Phio Pharmaceuticals Corp. (filing issuer: RXi Pharmaceuticals Corporation) — Form 10-Q summary
Reporting period: Quarter ended March 31, 2013. The filing identifies RXi Pharmaceuticals Corporation as the registrant and describes it as a development-stage biotechnology company focused on RNAi therapeutics. Financial amounts below are in U.S. dollars; statement amounts are generally in thousands.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | $53,000, all from government grants | None |
| Research and development expense | $13.771 million | $1.154 million |
| General and administrative expense | $676,000 | $751,000 |
| Operating loss | $14.394 million | $1.905 million |
| Net loss | $14.397 million | $1.926 million |
| Net loss attributable to common stockholders | $17.944 million; $0.09 per share | $1.926 million; $0.04 per share |
| Cash used in operating activities | $1.128 million | $1.209 million |
R&D expense included a $12.25 million noncash charge for RNAi assets acquired from OPKO. Excluding that charge, the reported increase in R&D was much smaller; the filing attributes it mainly to clinical-trial costs and employee stock compensation. The $3.547 million preferred-stock dividend/accretion charge increased the loss attributable to common stockholders beyond the net loss. Conventional margins are not meaningful given the very small grant revenue and absence of product sales.
Cash and cash equivalents were $19.643 million at March 31, up from $5.127 million at year-end, principally reflecting the March equity offering. Current assets were $19.798 million and current liabilities $1.958 million. Total liabilities were $1.958 million, including $2,000 of current capital-lease maturities; the filing reports no material borrowing balance. Net financing cash flow was $15.644 million, including $15.647 million of net common-stock proceeds. No investing cash flow was reported for the quarter.
Material changes and transactions
- On March 12, 2013, the company completed an offering of 112,956,911 common shares at $0.145 per share, generating approximately $16.4 million gross and $15.6 million net.
- On the same date, it issued OPKO 50 million common shares to acquire substantially all of OPKO’s RNAi-related assets. The $12.25 million fair value was expensed as in-process R&D because the acquired assets did not constitute a business and were at an early development stage.
- The OPKO agreement provides for potential development and commercialization milestone payments of up to $50 million per product, if applicable, plus royalties upon commercialization.
- Common shares outstanding rose from 158.7 million at December 31, 2012 to 321.6 million at March 31, 2013. The filing reports 338,153,834 shares outstanding as of May 10, 2013.
- Series A preferred shares increased to 9,896 from 9,726 through quarterly dividends paid in additional preferred shares. The stock carries cumulative mandatory dividends at 7% annually and is initially convertible into 73,127 common shares per preferred share, subject to ownership limits.
Outlook, risks and other disclosures
Management said available cash was expected to fund operations, including the planned RXI-109 Phase 2 program, into fiscal 2015. The company expected significant operating losses and stated that it had no product revenue and might not generate any in the foreseeable future. It may need additional third-party funding; the filing warns that financing may not be available on acceptable terms or at all.
- RXI-109 is being developed to reduce dermal scarring by targeting CTGF. The company expected top-line results from Study 1201 in Q2 2013 and Study 1202 in mid-2013, and planned to initiate Phase 2 trials in the second half of 2013, subject to development progress.
- Management cited clinical-trial success and timing, regulatory uncertainty, resource availability, development costs, competition, and reimbursement and government policies as risks. Forward-looking statements are not assurances of results.
- The filing reports no legal proceedings and no material change in internal control over financial reporting; management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether the cash runway estimate through fiscal 2015 remained supportable after actual spending and the planned clinical program.
- RXI-109 trial readouts and whether planned Phase 2 studies proceeded on the stated timeline.
- The potential cash impact and terms of OPKO milestone and royalty obligations if programs advance.
- The fully diluted share count and dilution exposure: the filing lists 723.7 million common shares underlying preferred stock, 63.8 million options, and 138,462 warrants excluded from diluted loss per share as anti-dilutive.
- How much of future operating costs could be supported by grants or partnerships, given negligible revenue and the stated risk of needing further financing.