Filing summary
Period and entity: This is RXi Pharmaceuticals Corporation’s unaudited Form 10-Q for the quarter ended September 30, 2013, filed November 14, 2013. The filing identifies RXi—not Phio Pharmaceuticals Corp.—as the registrant; verify the entity and historical filing match the intended company.
Business context and outlook
RXi was a development-stage biotechnology company focused on RNAi therapeutics. Its lead candidate, RXI-109, was being developed to reduce dermal scarring. Management reported encouraging Phase 1 safety and biomarker findings and expected the second part of Phase 1 Study 1202 to finish by year-end 2013. It expected to begin Phase 2 trials following scar-revision surgery in the fourth quarter of 2013. These were plans, not reported outcomes.
Financial results
Amounts below are in millions of dollars except per-share data. Revenue was grant revenue only; the company had no product revenue.
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $0.092 | $0.057 | $0.370 | $0.057 |
| Research and development | $1.229 | $1.214 | $16.213 | $9.314 |
| General and administrative | $0.934 | $0.539 | $2.588 | $2.006 |
| Operating loss | $(2.071) | $(1.696) | $(18.431) | $(11.263) |
| Net loss | $(2.059) | $(1.644) | $(18.417) | $(11.168) |
| Net loss attributable to common stockholders | $(3.506) | $(2.921) | $(25.810) | $(23.065) |
| Loss per common share | $(0.30) | $(0.56) | $(2.64) | $(5.32) |
Margins are not meaningful given minimal grant revenue and ongoing development spending. Nine-month R&D expense rose 74%, largely due to a $12.25 million noncash charge for acquired OPKO RNAi assets, higher stock compensation and Phase 1 trial costs. Q3 G&A increased 73%, with higher stock compensation, legal costs and personnel-related expenses. Common-stockholder loss also includes preferred-stock accretion and dividends, which totaled $7.393 million for the nine-month period; this is not the same as operating cash use.
Cash, liquidity, and capitalization
- At September 30, 2013, cash and cash equivalents were $6.847 million, short-term investments were $9.000 million, and restricted cash was $0.053 million. Cash plus short-term investments totaled $15.847 million, versus $5.127 million in cash and no short-term investments at December 31, 2012.
- Nine-month operating cash use was $4.909 million; investing cash use was $9.010 million, primarily from purchases of short-term investments; financing provided $15.639 million.
- The March 2013 common-stock offering generated $16.4 million gross and $15.7 million net proceeds. RXi also issued 1,666,666 shares to OPKO for RNAi assets. Common shares outstanding were 11,684,153 at September 30; the filing reports 11,684,153 outstanding as of November 12.
- Total liabilities were $1.342 million, primarily current operating liabilities. No material borrowing balance was reported; capital lease obligations had been repaid by September 30.
- Management said existing cash and cash equivalents would fund operations, including the planned RXI-109 Phase 2 program, into the second quarter of fiscal 2015. The filing also cautioned that further external financing may be needed and may not be available on acceptable terms.
Material changes, risks, and contingencies
- The company acquired substantially all of OPKO’s RNAi-related assets for common stock. The agreement provides for potential development and commercialization milestone payments of up to $50 million per product, plus royalties if products are commercialized.
- In July 2013, RXi effected a 1-for-30 reverse stock split. In August, it exchanged 2,000 Series A preferred shares for Series A-1 shares; the latter eliminated potential cash penalties tied to insufficient common shares for conversion. Both preferred series carry cumulative 7% annual dividends payable in additional preferred shares and have liquidation preferences.
- The company expected significant operating losses and no near-term product revenue. It warned that failure to raise additional funding could require it to scale back or terminate operations, or pursue a merger or sale. Clinical, regulatory, development-cost, intellectual-property, and financing uncertainties were highlighted.
- No legal proceedings or material subsequent events were reported. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the filing’s registrant and its relationship, if any, to Phio Pharmaceuticals Corp.
- Check subsequent filings for actual Phase 2 start/completion, trial results, and changes to RXI-109’s development plans.
- Verify cash runway against later operating cash burn, financing activity, and the stated Phase 2 spending assumptions.
- Review the preferred-stock conversion, dividend, and liquidation terms, and the OPKO milestone and royalty obligations for potential dilution and future cash commitments.