Processa Pharmaceuticals, Inc. (PCSA) Initiation Report

October 28, 2020 Processa Pharmaceuticals, Inc. Page 5 of 16 ALPHA SELECT LIST Institutional Research WHAT DO THEY DO Headquartered in Hanover, Maryland, Processa Pharmaceuticals, Inc. is a clinical stage biotech company focused on the development of therapeutics that improve survival and/or quality of life for patients with high unmet medical need. The foundation of the Company is its high caliber management and clinical development team that has collectively been involved in over 30 drug approvals by the FDA and achieved multiple successful biotech exits, each over a billion dollars. The lead program is PCS499, which will begin enrolling a Phase IIb study in Q1 2021 to treat necrobiosis lipoidica, a rare autoimmune disease for which there are no approved treatments. PCS6422 is an adjunctive therapy to 5-FU, the most widely use chemotherapy regimen, that enhances the formation of cancer killing metabolites while reducing the side effects of neuropathy and hand-foot syndrome (HFS). PCS12852 is a more selective 5HT4 inhibitor that also improves upon the efficacy and side effect profile of gastrointestinal motility therapies for constipation. The Phase IIa is also expected to begin by early next year. While the Company has two additional assets in preclinical development, the current focus will be on furthering the clinical stage programs over the next two years. Figure 3: PCSA Pipeline Source: Company filing. PCS499 for Necrobiosis Lipoidica Background on Necrobiosis Lipoidica Necrobiosis lipoidica (NL) is a chronic and rare granulomatous disease that disfigures the skin with no FDA approved therapies. Typically, red-brown-violet patches develop on the legs, progressing to yellow-brown plaques that may cause pain and even if asymptomatic, significantly impair quality of life. The cause of NL is unclear, but the most common theory identifies a vascular disturbance involving immune complex deposition or microangiopathic changes leading to collagen degeneration or abnormal collagen synthesis, with inflammation occurring as a secondary event. Definitive diagnosis is based on histopathology that shows multinucleated giant cells located between collagen, necrotic collagen, and an associated inflammatory infiltrate of lymphocytes and plasma cells. Ulceration is the main complication in ~1/3 of lesions, typically following minor trauma. Lesions must be monitored for more severe complications, such as deep tissue infection, increased risk of squamous cell carcinoma, and osteonecrosis, which can threaten the entire limb. The lesions take months to close and are best managed by a medical team that includes a dermatologist, endocrinologist, wound care nurse, internist and an infectious disease specialist. Approximately 13-19% of all patients with NL naturally progress to complete healing over many years (range of 1-34 years, average of 12 years for diabetics and 8 years for nondiabetics). The more severe form with ulcers has <10% likelihood of healing after 1-2 years. NL has an increased prevalence of ~0.3-2.0% in individuals with diabetes.