Phio Pharmaceuticals Corp. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; comparative figures are for FY 2017. This is an annual report, not a standalone fourth-quarter report. Amounts below are in U.S. dollars; financial statement figures are generally in millions unless stated otherwise.
Business context
Phio is a clinical-stage biotechnology company developing self-delivering RNA interference (sd-rxRNA) therapeutics. In January 2018, it shifted its focus exclusively to immuno-oncology, completing its open dermatology and ophthalmology trials and stating that it would seek partners or licensees for those programs. The company changed its name from RXi Pharmaceuticals to Phio Pharmaceuticals in November 2018. Its lead immuno-oncology program, RXI-762 (targeting PD-1), was expected to enter clinical development for melanoma in adoptive cell therapy by the end of 2019; it had not yet entered clinical testing at year-end.
Financial and operating metrics
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $0.138 million | $0.015 million |
| Research and development expense | $4.326 million | $5.370 million |
| Acquired in-process R&D expense | None | $4.696 million |
| General and administrative expense | $3.176 million | $4.011 million |
| Total operating expenses | $7.502 million | $14.077 million |
| Operating loss | $(7.364) million | $(14.062) million |
| Net loss | $(7.360) million | $(12.452) million |
| Basic and diluted loss per share | $(1.04) | $(5.52) |
| Net cash used in operating activities | $(7.520) million | $(9.514) million |
Revenue was a government-grant subaward for work with BioAxone, not product sales. The company reported no commercial product revenue. Margins are not meaningful for assessing a commercial business at this development stage. The lower operating loss mainly reflects no repeat of 2017’s MirImmune-related acquired R&D charge, along with lower R&D and G&A spending. The 2017 net loss also included a $1.621 million tax benefit related to the acquisition; there was no income tax benefit in 2018.
At December 31, 2018, cash was $14.879 million (restricted cash: $0.050 million), versus cash of $3.581 million a year earlier. Total assets were $15.322 million, current liabilities were $1.744 million, and stockholders’ equity was $13.578 million. The balance sheet lists no debt; liabilities shown were accounts payable and accrued expenses. Operating cash burn was funded substantially by $18.823 million of financing cash flow. Management said existing cash should fund planned operations for at least 12 months, while noting continued losses and dependence on future financing.
Material changes, outlook and risks
- R&D expense fell 19% and G&A expense fell 21% year over year, primarily due to completion of dermatology and ophthalmology work, reduced clinical and manufacturing costs, lower headcount, and lower legal fees.
- The company raised net proceeds of $4.210 million in an April registered offering/private placement and $13.193 million in an October public offering, in addition to proceeds from its Lincoln Park equity facility. These financings materially increased shares outstanding and included substantial warrant issuance.
- At year-end, 32.821 million warrants were outstanding, including 21.429 million October 2018 warrants and 7.169 million pre-funded warrants. Common shares outstanding were 18.842 million at year-end and 22.299 million as of March 22, 2019. Potential dilution is significant; warrant exercise is not assured.
- Research collaborations reported preclinical findings, including PD-1 reduction in TILs and an 80–85% reduction of a target gene in a mouse melanoma model after intratumoral injection. These are not clinical efficacy results for Phio’s immuno-oncology candidates.
- Completed legacy-program results included positive reported Phase 2 results for RXI-109 in hypertrophic scars, Samcyprone response results in cutaneous warts, and safety/tolerability findings in an RXI-109 retinal-scarring Phase 1/2 study. The company intended to seek partners or licensees rather than fund continued development itself.
- Nasdaq notified Phio in November 2018 that it was below the $1 minimum bid-price requirement, with a compliance deadline of May 13, 2019. The filing does not establish whether compliance was regained after the reporting date.
- Key risks include early-stage development and no immuno-oncology clinical trials yet, uncertain regulatory and commercial success, limited cash runway, reliance on external collaborators and manufacturers, competition, patent and licensing uncertainty, and possible future dilution. No material legal proceedings were reported.
- The company renewed its Marlborough facility lease for five years beginning April 2019. It expected adoption of the new lease accounting standard to recognize a right-of-use asset and lease liability estimated at approximately $0.6 million.
Most important facts for investors to verify
- Whether RXI-762 entered clinical development on the stated timetable, and what subsequent data show about its safety, activity and trial plans.
- Actual cash burn and financing needs relative to management’s 12-month runway statement, including later capital raises and any changes in operating plans.
- Current common shares outstanding, warrant exercises and remaining warrant overhang; assess dilution using the instruments’ terms rather than assuming exercise.
- Whether Phio regained Nasdaq’s minimum bid-price compliance by the deadline and maintained listing requirements.
- Whether partners or licensees were secured for the dermatology and ophthalmology assets, and whether any resulting payments or obligations materialized.