Business context and reporting period
The filing is RXi Pharmaceuticals Corporation’s unaudited Form 10-Q for the quarter ended March 31, 2014—not a filing under the name Phio Pharmaceuticals. RXi described itself as a development-stage biotechnology company developing RNAi therapies. Its lead candidate, RXI-109, targets CTGF and was being studied for prevention or reduction of scarring. The filing says RXI-109 began human trials in 2012.
Financial results and liquidity
Amounts below are in U.S. dollars; financial statement amounts are in thousands except per-share data.
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue, primarily government grants | $29 | $53 |
| Research and development expense | $1,476 | $13,771 |
| General and administrative expense | $843 | $676 |
| Operating loss | $(2,290) | $(14,394) |
| Net loss | $(2,284) | $(14,397) |
| Net loss applicable to common stockholders | $(4,039) | $(17,944) |
| Net loss per common share, basic and diluted | $(0.32) | $(2.76) |
| Net cash used in operating activities | $(2,380) | $(1,128) |
- At March 31, 2014, cash and cash equivalents were $9.010 million, short-term investments $3.000 million, and restricted cash $50,000. Cash, cash equivalents, and short-term investments totaled approximately $12.0 million, versus approximately $14.4 million at December 31, 2013.
- Current assets were $12.286 million and current liabilities $1.390 million. The balance sheet reports no debt balance; it does report Series A and Series A-1 convertible preferred stock, including cumulative 7% annual dividends.
- No product revenue was reported. The filing does not provide a meaningful commercial gross margin; revenue consisted of grant income.
Material changes versus the prior period
- Revenue fell $24,000, or 45%, reflecting reduced grant-related work.
- R&D expense declined 89%, largely because Q1 2013 included a one-time $12.250 million non-cash charge for common stock issued for OPKO patent and technology rights. Q1 2014 also included a $170,000 milestone payment following issuance of the company’s first patent.
- G&A expense increased 25%, primarily due to higher employee stock-based compensation and NASDAQ listing fees.
- Preferred-stock accretion and dividends charged in determining loss applicable to common stockholders declined to $1.755 million from $3.547 million. This is a preferred-stock accounting charge, not operating expense.
- Operating cash use increased to $2.380 million from $1.128 million. The company reported no investing or financing cash flows in Q1 2014.
Outlook, risks, and unusual items
- Management expected existing cash and cash equivalents to fund operations, including planned RXI-109 Phase 2 programs, into fiscal 2015. The company expected continued operating losses, minimal near-term revenue, and dependence on grants, equity or debt financing, and collaborations.
- After quarter-end, RXi entered a 30-month purchase agreement with Lincoln Park Capital for the right to sell up to $20 million of common stock, subject to conditions. On April 22, 2014, it sold 500,000 shares for $2 million gross proceeds at $4 per share and issued 100,000 commitment-fee shares.
- RXi had initiated Phase 2 Study 1301 in November 2013, initiated Study 1401 in April 2014, and expected to start another Phase 2 study during 2014. Management’s plans and clinical expectations are forward-looking and subject to trial, regulatory, funding, and execution risks.
- Management cited uncertainty around clinical results and timing, regulatory approvals, research and development costs, financing availability, and the ability to complete trials. Failure to obtain funding could require reduced or terminated operations or a sale or merger.
- The filing reported no legal proceedings, defaults upon senior securities, or off-balance-sheet arrangements. Disclosure controls were concluded to be effective, with no material change in internal control reported for the quarter.
Most important facts for investors to verify
- Confirm the issuer identity and ticker: this source is an RXi Pharmaceuticals Corporation filing, although the request identifies Phio Pharmaceuticals Corp.
- Review the preferred-stock conversion, dividend, and liquidation terms, and the resulting potential dilution. At March 31, 2014, the filing listed 13,427,167 common shares outstanding and 25,670,763 potential common shares excluded from diluted loss per share as anti-dilutive.
- Assess cash runway against the stated fiscal 2015 horizon, the pace of clinical spending, and the conditions and dilution associated with the Lincoln Park facility.
- Track RXI-109 Phase 2 enrollment, safety, efficacy, and regulatory progress; early-stage development outcomes are uncertain.