Phio Pharmaceuticals Corp. (filed as RXi Pharmaceuticals Corporation) — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The unaudited consolidated statements are prepared under U.S. GAAP. Per-share and share data reflect the 1-for-10 reverse stock split effected January 8, 2018.
Business context and strategy
The company develops self-delivering RNAi therapeutics and, in January 2018, shifted its focus to immuno-oncology and adoptive cell transfer (ACT). It plans to complete ongoing dermatology and ophthalmology trials, then seek partners or out-license those programs. Its leading immuno-oncology candidates include RXI-762 (PD-1) and RXI-804 (TIGIT); management expected to begin clinical development of RXI-762 as part of ACT for solid tumors within 12–18 months.
Financial highlights
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $23,000 | $0; 2018 revenue was grant-related subcontract work |
| Research and development expense | $1.361 million | $1.347 million, up $14,000 (1%) |
| General and administrative expense | $901,000 | $1.123 million, down $222,000 (20%) |
| Acquired in-process R&D expense | $0 | $4.611 million in 2017, related to the MirImmune acquisition |
| Operating loss | $2.239 million | $7.081 million |
| Net loss | $2.239 million | $5.460 million; 2017 included a $1.621 million tax benefit |
| Basic and diluted loss per share | $0.90 | $2.65 |
| Net cash used in operating activities | $1.907 million | $2.799 million |
| Cash, cash equivalents and restricted cash at quarter-end | $2.656 million | $10.255 million at March 31, 2017 |
At March 31, 2018, cash and cash equivalents were $2.606 million; restricted cash was $50,000. Total assets were $3.090 million, current liabilities $2.523 million, and stockholders’ equity $567,000. The filing presents no debt balance. Gross margin is not separately reported and is not meaningful to assess from the disclosed figures.
Liquidity, financing and material changes
Cash and cash equivalents declined from $3.581 million at December 31, 2017. Operating cash use was partly offset by $932,000 of net proceeds from issuing 270,000 shares to Lincoln Park Capital (LPC). Management stated that the company had recurring losses, expected negative operating cash flows, and faced substantial doubt about its ability to continue as a going concern for at least one year; additional financing or strategic transactions would be needed, with no assurance of availability on acceptable terms.
After quarter-end, the company received approximately $4.1 million in net proceeds from an April offering and concurrent warrant placement, assuming the warrants are not exercised. It also sold 45,000 shares to LPC for approximately $130,000. These proceeds were expected to increase stockholders’ equity in Q2. The filing says Nasdaq notified the company on March 29 that it failed the continued-listing stockholders’ equity requirement; management believed the April financing restored compliance, but Nasdaq would continue monitoring compliance.
Outlook, risks and unusual items
- Management expected final readouts before the end of Q2 2018 for the RXI-109 retinal-scar trial and the Samcyprone wart trial. Enrollment and participation were complete; data analysis was ongoing.
- The company intends to pursue partnerships or out-licensing for its dermatology and ophthalmology assets to help fund immuno-oncology development and extend its financial runway.
- Disclosure controls were reported ineffective due to a material weakness in controls over income-tax accounting. Management’s remediation plan included greater tax-accountant involvement, process improvements and staff training; management targeted remediation by year-end 2018, subject to testing.
- Risks include the going-concern uncertainty, dependence on external financing, clinical and development uncertainty, and possible Nasdaq delisting. The company reported no legal proceedings.
- Off-balance-sheet indemnification obligations exist under license and other agreements; the company reported no material costs or accrued liabilities related to them.
Important facts for investors to verify
- Whether post-quarter financing and subsequent results provide adequate runway, and whether the going-concern uncertainty remains.
- Nasdaq’s determination of continued-listing compliance, including any requirements beyond stockholders’ equity.
- Results and timing of the RXI-109 and Samcyprone readouts, and progress toward the stated RXI-762 clinical-development timeline.
- Whether the company secures partners or licensees for the dermatology and ophthalmology programs.
- Whether remediation of the income-tax accounting material weakness is completed and shown to operate effectively.