreement with
Integrium, LLC
to conduct your planned Phase 2 study for PCS-499 in the treatment of
NL. Please
also disclose whether the $1.8 million that will be paid directly to
Integrium by the
investor will be sufficient to complete the planned Phase 2 clinical
trial.
15. Expand your disclosure to explain how you identified Necrobiosis
Lipoidica (NL) and
Radiation-Induced Fibrosis (RIF) in head and neck cancer patients as
indications for
which PCS-499 may result in clinical efficacy.
16. We note your disclosure that you intend to pursue a Phase 2 clinical
trial for PCS-499.
Please disclose how you will proceed to a Phase 2 trial given that it
appears that you have
not conducted any Phase 1 clinical trials and disclose the regulatory
pathway that you
intend to pursue. Please expand your disclosure to discuss specific
trial results for your
product candidate on which you intend to rely, including the duration
of the trial, the
David Young
FirstName LastNameDavid Young
Processa Pharmaceuticals, Inc.
Comapany NameProcessa Pharmaceuticals, Inc.
August 28, 2018
August 28, 2018 Page 4
Page 4
FirstName LastName
number of subjects or patients in such trials, how the drug candidate
was administered,
who conducted the trials, the dosage used, any serious adverse events
experienced,
the primary and secondary endpoints and whether they were met.
Asset Acquisition, page 38
17. Please revise this section to discuss the material terms of your
CoNCERT agreement,
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 F-26 concerning CoNCERT's right to have one Board observer
attend the
Promet's Board meetings. If CoNCERT still has that right with respect
to Processa's
Board meetings, please discuss it here.
Intellectual Property, page 38
18. Expand 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.
Directors, Executive Officers, Promoters and Control Persons, page 43
19. Please revise 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 or
remove this statement from his biography.
Corporate Governance, page 45
20. We note your statement here that Mr. Thompson is independent as
defined by NASDAQ
Rule 5605, and your statement in your Annual Report on Form 10-K filed
on April 2,
2018, as amended, that there were no independent directors on your
board under this rule,
which would include Mr. Thompson. Please explain what factors led to
this change.
Security Ownership of Certain Beneficial Owners and Management, page 49
21. Please revise your disclosure to identify the natural person or
persons who have voting
and investment control of the shares held by Promet Therapeutics, LLC,
CorLyst, LLC
and CoNCERT Pharnaceuticals, Inc. Please also confirm whether Dr.
Young has voting
and investment control of the shares held by the Young-Plaisance Revoc
Trust.
Transactions with Related Persons, Promoters and Certain Control Persons, page
50
22. We note your statement that Dr. Young is also the CEO and managing
member of
CorLyst, LLC. Please revise to clarify the percentage of time Dr.
Young spends on your
business, and if the time spent on other businesses is not immaterial,
please expand your
risk factor discussion to disclose this obligation.
David Young
FirstName LastNameDavid Young
Processa Pharmaceuticals, Inc.
Comapany NameProcessa Pharmaceuticals, Inc.
August 28, 2018
August 28, 2018 Page 5
Page 5
FirstName LastName
The Selling Stockholders, page 55
23. Revise your table to also include information relating to the
percentage to be owned by
security holders after completion of the offering to the extent such
percentage is 1% or
more. In addition, please disclose the relationship you have with PoC
Capital, LLC,
which appears to be the investor who is committed to fund up to $1.8
million of your
clinical trial expenses. Refer to Item 507 of Regulation S-K.
Plan of Distribution, page 57
24. We refer to your statement that any pledgee of each selling
stockholder may sell the
shares covered by the registration statement, and we note that under
your agreement with
PoC Capital, PoC has pledged to you as collateral 50% of its
securities received from its
investment. If true, please revise to clarify the exclusion of these
pledged securities from
your statement. In addition, please tell us when the securities will
be released from the
pledge, and file your agreement with this investor as an exhibit to
your registration
statement, including all exhibits thereto.
Financial Statements
Notes to Consolidated Financial Statements
Note 2 - Intangible Asset, page F-38
25. 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 F-41 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, 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 6
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
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 6
cc: Neda Sharifi
FirstName LastName