Phio Pharmaceuticals Corp. — Q1 2019 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2019. Phio is a clinical-stage biotechnology company developing self-delivering RNAi therapeutics for immuno-oncology. Revenue was primarily grant-related, not product sales.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $21,000 | $23,000 |
| Research and development expense | $1.089 million | $1.361 million |
| General and administrative expense | $1.078 million | $901,000 |
| Total operating expenses | $2.167 million | $2.262 million |
| Operating loss | $2.146 million | $2.239 million |
| Net loss | $2.119 million | $2.239 million |
| Basic and diluted loss per share | $0.10 | $0.90 |
| Cash and restricted cash at quarter-end | $12.796 million | $2.656 million at March 31, 2018 |
| Operating cash used | $2.175 million | $1.907 million |
At March 31, 2019, cash was $12.746 million; total current assets were $12.913 million and current liabilities were $1.516 million. Total liabilities were $2.016 million, including $592,000 in operating lease liabilities; the filing reports no debt borrowings. Stockholders’ equity was $11.662 million. Revenue is immaterial relative to expenses, so operating margins are not meaningful.
Changes versus the prior comparable period
- Operating expenses fell $95,000: R&D declined $272,000, mainly due to lower headcount and completion of RXI-762 drug manufacture in the prior-year period; G&A rose $177,000, primarily from stock compensation for the former CEO.
- Net loss improved by $120,000, including $27,000 of other income in 2019. Loss per share improved, but weighted-average shares increased from about 2.49 million to 20.42 million; the per-share comparison is affected by the substantial increase in shares and warrants.
- Operating cash use increased $268,000, which management attributed primarily to payment for RXI-782 drug manufacture. Financing cash was $43,000, versus $932,000 in the prior-year quarter.
- Cash and restricted cash decreased $2.133 million during Q1 2019. Common shares outstanding increased to 23.389 million at quarter-end, including shares issued upon pre-funded warrant exercises.
Outlook, risks, and unusual items
- Management expects continued operating losses and negative operating cash flows, but believes existing cash is sufficient for at least the next 12 months. Further financing may be needed; management cautions that funding may not be available on acceptable terms or at all, potentially requiring operations to be scaled back, terminated, or combined with another company.
- Phio planned to enter the clinic with RXI-762 in an investigator-sponsored ACT trial by Q1 2020. The filing also describes preclinical and collaboration work; these are development plans and research findings, not established clinical efficacy.
- The company’s October 2018 financing left 28.516 million warrants outstanding at March 31, 2019, compared with 23.389 million common shares outstanding. Potential exercises could materially dilute existing shareholders.
- Phio was below Nasdaq’s $1 minimum bid-price requirement. On May 14, 2019, Nasdaq extended the compliance deadline to November 11, 2019; the company said it may consider a reverse stock split. Failure to regain compliance could lead to delisting proceedings.
- Adoption of lease accounting standards in January 2019 and a five-year office and laboratory lease extension resulted in a $592,000 right-of-use asset and lease liability at quarter-end. Future minimum lease payments totaled $663,000 before imputed interest.
- The filing reports no material legal proceedings and no material costs or accrued liabilities related to disclosed indemnification commitments. Management assessed disclosure controls as effective.
Investor verification points
- Confirm cash runway assumptions, expected development spending, and timing and terms of any future financing.
- Track RXI-762’s progress toward the planned investigator-sponsored trial and distinguish preclinical results from clinical evidence.
- Review warrant terms, potential dilution, and the share count following the quarter; 23,889,132 common shares were outstanding on May 10, 2019.
- Monitor Nasdaq bid-price compliance actions and any decision concerning a reverse stock split.
- Assess lease commitments and the effect of continued R&D and clinical-development spending on cash burn.