Processa Pharmaceuticals' $5M Public Offering: A Cautious Optimism

Processa Pharmaceuticals, Inc. (Nasdaq: PCSA) has announced the pricing of a $5 million public offering, priced at-the-market under Nasdaq rules. The offering consists of 1,555,555 shares of common stock (or pre-funded warrants in lieu thereof) and common warrants to purchase up to 1,555,555 shares of its common stock, at a combined public offering price per share of common stock (or per pre-funded warrants in lieu thereof) and accompanying common warrant of $4.50. The offering was conducted on a "reasonable best efforts" basis, with H.C. Wainwright & Co., LLC acting as the exclusive placement agent.

The pricing of this public offering reflects a cautious market sentiment towards Processa Pharmaceuticals and the biopharmaceutical sector as a whole. The combined purchase price per share (and accompanying warrants) of $0.615 for institutional investors and $0.7975 for the Company's Chief Executive Officer and certain board members indicates a significant discount from the Company's previous stock price. This discount suggests that investors are seeking a lower entry point due to concerns about the Company's financial health and the broader biopharmaceutical sector's performance. The fact that the offering is a "reasonable best efforts" offering, rather than a firm commitment offering, further underscores the uncertainty and caution in the market. Additionally, the Company's intention to seek stockholder approval for the issuance of shares upon exercise of the Series A and B warrants indicates that the Company is aware of potential shareholder concerns about dilution.

Processa Pharmaceuticals aims to achieve several strategic objectives with the proceeds from this offering, which align with its long-term growth plans. These objectives include:

1. Funding Operations: The company expects the cumulative proceeds of $12.9 million to be adequate to fund its operations into the third quarter of 2024. This indicates that a significant portion of the funds will be used to maintain day-to-day operations and ensure the company's financial stability.
2. Clinical Trial Costs: The increase in net loss was primarily due to increased clinical trial costs. With the proceeds from the offering, Processa can continue to fund its ongoing clinical trials, such as the Phase 2A trial of PCS12852 in patients with gastroparesis and the Phase 2B trial of Next Generation Capecitabine (NGC-Cap) in colorectal cancer.
3. Research and Development: The company incurred $11.5 million in research and development costs in 2022, up from $6.9 million in 2021. The proceeds from the offering will enable Processa to continue investing in its research and development efforts, particularly in the development of Next Generation Chemotherapy drugs.
4. General and Administrative Expenses: The offering will also help Processa cover its general and administrative expenses, which totaled $8.8 million for the year ended December 31, 2022, compared to $4.7 million for the same period in 2021. This increase was primarily due to stock-based and other compensation costs.

The participation of the Company's Chief Executive Officer, board members, and existing institutional investors in this offering indicates their confidence in the Company's future prospects. This is evident from their willingness to invest in the Company at a premium price, despite its current financial situation. Their involvement in the offering also indicates their support for the Company's strategy, including its focus on developing Next Generation Chemotherapies and its use of the Project Optimus Oncology initiative to define Optimal Dosage Regimens for FDA approvals.

In conclusion, the pricing of Processa Pharmaceuticals' $5 million public offering reflects a cautious market sentiment towards the Company and the biopharmaceutical sector. However, the Company's strategic objectives and the confidence of its Chief Executive Officer, board members, and existing institutional investors indicate a positive outlook for the Company's future prospects. With the proceeds from the offering, Processa can continue to fund its operations, clinical trials, research and development efforts, and general and administrative expenses, ultimately working towards improving the efficacy and safety of cancer treatment and expanding its market reach.