Business context and reporting period
RXi Pharmaceuticals Corporation’s Form 10-K covers the fiscal year ended December 31, 2015. The company was a clinical-stage biotech developing self-delivering RNAi therapeutics and Samcyprone, a topical immunomodulator, with no commercial products or product-sales revenue. Its lead programs targeted dermal and retinal scarring (RXI-109) and cutaneous warts (Samcyprone).
Financial performance and liquidity
Amounts are in U.S. dollars; financial statement figures are in millions unless noted.
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue, principally government grants | $0.034 | $0.071 |
| Research and development expense | $6.925 | $5.680 |
| General and administrative expense | $3.346 | $3.217 |
| Operating loss | $(10.237) | $(8.826) |
| Net loss | $(10.223) | $(8.800) |
| Net loss attributable to common stockholders | $(10.432) | $(12.930) |
| Net loss per common share | $(0.21) | $(0.79) |
| Cash used in operating activities | $(7.317) | $(7.758) |
- Revenue fell 52% as work on a government grant concluded. R&D expense rose 22%, mainly due to clinical drug manufacturing, cosmetic research and increased staffing; total operating expenses rose about 15%.
- Net loss widened about 16%, while loss attributable to common stockholders narrowed because preferred-stock dividends fell from $4.130 million to $0.209 million after the preferred shares converted to common stock in May 2015. The per-share loss also reflects a substantially larger weighted-average share count.
- At year-end, cash and cash equivalents were $5.117 million and short-term investments were $5.500 million, totaling $10.617 million; restricted cash was a further $0.050 million. Current assets were $10.978 million and current liabilities $2.269 million (working capital about $8.709 million; current ratio about 4.8).
- Financing provided $9.495 million in 2015, primarily from a public offering that generated approximately $9.2 million net. Investing activities used $5.557 million, largely reflecting net purchases of short-term investments. The company reported no debt on the presented balance sheet.
- Common shares outstanding increased from 21.98 million at December 31, 2014 to 65.35 million at December 31, 2015. The 2015 public offering issued 26 million shares; preferred-stock conversions and other issuances also contributed to dilution.
Material changes, outlook and risks
- Management expected year-end cash, cash equivalents, short-term investments and the Lincoln Park equity facility to fund planned operations through at least the first quarter of fiscal 2017. The filing cautions that additional financing may be needed and may not be available on acceptable terms.
- RXI-109 Study 1402 preliminary observations reported scars at treated revision sites were less visible than untreated sites over three months in the same subjects. Two cohorts were added in November 2015; early results and later read-outs were expected in 2016. The observation was preliminary, not a definitive efficacy finding.
- Samcyprone’s Phase 2 wart study began in December 2015; management expected full enrollment by the end of 2016 and early read-outs in the second half of 2016. RXI-109’s Phase 1/2 retinal-scarring trial began in November 2015, with initial safety read-outs expected in the second half of 2016.
- The company reported an accumulated deficit of $57.1 million, expected continuing operating losses, and no assurance of successful trials, regulatory approval or commercialization. Key risks include clinical and regulatory uncertainty, reliance on third-party manufacturing and collaborators, IP and licensing exposure, and dependence on further funding.
- Nasdaq had notified the company of noncompliance with the $1 minimum bid-price rule. The company had until May 2, 2016 to regain compliance; otherwise, delisting proceedings could follow. Its 2015 quarterly share-price low was $0.34 and high was $1.73.
- License agreements include future fixed payments totaling $1.896 million as of year-end, plus contingent milestones and royalties. No material legal proceedings were reported. The independent auditor issued an unqualified opinion on the financial statements; management concluded disclosure controls and internal control over financial reporting were effective.
Important facts investors should verify
- Whether RXI-109 and Samcyprone clinical read-outs met prespecified endpoints and what subsequent trial plans, enrollment and safety findings showed.
- Actual cash burn and financing runway relative to management’s first-quarter 2017 estimate, including access to the LPC equity facility and any additional capital raised.
- The effect of the 2015 share issuance, outstanding warrants and options, and any subsequent financing on fully diluted share count.
- Whether the company regained Nasdaq’s minimum bid-price compliance by May 2, 2016 and maintained its listing.
- Potential milestone, royalty and license-reversion obligations, and any changes in collaborations, manufacturing arrangements or intellectual-property protection.