Phio Pharmaceuticals Corp. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Amounts below are in U.S. dollars; financial statement amounts are generally in thousands, except per-share data. Phio is a development-stage biotechnology company focused on immuno-oncology therapeutics using its INTASYL self-delivering RNAi platform. It reported no product revenue in the quarter.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $21 |
| Research and development | $1,256 | $1,042 | $3,253 | $3,277 |
| General and administrative | $1,050 | $1,071 | $3,078 | $3,062 |
| Total operating expenses | $2,306 | $2,113 | $6,331 | $6,339 |
| Net loss | $2,309 | $2,094 | $6,332 | $6,248 |
| Basic and diluted loss per share | $0.40 | $4.53 | $1.51 | $14.70 |
The company had no revenue-generating operations, so gross margin is not meaningful. Q3 operating expenses rose $193,000 year over year, primarily because of higher outsourced preclinical research spending; nine-month operating expenses were nearly unchanged. The filing reports no separate operating-margin measure.
- Cash and liquidity: Cash was $16.868 million at September 30, 2020, versus $6.934 million at December 31, 2019; restricted cash was $50,000. Current assets were $17.620 million and current liabilities $2.230 million.
- Cash flow, nine months: Operating activities used $6.179 million, compared with $6.099 million in 2019; investing activities used $18,000. Financing activities provided $16.131 million, mainly from stock and warrant transactions and a $231,000 PPP loan.
- Debt and commitments: The $231,000 PPP loan bears 1% interest and matures in May 2022. It is recorded as long-term debt; forgiveness had not been determined. Lease liabilities totaled $438,000. Total liabilities were $2.786 million.
- Equity and potential dilution: Common shares outstanding increased from 669,433 at year-end 2019 to 5,780,533 at September 30, 2020, reflecting the 2020 offerings and warrant exercises. The company reported 3,579,284 outstanding warrants at quarter-end. Share and per-share figures were retroactively adjusted for the January 2020 1-for-55 reverse split.
Material changes and business developments
Q3 net loss increased by $215,000 year over year, while nine-month net loss increased by $84,000. Nine-month R&D expense decreased slightly, but Q3 R&D rose 21% as the company used more third-party providers for preclinical studies. The company raised net proceeds of approximately $1.467 million in a February registered offering, $7.093 million in a February underwritten offering, and $3.527 million in an April offering; it also received $3.856 million net from warrant exercises during the nine months.
Phio described PH-762, targeting PD-1, as its lead ACT and tumor-microenvironment program. It said required studies and steps for a first-in-human PH-762 study using intratumoral administration in advanced melanoma were ongoing, with initiation targeted in the 2021 timeframe. The filing also describes PH-894 and PH-804 programs and preclinical findings for its pipeline; these are company-reported research results, not evidence of clinical efficacy.
Outlook, risks, and unusual items
- Management said existing cash was expected to fund operations for at least 12 months from the financial statements’ release. The company has recurring operating losses, expects negative operating cash flow for the foreseeable future, and may need additional financing; access to capital on acceptable terms is not assured. Failure to obtain funding could force it to scale back or terminate operations or pursue a merger or acquisition.
- COVID-19 had not materially affected internal operations or financial results to date, according to management, but suppliers and outsourced service providers were experiencing impacts. Delays, limited materials, higher costs, and slower preclinical or clinical activity—including delays to PH-762—were identified as risks. The effect on future trial initiation and enrollment was uncertain.
- Senior management salaries were reduced by 10% through the remainder of 2020 as a cost-control measure. The company intended to seek forgiveness of its PPP loan but could not guarantee it would be forgiven.
- The filing reported no material legal proceedings and stated that disclosure controls and procedures were effective as of September 30, 2020. It also disclosed ordinary-course indemnification obligations without accrued liabilities or material costs to date.
Important facts for investors to verify
- Whether PH-762’s planned first-in-human study proceeded on the stated 2021 timeline, and what regulatory, preclinical, and enrollment milestones remain.
- Whether the PPP loan was forgiven, and how any unforgiven balance and repayment terms affect cash needs.
- How cash burn, supplier or trial delays, and future financing needs compare with management’s stated 12-month cash runway.
- The potential dilution from outstanding warrants and any subsequent equity or warrant issuances.
- Whether COVID-19 or other operational factors materially changed outsourced research availability, development timelines, or costs.