10-Q: Processa Q3 2025: Losses Mount, Crypto Strategy Emerges

Processa Pharmaceuticals reported increased net losses in Q3 2025, continued reliance on capital raises, and is pursuing a new cryptocurrency treasury strategy while advancing its oncology pipeline.

Summary

• Net loss for the three months ended September 30, 2025, was $(3,436,573), compared to $(3,384,703) for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $(10,204,896), an increase from $(9,121,410) for the same period in 2024.
• Operating loss for the three months ended September 30, 2025, was $(3,488,843), compared to $(3,424,853) for the same period in 2024.
• Operating loss for the nine months ended September 30, 2025, was $(10,286,616), an increase from $(9,316,475) for the same period in 2024.
• Cash and cash equivalents totaled $6,308,420 as of September 30, 2025, significantly up from $1,191,325 at December 31, 2024.
• The accumulated deficit reached $97,424,095 at September 30, 2025.
• The company raised $10.6 million in net proceeds from public offerings in January and June 2025.
• An additional $1.2 million in net proceeds was raised from an accredited investor and $1.0 million from an ATM program in August 2025.
• Warrant exercises generated $728,000 during the nine months ended September 30, 2025, with an additional $945,000 by November 3, 2025.
• The company initiated a corporate cryptocurrency treasury strategy, holding $350,000 in USD-backed stablecoins as of September 30, 2025, which increased to $850,000 by November 3, 2025.
• The exclusive option to license PCS12852 to Intact Therapeutics was extended by 120 days for a $30,000 fee.
• The licensing agreement for NGC-Gem (PCS3117) with Ocuphire Pharma, Inc. (now Opus Genetics) was terminated, with all rights reassigned to Opus on October 24, 2025.
• The company received a Nasdaq deficiency letter on February 4, 2025, for failing to meet the minimum $1.00 bid price requirement, and stockholders approved a reverse stock split on September 11, 2025, to regain compliance.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including increasing net losses, a substantial accumulated deficit, and a going concern warning. While recent capital raises have improved short-term liquidity, the need for continuous financing, Nasdaq compliance issues, and the inherent risks of a novel cryptocurrency treasury strategy create considerable uncertainty. Positive developments in clinical trials and licensing agreements are overshadowed by the overall financial instability and high operational burn rate.

Positives

• Cash and cash equivalents significantly increased to $6,308,420 at September 30, 2025, from $1,191,325 at December 31, 2024, primarily due to successful capital raises.
• Successfully raised $10.6 million in net proceeds from public offerings in January and June 2025, and an additional $2.2 million from a private placement and ATM program in August 2025.
• Warrant exercises generated $728,000 during the nine months ended September 30, 2025, with an additional $945,000 received by November 3, 2025, contributing to liquidity.
• Strategic evaluation and implementation of a corporate cryptocurrency treasury strategy, holding $850,000 in Digital Assets by November 3, 2025, aiming to diversify capital and enhance financial flexibility.
• Progress in the NGC-Cap Phase 2 advanced or metastatic breast cancer trial with active site additions and patient enrollment.
• Re-evaluation of PCS499 for primary glomerular diseases (PGDs) with data suggesting potential for improved safety and efficacy compared to existing treatments.
• The exclusive option to license PCS12852 to Intact Therapeutics was extended, indicating continued interest and potential for future milestone payments and royalties.
• Amendment to the Yuhan Agreement extended the deadline for PCS12852 clinical trials from 48 months to 108 months, providing more development flexibility.

Negatives

• Net loss for the nine months ended September 30, 2025, increased to $(10.2) million from $(9.1) million in the prior year, indicating worsening financial performance.
• The accumulated deficit grew to $97.4 million as of September 30, 2025, reflecting continuous operational losses since inception.
• The company remains dependent on equity and/or debt financing due to ongoing losses and no generated product revenue.
• General and administrative expenses increased by $831,000 for the nine months ended September 30, 2025, primarily due to salary increases for C-suite executives and investment management fees related to digital assets.
• Research and development expenses increased by $139,997 for the nine months ended September 30, 2025, driven by the NGC-Cap trial and PCS499 evaluation, despite a decrease in R&D staff costs.
• Current funds are only sufficient to satisfy capital needs into the first quarter of 2026, indicating a short liquidity runway and continuous need for further financing.
• Substantial doubt exists about the company's ability to continue as a going concern within one year.
• Received a Nasdaq deficiency letter on February 4, 2025, for failing to meet the minimum $1.00 bid price requirement, necessitating a reverse stock split.
• The licensing agreement for NGC-Gem (PCS3117) was terminated, reassigning all rights to Opus Genetics.

Risks

• Limited cash and history of losses, with substantial doubt about the ability to continue as a going concern within one year.
• Inability to obtain adequate financing when needed may lead to delays, reductions in scope, or suspension of current or planned clinical trials and R&D programs.
• Raising additional capital through collaborations or licensing arrangements may require relinquishing valuable rights to product candidates or future revenue streams.
• Equity offerings will dilute the ownership interest of existing stockholders, and debt financing may impose restrictive covenants.
• Disruptions at the FDA and other government agencies could hinder the timely development, approval, or commercialization of new or modified products.
• Risk of Nasdaq delisting due to failure to meet the minimum $1.00 bid price requirement, which could limit investors' ability to trade securities and subject the company to additional trading restrictions.
• Inability to successfully implement the new cryptocurrency treasury strategy, potentially leading to organizational and infrastructure challenges.
• High price volatility of Digital Assets could adversely affect financial results and the market price of common stock, potentially resulting in capital loss.
• Digital Assets held in custody accounts are subject to security breaches, cyberattacks, or loss of passwords, with potential losses not fully covered by insurance.
• Risk of legal or regulatory action, including fines, if a digital asset held is determined to be a security under applicable laws.
• Significant legal, commercial, regulatory, and technical uncertainty surrounding Digital Assets, with rapidly evolving regulatory landscapes that could adversely affect the company's business.
• Increased costs of director and officer liability insurance or inability to obtain such coverage due to engaging in a cryptocurrency treasury strategy.
• Liquidity of Digital Assets may be impacted by changes in applicable laws and regulatory requirements.
• Ongoing legal proceedings, including a dispute with Elion regarding a license agreement termination and a lawsuit alleging fraud and negligent misrepresentation from investors, could result in material adverse impacts, including defense costs and judgments.

Future Outlook

The company expects to continue incurring net losses and negative cash flows from operations in the foreseeable future, remaining dependent on equity and/or debt financing. Current funds are projected to last into the first quarter of 2026. Plans include raising additional funds through various capital market activities, potentially using proceeds to purchase Digital Assets. The company aims to meet with the FDA in Q4 2025 to define the Phase 3 study design for PCS499 and continues to advance the NGC-Cap Phase 2 trial.

Management Comments

• "We believe our NGC treatments will provide improved safety-efficacy profiles when compared to their currently marketed counterparts."
• "We believe that strategic engagement with emerging financial technologies, including select Digital Assets with potential yield-generating capabilities, may offer novel avenues to diversify our capital base and enhance financial flexibility, while providing an opportunity for long-term value creation."
• "One of the potential benefits of a cryptocurrency treasury strategy is the potential of blockchain-based assets to contribute meaningfully to the funding of our clinical development programs."
• "We believe that if our clinical trials are successful and are showing better efficacy and tolerability than the currently used drugs, the commercial adoption for our NGC therapies will be rapid and broad."
• "We plan to obtain preliminary safety-efficacy data from these breast cancer patients in order to provide insight into the benefit of NGC-Cap over existing treatments."
• "The data suggests that PCS499 may not only be safer, but also more efficacious in more patients than PTX or other drugs presently used onand off-label for PGDs."
• "We plan to meet with the FDA in the fourth quarter of 2025 to further define the design of the Phase 3 study."
• "We plan to use the net proceeds from both financings for continued research and development for NCG-Cap, and for working capital and general corporate purposes."
• "We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us."

Industry Context

Processa Pharmaceuticals operates in the highly competitive and capital-intensive clinical-stage biopharmaceutical sector, focusing on oncology. The company's strategy of modifying existing FDA-approved drugs to improve safety and efficacy (Next Generation Cancer therapy) is a common approach to de-risk drug development. The exploration of a cryptocurrency treasury strategy is a novel and unconventional move for a biopharmaceutical company, potentially aiming to diversify funding sources beyond traditional capital markets, which could set it apart but also introduce new risks not typically associated with the industry. The re-evaluation of PCS499 for primary glomerular diseases (PGDs) leveraging FDA's acceptance of proteinuria as an endpoint reflects an adaptive strategy to clinical development pathways.

Comparison to Industry Standards

• The company's accumulated deficit of $97.4 million and continued net losses are typical for clinical-stage biopharmaceutical companies that have not yet brought a product to market.
• Reliance on frequent capital raises (public offerings, ATM programs, warrant exercises) is standard for pre-revenue biotech firms to fund extensive R&D and clinical trials.
• The Nasdaq minimum bid price deficiency is a common challenge for smaller, development-stage companies, often leading to reverse stock splits.
• The adoption of a cryptocurrency treasury strategy is highly unusual for a biopharmaceutical company and deviates significantly from industry norms for treasury management, introducing unique financial and regulatory risks.
• The licensing and partnership approach for non-oncology assets like PCS12852 (with Intact Therapeutics) is a standard industry practice to monetize non-core assets and share development risks.
• The termination of the NGC-Gem licensing agreement (PCS3117) is also a common occurrence in drug development, reflecting strategic shifts or lack of progress.

Corporate Governance

Legal Proceedings

• Dispute with Elion regarding the purported termination of a license agreement, with the company filing a complaint seeking monetary damages, declaratory judgment, and injunctive relief. The discovery phase has commenced.
• Lawsuit filed by Jason Assad and Marc Gyimesi alleging fraud and negligent misrepresentation in connection with a February 2021 private offering. The court dismissed two of three counts and claims against Patrick Lin and George Ng, leaving a portion of the fraud claim. The discovery phase has commenced.

Related Party Transactions

• CorLyst, LLC, where the President, Research and Development is CEO and CorLyst is a stockholder, reimburses the company for shared payroll, health insurance, and rent costs.
• Reimbursements from CorLyst were approximately $24,000 for the three months ended September 30, 2025, and $84,000 for the nine months ended September 30, 2025.
• Approximately $19,000 was due from CorLyst as a current asset at September 30, 2025.

Stakeholder Impact

• Shareholders face significant dilution from recent and planned capital raises, potential for further dilution from warrant exercises and stock-based compensation. The risk of Nasdaq delisting could negatively impact liquidity and trading. Ongoing legal proceedings introduce uncertainty. The cryptocurrency strategy introduces new, high-risk investment exposure.
• Employees and management received salary increases for C-suite executives. Stock-based compensation (options, RSUs) provides incentives.
• Future customers could benefit from new treatment options for cancer and primary glomerular diseases if NGC-Cap and PCS499 clinical trials are successful.
• Creditors face elevated risk due to the company's going concern warning.
• Licensors such as Yuhan Corporation benefit from an extended deadline for PCS12852 development. Intact Therapeutics' extended due diligence for PCS12852 indicates continued interest. The termination of the NGC-Gem license with Opus Genetics reassigns rights.

Next Steps

• Continue active patient enrollment and site additions for the NGC-Cap Phase 2 advanced or metastatic breast cancer trial.
• Obtain preliminary safety-efficacy data from NGC-Cap breast cancer patients to inform potential protocol modifications.
• Meet with the FDA in Q4 2025 to define the design of the Phase 3 study for PCS499 in primary glomerular diseases (PGDs).
• Continue due diligence and negotiations with Intact Therapeutics for the PCS12852 license agreement.
• Implement the corporate cryptocurrency treasury strategy, including acquiring and holding Digital Assets.
• Raise additional funds through public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and other marketing and distribution arrangements.
• Address Nasdaq minimum bid price compliance, potentially through a reverse stock split.
• Vigorously defend against ongoing legal proceedings with Elion and the Assad/Gyimesi lawsuit.

Key Dates

Recommendation

Processa Pharmaceuticals presents a highly speculative investment. The company is deeply unprofitable with an accumulated deficit nearing $100 million and explicitly states 'substantial doubt exists about our ability to continue as a going concern within one year.' While recent capital raises have provided a temporary cash infusion, the company's liquidity runway is short (into Q1 2026), necessitating continuous, dilutive financing. The Nasdaq delisting risk, requiring a reverse stock split, further signals underlying operational and market challenges. The introduction of a cryptocurrency treasury strategy, while novel, adds significant, unproven, and highly volatile risk exposure for a biopharmaceutical company, diverting focus and capital from its core drug development. Ongoing legal disputes add further uncertainty and potential financial strain. Despite some clinical progress and licensing activity, the overwhelming financial instability, high burn rate, and new speculative ventures make this a 'strong sell' for seasoned investors.

Keywords

Biopharmaceutical, Oncology, Cancer Therapy, Clinical Trials, SEC Filing, 10-Q, Financial Results, Liquidity, Going Concern, Capital Raise, Cryptocurrency Strategy, Digital Assets, Nasdaq Delisting, PCS6422, NGC-Cap, PCS499, PCS12852, Intact Therapeutics, Yuhan Corporation, Drug Development, Risk Factors