Processa Pharmaceuticals, Inc. (PCSA) Initiation Report

October 28, 2020 Processa Pharmaceuticals, Inc. Page 15 of 16 ALPHA SELECT LIST Institutional Research RISKS We believe an investment in PCSA involves the following risks: • Exogenous considerations – competitive, political and regulatory: We believe pharmaceutical companies have the least control over competitive, political, and regulatory risks. Although we have incorporated competitive assumptions into our forecasts, there may be other risks beyond the scope of our analysis. Changes in the drug reimbursement system, as well as any political or regulatory amendments, may significantly influence the earnings power of these companies. The ongoing Covid-19 pandemic could also disrupt operations and the ability to run clinical trials. • Product performance and regulatory approval: Actual clinical results and the FDA’s conclusions may deviate from expectations. Many of our assumptions are based on a review of incomplete clinical trial data available in the public domain. Often, our conclusions are drawn from early stage data, which may not be reflected by pivotal studies. Furthermore, the regulatory authority’s conclusions may not coincide with our own, materially changing our financial assumptions. The product candidate is based on a new formulation of an existing technology which has never been approved for the treatment of any cancer and, consequently, is inherently risky. Concerns about the safety and efficacy could limit future success. • Compliance issues, product recalls, manufacturing, and other regulatory mandates: Regulatory compliance issues, ranging from accounting irregularities to defective manufacturing, could materially change our assumptions and earnings outlook. Unanticipated product recalls and labeling changes could also have adverse consequences on our earnings assumptions. Similarly, delays or hurdles in developing a commercial grade manufacturing supply may delay clinical trials or otherwise impact business operations. • Risk of transactional events, liquidity: Raising additional capital may cause dilution to stockholders or restrict operations. PCSA will require substantial additional capital in the future to further development and license any additional products. Delays in obtaining additional funding could adversely affect its ability to move forward with additional studies or in licensing activities. • Legal: Legal matters could lead to additional liabilities and revenue loss. In addition to the expenses incurred by patent challenges, product liability and other legal suits could occur and lead to additional liabilities and revenue loss, which could substantially change our financial assumptions. Note: The above list does not purport to be a complete list of risk factors. See the company’s annual filing for other investment risks. CRAIG-HALLUM ALPHA SELECT LIST The Alpha Select list is an actively researched collection of smaller, underfollowed public companies that we believe have the potential to become much larger. An “acorn” list of sorts, the Alpha Select List will typically consist of sub-$250M market cap companies with attractive business models, above average growth trends, favorable macro-secular themes, and management teams that we believe have the ability to take the business to the next level.