According to the pharmaceutical and biotech industry on the 7th, Processa and Yuhan Corporation signed “Amendment No. 2” regarding PCS12852 and made partial changes to the terms of the technology transfer agreement. In its second-quarter report recently filed with the U.S. Securities and Exchange Commission (SEC), Processa specified August 14 of next year as the deadline for the first patient dosing in a Phase 2b, Phase 3, or other pivotal clinical trial.
Four-Year Stagnation After Phase 2a… One-Year Extension Granted Five Days Before ExpirationThe background to this contract amendment lies in the development delays of PCS12852, which have persisted for several years since 2020, and the process of pursuing a technology transfer to a third party.
PCS12852 is a serotonin receptor agonist that promotes gastrointestinal motility. In August 2020, Yuhan transferred the global rights (excluding South Korea) for the development, manufacturing, and commercialization of PCS12852 to Processa. The total contract value was up to $410.5 million (approximately 500 billion won), including an upfront payment of $2 million and milestone payments tied to development, regulatory approval, and sales milestones.
The agreement also included phased obligations to prevent Processa from merely securing the rights while delaying development for an extended period. Within 90 days of signing the agreement, Processa was required to prepare a draft development plan incorporating Yuhan Corporation’s feedback, and within six months, it had to apply for a pre-IND (Investigational New Drug) meeting with the U.S. Food and Drug Administration (FDA).
Furthermore, the agreement stipulated that the first patient dosing for a Phase 2a clinical trial must occur within 24 months of signing the contract, and the first patient dosing for a Phase 2b or Phase 3 trial—or any other pivotal clinical trial—must be completed within 48 months. There was also a condition that commercial sales must begin within 12 months of receiving marketing approval. If Processa failed to fulfill these development obligations on time, Yuhan Corporation could terminate the contract following a set procedure.
Early-stage development proceeded relatively smoothly. After receiving an IND approval from the FDA for the Phase 2a clinical trial in October 2021, Processor enrolled its first patient in April 2022. By September of the same year, the company had completed enrollment of 25 patients with moderate-to-severe gastroparesis. Clinical results showed that in the high-dose group (0.5 mg), the time to half-emptying of the stomach contents was reduced by an average of 31.9 minutes compared to before administration. In the placebo group, the reduction was 9.36 minutes. No serious adverse events or cardiovascular safety issues were reported.
The problem arose afterward. According to the contract, Processor was required to administer the drug to the first patient in a follow-up clinical trial by August 2024—48 months later—but failed to meet this deadline. Even now, nearly four years after the completion of the Phase 2a trial, the Phase 2b trial has not yet begun.
Analysts attribute the development delay to Processor’s poor financial condition. In 2023, Processa’s stock price remained below $1 for 30 consecutive trading days, prompting the Nasdaq to notify the company that it had failed to meet listing requirements. Subsequently, in January 2024, the company carried out a 20-for-1 reverse stock split. Last year, it again failed to meet listing requirements for the same reason and conducted another 25-for-1 reverse stock split in December of that year.
Consequently, Processa pursued a plan to transfer the rights to a third party rather than continuing clinical trials on its own. In June of last year, it signed a binding term sheet with Intact Therapeutics granting the company an exclusive option to license PCS12852. Accordingly, Yuhan Corporation and Processa extended the deadline for the first patient dosing in the follow-up clinical trial from 48 months after the original contract was signed to 108 months (August 2029), with the condition that the deadline would automatically be adjusted to 72 months if Processa failed to enter into a final technology transfer agreement with Intact by June 30, 2025, or if the transferred rights were returned.
During the due diligence process, Intact paid a total of $50,000 to Processa, of which $30,000 went to Yuhan. However, Processa and Intact failed to reach a definitive agreement, and the term sheet expired on February 12 of this year. Subsequently, Processa announced that it was discussing development plans for PCS12852 with other potential partners, and the deadline for the follow-up clinical trial was automatically adjusted to August 19 of this year—72 months after the signing of the original agreement.
This second amendment to the contract was signed on the 14th of last month, five days before the original deadline, stipulating that administration to the first patient in the follow-up clinical trial must begin within 12 months—by August 14 of next year.
However, the specific background behind the contract amendment and future development plans remain unclear. A Yuhan Corporation official responded, “Since this is a substance licensed to Processa, all details are up to Processa.” Accordingly, this publication also inquired with Processa regarding the reasons for the contract amendment and whether negotiations with new partners were underway, but received no response.
Six Years of Waiting, but the Payoff… Reclaiming Rights Is Also a “Burden”For Yuhan Corporation, terminating the contract immediately and
reclaiming the rightsis not necessarily the most advantageous choice. This is because reclaiming the rights would require the company to either conduct the follow-up clinical trials directly or find a new partner. Considering the approximately four-year development gap that has already occurred, it may be more realistic to maintain the existing contract and allow Processa or a third-party partner to continue development.
Given that the economic returns secured so far have been limited relative to the time invested, it may be more advantageous to leave the door open for Processa to pursue further development and maintain the potential for milestone payments rather than terminating the contract immediately. Based on publicly available data to date, Yuhan Corporation’s total compensation is estimated at approximately $2.03 million, consisting of $2 million worth of Processa stock (corresponding to the signing bonus) and $30,000 allocated from Intact’s due diligence fees. Converted at recent exchange rates, this amounts to approximately 2.7 billion won, though the majority of this was in the form of stock rather than cash. The bulk of the contract value—up to $410.5 million—consists of contingent payments that can only be received upon achieving specific clinical, regulatory approval, and sales milestones.
Separately, Yuhan Corporation’s U.S. subsidiary acquired 750,000 shares at $4 per share—a total value of $3 million—during Processor’s NASDAQ initial public offering in October 2020. This was because the agreement stipulated that if Yuhan Corporation invested more than $3 million, higher development milestone conditions would apply. While it is unclear whether the shares were sold, if Yuhan Corporation had retained the shares purchased separately from the upfront payment until recently, the possibility that the value of its stake has declined cannot be ruled out.
Of course, it is positive that Processa’s development capabilities have improved compared to before. Processa raised $200 million from institutional investors following its acquisition of Vidya Therapeutics last July. The net proceeds amounted to $183.3 million, and the company explained that it has secured operating funds through the second half of 2029. Although the company states that the funds will primarily be used for “VT-7208,” the BTK inhibitor acquired from Vidya, it is still a positive sign that it has moved beyond the stage where its very survival was in question.
If follow-up clinical trials do not begin by August 2027, Yuhan Corporation may consider terminating the contract and reclaiming its rights. If the contract is terminated, the global license (excluding South Korea) held by Processa will expire. Under the terms of the contract, Yuhan Corporation may, at its discretion, receive regulatory submissions, clinical and preclinical data, and related manufacturing documentation.
However, even if the rights are reclaimed, development will not immediately return to normal. Yuhan will have to either conduct follow-up clinical trials directly or seek a new partner. It must also consider the prolonged development hiatus, the remaining terms of patents and market exclusivity, and the time and costs required for follow-up clinical trials.
A pharmaceutical and biotech industry official stated, “Given the prolonged development hiatus, it will not be easy for Yuhan to resume clinical trials on its own or find a new partner, even if it regains the rights,” adding, “While the ability to leverage U.S. Phase 2a clinical trial data and the existing overseas development infrastructure is a positive factor, at this stage, it may be more realistic for Processa or a new partner to continue the subsequent development.”
