Business context and reporting period
The filing is RXi Pharmaceuticals Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2014. The request identifies Phio Pharmaceuticals Corp.; that does not match the registrant named in this filing, so the company identity should be verified.
RXi was a development-stage biotechnology company focused on RNA interference therapies. Its lead candidate, RXI-109, was in Phase 2a studies for reducing or preventing skin scarring; the company also had preclinical ophthalmology programs. It reported no product revenue.
Financial results and liquidity
| Metric | Three months ended Sep. 30, 2014 | Three months ended Sep. 30, 2013 | Nine months ended Sep. 30, 2014 | Nine months ended Sep. 30, 2013 |
|---|---|---|---|---|
| Revenue, primarily grants | $16,000 | $92,000 | $57,000 | $370,000 |
| Research and development | $1.459 million | $1.229 million | $4.118 million | $16.213 million |
| General and administrative | $766,000 | $934,000 | $2.459 million | $2.588 million |
| Operating loss | $2.209 million | $2.071 million | $6.520 million | $18.431 million |
| Net loss | $2.206 million | $2.059 million | $6.496 million | $18.417 million |
| Net loss applicable to common stockholders | $2.906 million | $3.506 million | $10.164 million | $25.810 million |
| Loss per common share, basic and diluted | $0.17 | $0.30 | $0.69 | $2.64 |
Amounts are shown as losses where applicable; financial statement amounts are in thousands except per-share data. The filing does not present meaningful operating margins given minimal grant revenue and ongoing development spending.
- At September 30, 2014, cash and cash equivalents were $5.130 million, short-term investments $5.000 million, and restricted cash $50,000. Cash plus short-term investments totaled about $10.130 million, versus $14.390 million at December 31, 2013.
- Total assets were $10.901 million; current liabilities were $1.156 million. No borrowing or debt balance is reported on the balance sheet.
- Operating cash used in the first nine months was $6.163 million; investing cash used was $2.074 million; financing cash provided was $1.977 million. Ending cash was $5.130 million.
- Preferred stock carried mandatory cumulative dividends at 7% of face value annually, generally paid in additional preferred shares. Recorded preferred dividends were $3.668 million for the first nine months of 2014 and reduced earnings applicable to common shareholders.
Material changes versus the prior comparable period
- Nine-month revenue fell 85% to $57,000, reflecting fewer outstanding government grants and less grant-related work.
- Nine-month R&D expense fell 75%, mainly because 2013 included a one-time $12.250 million noncash charge for OPKO technology rights. Excluding that comparison effect, 2014 R&D rose with Phase 2a trials and ocular preclinical work. Third-quarter R&D increased 19% year over year.
- Nine-month G&A declined 5%; third-quarter G&A declined 18%, mainly due to lower legal, consulting, and share-based compensation costs.
- Cash and short-term investments declined about $4.3 million from year-end 2013. Common shares outstanding increased from 11.8 million at year-end to 21.1 million at September 30, including shares issued through preferred conversions and an equity financing arrangement.
Outlook, commentary, and risks
- Management expected existing cash, cash equivalents, and short-term investments to fund operations, including current and planned RXI-109 Phase 2 programs, into the third quarter of 2015. Management said use of its Lincoln Park Capital equity facility could extend funding into fiscal 2017.
- The April 2014 facility permits sales of up to $20 million of common stock over 30 months, subject to conditions and limitations. Lincoln Park initially purchased $2 million of stock; the company reported approximately $1.947 million net proceeds. Further use could dilute shareholders.
- RXI-109 Phase 2a Study 1301 enrolled two cohorts of eight patients. Early observations suggested dosing beginning two weeks after surgery performed better than immediate post-surgery dosing; management also cited clinical benefit in photographs from the first two patients at three months. These were early observations, not definitive efficacy results.
- Studies 1401 and 1402 began in 2014 to assess keloid recurrence and hypertrophic-scar recurrence, respectively. RXI-109’s safety, efficacy, trial completion, regulatory path, and funding needs remain uncertain.
- Management anticipated continued operating losses and said grant revenue would fluctuate; it expected minimal early revenue under the Ethicor distribution agreement. Additional financing may be needed, and the filing cautions that financing may not be available on acceptable terms or at all.
- Preferred-stock conversions and dividends, clinical development costs, and the possibility of trial failure or delay are material risks. The filing reported no legal proceedings, defaults upon senior securities, or off-balance-sheet arrangements. Management stated disclosure controls were effective and there was no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether this RXi Pharmaceuticals filing is the intended filing for the Phio Pharmaceuticals request.
- Current cash runway and the assumptions underlying management’s forecast through Q3 2015; availability and terms of any further Lincoln Park facility sales.
- Subsequent RXI-109 trial results, enrollment, timing, and whether early observations translated into reliable efficacy findings.
- Common-share dilution from preferred conversions, additional equity issuance, and the preferred stock’s 7% cumulative dividends and liquidation preferences.
- The scale and sustainability of grant revenue, and the extent to which future R&D spending may increase as clinical and ophthalmology programs advance.