Business context and reporting period
This is RXi Pharmaceuticals Corporation’s Form 10-K for the fiscal year ended December 31, 2016—not a standalone fourth-quarter report. The filing describes a clinical-stage biotechnology company developing self-delivering RNAi therapies and Samcyprone. The filing’s registrant is RXi Pharmaceuticals Corporation; it does not identify the company as Phio Pharmaceuticals Corp.
Key programs included RXI-109 for dermal and retinal scarring and Samcyprone for common warts. In January 2017, after year-end, RXi acquired MirImmune, adding early-stage cell-based cancer immunotherapy programs.
Financial performance and liquidity
| Metric | FY 2016 | FY 2015 |
|---|---|---|
| Revenue | $19,000 | $34,000 |
| Research and development expense | $5.415 million | $6.925 million |
| General and administrative expense | $3.619 million | $3.346 million |
| Operating loss | $9.015 million | $10.237 million |
| Net loss | $8.994 million | $10.223 million |
| Net loss applicable to common stockholders | $11.069 million | $10.432 million |
| Net cash used in operating activities | $7.760 million | $7.317 million |
Revenue was not from product sales; 2016 revenue came from license agreements. No product revenue had been generated. Gross margin is not meaningful for this pre-commercial business. At December 31, 2016, cash and cash equivalents were $12.906 million, short-term investments were nil (versus $5.5 million in 2015), current assets were $13.106 million, and current liabilities were $2.542 million. The balance sheet reported no debt. Accumulated deficit was $66.099 million.
Cash increased by $7.789 million during 2016, including $10.203 million of financing cash inflows, principally from the December public offering. Management stated that existing cash was expected to fund operations for at least 12 months. This is a runway estimate, not assurance of funding through development or commercialization.
Material changes versus 2015
- Revenue declined $15,000, or 44%, following completion of a National Cancer Institute grant in 2015.
- R&D expense fell $1.510 million, mainly because 2015 included Samcyprone licensing and RXI-109 manufacturing costs, and stock-based compensation decreased.
- G&A expense increased $273,000, reflecting business-development focus and MirImmune acquisition-related legal costs, partly offset by lower stock compensation.
- Net loss narrowed, but loss applicable to common stockholders increased, principally due to a $2.075 million Series B preferred-stock beneficial-conversion accretion charge.
- Operating cash use rose $443,000. The company raised $10.051 million net in its December 2016 offering, issuing common stock, warrants and Series B convertible preferred stock.
Outlook, commentary, and risks
- Management expected complete RXI-109 Study 1402 dermal-scar data in 2017; preliminary results reported through nine months were described as favorable for a subset of subjects, with the drug reported safe and well tolerated.
- Samcyprone Study 1502 preliminary subset results showed sensitization in more than 90% of subjects and wart-clearance response in more than 60%; final study results were anticipated in the second half of 2017. These were preliminary, limited-subset results.
- RXI-109 retinal-scar Study 1501 was enrolling its third cohort; completion of enrollment was anticipated in the first half of 2017. RXI-231 cosmetic human testing was planned for the second quarter of 2017.
- MirImmune was acquired for common and Series C preferred shares, with potential additional milestone consideration payable in shares or cash. The acquired programs were early stage and required further investment.
- The company had no approved products and expected continuing losses and significant R&D spending. It warned that additional financing might be needed and might not be available on acceptable terms, creating dilution or operational-cutback risk.
- Principal risks include clinical and regulatory failure or delay, uncertain commercial acceptance and reimbursement, competition, reliance on third-party manufacturing and collaborators, and uncertain patent protection. RXi also disclosed a Nasdaq minimum-bid-price deficiency notice received in February 2017, with an August 1, 2017 compliance deadline.
Important facts for investors to verify
- Whether subsequent full clinical readouts supported the preliminary RXI-109 and Samcyprone findings, including safety and efficacy in larger datasets.
- Cash burn, financing needs and actual runway after the MirImmune acquisition, including any milestone payments or further equity issuance.
- MirImmune’s acquisition accounting, development progress, and the conditions and potential dilution associated with milestone consideration and Series C preferred stock.
- Nasdaq listing compliance and the impact of outstanding warrants, preferred-stock conversions and other potential share dilution.
- The filing states that the audited financial statements were fairly presented under U.S. GAAP; management reported effective disclosure controls and internal control over financial reporting as of year-end.