Phio Pharmaceuticals Corp. (filing identifies registrant as RXi Pharmaceuticals Corporation) — Form 10-Q
Reporting period: Quarter ended September 30, 2016; filed November 10, 2016. The filing’s registrant name differs from the company name in the request.
Business context and reporting period
RXi describes itself as a clinical-stage RNAi company developing therapeutics using its self-delivering RNAi platform, as well as Samcyprone, a topical immunomodulator. Its clinical programs included RXI-109 for dermal and ocular scarring and Samcyprone for common warts, alongside discovery and preclinical programs. The company reported no product sales.
Financial performance and position
Amounts below are in $ millions, except per-share data.
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0.019 | $0.034 |
| Research and development expense | $1.464 | $1.734 | $4.108 | $5.202 |
| General and administrative expense | $0.752 | $0.770 | $2.587 | $2.447 |
| Total operating expenses | $2.216 | $2.504 | $6.695 | $7.649 |
| Net loss | $(2.212) | $(2.496) | $(6.655) | $(7.607) |
| Net loss per common share | $(0.34) | $(0.38) | $(1.02) | $(1.76) |
- At September 30, 2016, cash and cash equivalents were $2.379 million, short-term investments $2.000 million, and restricted cash $0.050 million. Total assets were $4.901 million; current liabilities were $1.865 million; stockholders’ equity was $3.036 million.
- No debt balance is reported on the balance sheet. The filing does not provide a gross-margin measure; revenue was negligible and there were no product sales.
- For the first nine months of 2016, operating cash use was $6.388 million, investing activities provided $3.498 million (primarily from net investment maturities and purchases), and financing provided $0.152 million. Cash and cash equivalents decreased $2.738 million.
- Accumulated deficit was $63.760 million. The company said its current resources might not fund operations for at least the next 12 months and disclosed substantial doubt about its ability to continue as a going concern.
Material changes versus comparable periods
- Third-quarter net loss narrowed by $0.284 million year over year; nine-month net loss narrowed by $0.952 million. Nine-month operating expenses fell $0.954 million, mainly as prior-year Samcyprone licensing, toxicology, and RXI-109 manufacturing costs did not recur, and stock compensation declined. Nine-month G&A rose $0.140 million, primarily due to business-development and professional-service costs.
- Operating cash use increased by $0.653 million year over year, despite the lower net loss; management attributed the change mainly to working-capital movements, including payments for drug manufacturing.
- Financing cash inflow fell from $9.313 million in the first nine months of 2015 to $0.152 million in 2016. The 2015 period included proceeds from a public offering.
- The company completed a 1-for-10 reverse stock split in April 2016 and said it regained compliance with Nasdaq’s minimum bid-price requirement. It sold 65,000 shares to Lincoln Park Capital in Q3 for net proceeds of approximately $0.152 million.
Outlook, management commentary, risks, and unusual items
- Management expected continued significant losses, particularly as clinical programs advanced. It said research and development spending could increase with expanded discovery, preclinical, and clinical activity.
- Management said additional capital would be needed and might be sought through securities sales or strategic opportunities; securities issuance could dilute shareholders. There was no assurance the company could obtain funding or continue as a going concern.
- RXI-109 Study 1402 completed enrollment in two added dermal-scar cohorts during Q3; Study 1501, evaluating retinal scarring, was enrolling. Samcyprone Study 1502 for common warts was enrolling, with completion of the added cohort expected in Q1 2017.
- On October 7, 2016, RXi entered an option agreement to acquire MirImmune. The option could be exercised through April 5, 2017, for shares equal to 19.99% of RXi’s then-outstanding common stock, plus potential milestone consideration. Exercise was optional; dilution and execution risks were disclosed.
- In May 2016, RXi granted Thera Neuropharma an exclusive license to certain RNAi platform rights for neurodegenerative diseases in exchange for equity and potential future payments and royalties. The filing’s text appears inconsistent about the dollar amounts and presentation of the Thera investment and warrant; see verification items below.
- Forward-looking results depend on clinical and regulatory outcomes, trial completion, funding availability, and potential strategic transactions. The filing reported no legal proceedings and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Confirm the registrant identity and corporate-name relationship: this 2016 filing is for RXi Pharmaceuticals Corporation, although the request names Phio Pharmaceuticals Corp.
- Review the going-concern disclosure and assess financing needs against cash, investments, and the reported operating cash burn.
- Reconcile the Thera asset disclosures: the notes refer to a $4,500 carrying value and $4,500 warrant value, while the balance sheet and fair-value table show amounts that do not appear consistent if read in the stated $thousands units.
- Track clinical enrollment, safety and efficacy data, and the timing and outcome of the MirImmune option; any acquisition consideration could materially dilute shareholders.
- Assess potential dilution from future capital raises, outstanding warrants (1,300,464 at September 30, 2016), and stock-based awards.