Phio Pharmaceuticals Corp. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; balance-sheet comparisons are to December 31, 2019. Phio is a development-stage biotechnology company advancing its INTASYL self-delivering RNAi platform for immuno-oncology. It reported no product revenue in the quarter.
Financial highlights
Amounts below are in thousands of dollars except per-share data.
| Metric | Q1 2020 | Q1 2019 or prior balance date |
|---|---|---|
| Revenue | $0 | $21 |
| Research and development expense | $1,218 | $1,089 |
| General and administrative expense | $1,138 | $1,078 |
| Total operating expenses | $2,356 | $2,167 |
| Operating loss | $(2,356) | $(2,146) |
| Net loss | $(2,351) | $(2,119) |
| Basic and diluted net loss per share | $(1.33) | $(5.71) |
| Cash and restricted cash at period end | $13,334 | $6,984 at Dec. 31, 2019 |
| Net cash used in operating activities | $(2,176) | $(2,175) |
| Net cash provided by financing activities | $8,536 | $43 |
| Total liabilities | $2,320 | $2,291 at Dec. 31, 2019 |
Cash alone was $13.284 million at March 31; restricted cash was $50,000. Current liabilities were $1.937 million. Reported liabilities were primarily accounts payable, accruals and lease obligations; the filing reports no conventional debt balance at quarter-end. Lease liabilities totaled $492,000. The company had no meaningful operating margin because it recorded no revenue and incurred operating losses.
Changes versus the prior comparable period
- Operating expenses increased $189,000 (about 9%); R&D rose $129,000, primarily from CRO preclinical animal studies and increased headcount, while G&A rose $60,000, including payroll-related costs and reverse-split transfer-agent fees.
- Net loss widened by $232,000. Operating cash use was essentially unchanged year over year.
- Financing cash inflow increased substantially due to two February equity-and-warrant offerings. Net proceeds were $1.467 million from the registered direct offering and $7.093 million from the underwritten offering.
- A 1-for-55 reverse stock split became effective January 15, 2020; historical share and per-share figures were retroactively adjusted. Shares issued and outstanding rose to 2,867,851 at March 31 from 669,433 at year-end, reflecting offerings and warrant exercises. The offerings also created substantial warrant overhang.
Outlook, operations and risks
- Management expects continuing operating losses and negative operating cash flows. It stated that cash on hand and the April 2020 capital raise should fund operations for at least 12 months; this is a management estimate, not a guarantee.
- On April 2, 2020, Phio completed another registered offering, with estimated net proceeds of approximately $3.5 million. On May 11, it received a $231,252 Paycheck Protection Program loan at 1% interest, due May 11, 2022, with payments deferred for six months and potential forgiveness subject to eligible use. Management also reduced senior-management salaries by 10% through the remainder of 2020, or until market conditions improve.
- COVID-19 had not materially disrupted operations, supply or financial results as of the filing, but management warned of possible CRO and supplier disruption, higher costs, clinical-trial delays and reduced enrollment. It said PH-762 ACT development could be delayed; studies intended to support a direct-injection clinical trial in the 2021 timeframe were continuing, though impacts remained uncertain.
- Pipeline programs discussed include PH-762 (PD-1), PH-804 (TIGIT), PH-894 (BRD4) and PH-790 (PD-L1). The filing describes preclinical findings and collaborations, not established clinical efficacy. A March 2020 collaboration with Medigene AG and Helmholtz Zentrum München includes a Medigene option for an exclusive license to potential immune-cell enhancers.
- Key risks include the need for future financing, market-access uncertainty, dependence on collaborators and third-party research providers, and the uncertain effects of COVID-19 on development timelines. Management warned that failure to obtain funding could require scaling back or ending operations or seeking a merger or acquisition.
- The company reported no material legal proceedings, stated that disclosure controls were effective, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the stated minimum 12-month cash runway remains supportable after actual spending, the April offering and the PPP loan.
- Current cash burn, financing needs and the timing and terms of any future equity, debt or strategic funding.
- Clinical and preclinical milestones, including any COVID-related delays and progress toward PH-762 direct-injection trial readiness.
- Potential dilution from outstanding warrants: 3,141,870 equity-classified warrants were reported outstanding at March 31, 2020, before the April offering warrants.
- PPP loan forgiveness eligibility and any remaining repayment obligation.
- Whether the preclinical findings and collaboration plans translate into clinical progress; the filing does not establish product efficacy or regulatory approval.