Greetings and welcome to Processa Pharmaceuticals Second Quarter 2021 Earnings Conference Call and Corporate Update. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference call is being recorded. It is now my pleasure to introduce Jim Stanker, Chief Financial Officer. Thank you, sir. You may begin.

Thank you and welcome to Processa's second quarter 2021 quarterly results and drug development update conference call. Joining me on the call today are our Chief Executive Officer, Dr. David Young; and our Chief Operating Officer, Mike Floyd. Shortly before this call, we filed our second quarter Form 10-Q. I want to remind everyone that a PowerPoint presentation will accompany Dr. Young's prepared remarks. To view the PowerPoint slides, please go to the earnings press release and click on the webcast link to follow along. I will start our call by reading the Safe Harbor statement. This statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historic facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Although we believe expectations and assumptions reflected in these forward-looking statements are reasonable, we can make no assurances that such expectations will prove to be correct. Actual results may differ materially from those expressed or implied in forward-looking statements due to various risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in our annual report on Form 10-K, those contained in subsequently filed quarterly reports on Form 10-Q, as well as in other reports we file from time-to-time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent knowledge, events or…

Thank you, Jim. Good evening. Thank you for joining us today. During my time with you today, I plan to highlight what we've accomplished so far in 2021 in our drug development programs, then briefly share what you should be expecting over the next 6 to 12 months. I will not be covering all the details on each slide, but the slides will be posted on our website if you want to study them more. Let's go to our first slide. I'm sure that most of you seen this slide before, it describes the criteria that we use to select the drug for our pipeline. But also describe the fundamental approach that Processa uses corporately. We make small bets on potentially large wins in order for Processa to achieve an asymmetrical risk reward or market cap to market opportunity. Both our regulatory science approach and our corporate approach, is to evaluate the benefit risk of everything and determine how to improve the benefit risk profile to our advantage. That's why we are a drug development company not a drug discovery company, and while we have 5 criteria that must be met for a drug to be in our pipeline. Today, I will only briefly talk about the first 3 criteria. The first criteria is the drug must provide treatment to patients that need better treatment options than what already exists. These are patients with an unmet medical need condition, who need something to improve their survival and are improve their quality of life. Second, there must be some evidence of clinical efficacy for the drug in the target population of patients. This means that a drug or a drug with similar pharmacology must have demonstrated some efficacy in the target population. And third, the regulatory science approach to develop the…

Certainly. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question is coming from François Brisebois. Your line is live. François Brisebois: Hi, thanks for taking the question. So I was just wondering on 6422 is coming up shortly for an interim look. What are you hoping to see in this interim look? And I think you mentioned having found some biomarkers for 6422. I was just wondering if there's anything shared there on that side? Thank you.

Thanks for the question, Frank. This is David. We're not really sharing what the biomarkers are right now. And so, I can't share that. But what I can tell you is the interim look we're going to be actually figuring out if 6422 is affecting the metabolism enough and long enough to give us an advantage and improve the safety and efficacy of Xeloda or capecitabine. So we'll be looking actually at the metabolism, what's the effect on the metabolism side of view. That's really what we'll be doing. And we'll be able to report that out with multiple cohorts by the end of the year. François Brisebois: And will you get any look on levels of DPD for instance.

We're going to be looking at DPD. And so, we're working on multiple assays. One assay may be a little bit better than the other. And so, that's kind of being evaluated now. We will try to look at DPD, but we're not sure what assay we'll be using to do that with, because there are multiple assays that we could use. But we will have a feeling for what's going on with DPD, yes, 100%. François Brisebois: Understood, that's great. And then, just if I sneak another one in, on 6422, in terms of the commercial opportunity, I know that's a little further away. However, I guess, a 2-part question, from this Phase 1B, can you move right into a Phase 3 and depending on the data, I guess? And also, how important is it to show safety and efficacy advantages? Or would safety alone be sufficient? Thank you.

Okay. Let me answer your second question first. All right, it would be better if we had efficacy and safety. The problem with just safety, being better safety, the sample size might require a larger number. That may be the problem. We don't know that yet. But having done safety-only studies or improving safety studies before in former life, that usually is what occurs. If you're trying to prove the safety is better, it usually requires larger sample size. So that it would be better for us if it was efficacy and safety. All right. And we think we're going to see both. But again, we're not saying what the exact efficacy improvement will be. We know it will be safety. But we think we'll also be able to have some efficacy improvement. So that's your second question. Your first question, I forgot, Frank, what was your first question?

He was asking whether you can go from Phase 1B to Phase 3. The question is, what would be - what could be the next phase of development hereafter?

Okay, all right. So it really depends on what we're seeing in the Phase 1B. If we're seeing some efficacy in terms of progression-free survival or overall efficacy, then we might be able to. If we're not, we might be able to go to a Phase 3. What we would do though, is we would choose an adaptive design Phase 3. We wouldn't just do a straight Phase 3. We would choose an adaptive design Phase 3. If we're not able to get enough efficacy call on what's going on in a Phase 1B then, in fact, we might do a 2B instead. And then, do a Phase 3 after that. So it really depends on what results we're getting. So it's a possibility. But I just don't know right now until we see the data. François Brisebois: Thank you very much.

Your next question is coming from Aydin Huseynov. Your line is live.

Hi, thank you for taking my questions and congratulations with the quarter. One question on 3117. So given that PCS3117 has a similar structure with gemcitabine, how would you imagine, hypothetically, the Phase 3 trial design? One of your slides mention that 55% to 85% are resistant to gemcitabine? So would you target this population or would you try 3117 in a randomized fashion versus gemcitabine?

That's a good question. And right now, we're thinking about all the options. We haven't come up with a final conclusion on it. But that's one reason we're doing the biomarker. And so, we will be doing 2B study. If the biomarker helps to identify those patients who respond to 3117, then we could theoretically just go with the 3117 biomarker type of approach, and against gemcitabine or take treatment resistant gemcitabine patient. So, there is a lot of options for the Phase 3, and we're just not sure yet until after we get the data from the Phase 2B study with biomarkers.

Okay, I appreciate that. And about the biomarker for 3117, if you had to develop a biomarker assay to improve the efficacy of gemcitabine, and obviously, right now it's just all commerce approach. But if you had to design a biomarker assay for gemcitabine, what would you be looking for in terms of how to improve the response rate of patients to gemcitabine?

There's been a lot of work actually done in looking at gemcitabine treatment resistance and whether it's be inherent treatment resistance, or acquired treatment resistance with gemcitabine. And a lot of that work points to there are 4 or 5 different areas, or different pharmacological biological things that occur that could be causing the resistance everywhere from the dCK level to the transport of the gemcitabine steadily through across the cell membrane to the ribonucleotide reductase level. All of those things are possibilities that could affect gemcitabine resistance and efficacy. And so part of our goal in looking at the biomarkers for 3117 will be, we're going to have to also consider the biomarkers that also may be in existence for gemcitabine and pancreatic cancer in general. So, again, we are not really being real specific on which biomarkers or biological molecular entities we're going to be monitoring. But, we're looking at a whole gambit of potential biological markers.

Understood. Thank you. I have another question on PCS499. So, you enrolled 2 patients, 10 patients who were pre-screened, but didn't fit the criteria apparently. So would you be able to comment which criteria of these patients didn't meet?

Yeah, it was a mixture, there was not 1 criteria, it was a mixture from patients not wanting to travel and do all the tests, all the visits that was one. With the criteria that instead of having an ulcer, it was more of an erosion of the skin, and rather than the ulceration of the skin, those types of things. So when the physician started talking to the patient on the phone to see if they would, should come in to be screened. They realize, oh, this patient isn't going to qualify, because, it's just an erosion, it's not really an ulcer, for example, or the ulcers real small, it's not large enough. So it was really, again, looking at based on the phone call, what's going on with the patient and then making some decisions upfront, that they just wouldn't be qualified.

Okay. Thank you very much for taking my questions.

Thank you.

Your next question is coming from Robin Garner. Your line is live.

Hi, good evening, and congratulations on the quarter. Few questions for me. The first, how many patients do you expect to be part of the interim analysis for necrobiosis lipoidica? And what are you hoping that that interim look will reveal?

Okay. So we expect to have somewhere between 8 and 10 patients on our interim analysis. And we expect that it will tell us something about the response rate of the placebo group, that's probably the most important thing, because nobody has actually formally studied that. You can talk to physicians, you can talk to patients, and all of them will tell you, well, if you just use the standard of care, nothing really heal the ulcers. It doesn't go away quickly. It may take years and years and years to go away, if it goes away at all, so that test is the placebo group. And so what, that's the biggest piece of information we'll get, is does the placebo group have a lower response rate in terms of natural healing. And if that's true, then it becomes easier for us to design and have a smaller sample size in our Phase 3 study, it's easier to discuss the options with FDA, because, again it's evidence that natural healing just doesn't occur.

Okay, thank you for that. You mentioned earlier that 3117 is your most advanced oncology asset. How should we - and I know this is a little bit far out, but how should we think about the length of a Phase 3 study for this program? And when it would read out relative to a 6422 Phase 3 study?

Yeah, that was a tough one. That was a tough one to answer. I don't think I have an answer for that one quite yet. I need to see the results of the Phase 1B trial and the Phase 2B trial. The reason we say it's the most advanced is, we believe we can get to the Phase 3 trial relatively quickly, based on doing a Phase 2B biomarker kind of study or analysis, and then quickly go into the Phase 3. Well, the 6422, we're in Phase 1B to determine the maximum tolerated dose. And depending if we see any efficacy that will guide us in terms of what we're going to do. We already know that in treatment resistance gemcitabine patients that there is some efficacy with 3117. So we have that information already. So that's kind of where we're coming from, it's just there's a couple extra steps that we might have to take with 6422. Now, we could get lucky, and that we could see some efficacy results in the Phase 1B for 6422. Then, of course, it may be neck and neck between the 2. So I really, it's hard for me to say what the timing will be or which one will be hitting Phase 3 first. That's just kind of our guess given what we have, the data we have in front of us right now.

Okay, thank you for that. And then my last question, just how should we think about clinical trial costs going forward for all 3 programs that will be in the clinic very shortly?

Are you talking about clinical trial costs for the trials that are going on now, or you're talking about future clinical trial costs like Phase 3?

Really just the current, but including gastroparesis [indiscernible] 499.

Right. Okay. Yeah, so 499, 6422 study, and the 12852 gastroparesis study, all those are in the range of $3 million to $5 million. That's kind of the range of the study, depending on which one. So they're all in a very similar range between $3 million and $5 million. Now, the 3117 study, again, we're developing the biomarker. That's going to take about 6 to 12 months to develop. So we really haven't gotten to the whole design of that study yet. So I can't give you a cost. But my guess, if I would give you a cost, it's going to be somewhere around the $3 million range. So all of these studies I think are going to be in the $3 million to $5 million range. That's for all 4 of those drugs.

Okay, thank you.

Thank you.

There are no further questions from the lines at this time. Thank you, ladies and gentlemen, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Thank you. Bye-bye.