Phio Pharmaceuticals Corp. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing was signed March 25, 2021. Amounts below are in U.S. dollars; financial statement figures are generally in thousands unless stated otherwise.
Business context
Phio is a clinical-stage biotechnology company focused on immuno-oncology and its self-delivering RNA interference platform, INTASYL. Its candidates are being developed to modify immune cells for adoptive cell therapy and to treat the tumor micro-environment directly. The company reported no commercial products and no product-sales revenue; its programs were described as preclinical at year-end.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $21 | Down $21 |
| Research and development expense | $4.431 million | $4.300 million | Up $131,000 (3%) |
| General and administrative expense | $4.362 million | $4.708 million | Down $346,000 (7%) |
| Total operating expenses | $8.793 million | $9.008 million | Down $215,000 |
| Operating loss | $8.793 million | $8.987 million | Improved $194,000 |
| Net loss | $8.794 million | $8.908 million | Improved $114,000 |
| Basic and diluted loss per share | $1.92 | $19.33 | Per-share comparison affected by share count changes |
Operating and net margins are not meaningful because the company had no revenue in 2020. R&D increased primarily due to greater use of sponsored research organizations; G&A declined mainly because of lower legal and recruiting costs.
Cash was $14.244 million at year-end 2020, versus $6.934 million a year earlier; restricted cash was $50,000. Current assets were $15.164 million and current liabilities $2.196 million. Total assets were $15.739 million, total liabilities $2.722 million, and stockholders’ equity $13.017 million.
Cash used in operating activities was $8.802 million, compared with $8.645 million in 2019. Investing activities used $19,000. Financing activities provided $16.131 million, primarily from securities issuance and warrant exercises. Year-end long-term debt of $231,000 was the Paycheck Protection Program loan; the SBA approved full forgiveness on February 18, 2021. Lease liabilities totaled $411,000.
After year-end, Phio reported estimated net proceeds of $12.7 million from a January 2021 private placement and $6.9 million from a February 2021 registered offering, plus $2.146 million from subsequent warrant exercises. Management said existing cash and subsequent financing proceeds should fund planned operations for at least 12 months from the financial statements’ release date. The company nevertheless expects continuing operating losses and will need additional funding for development.
Material changes, outlook and risks
- Financing substantially increased cash, but also expanded potential dilution: common shares outstanding rose from 669,433 at year-end 2019 to 5,780,973 at year-end 2020, after the 1-for-55 reverse split and financing activity. The company reported 13,531,941 shares outstanding as of March 18, 2021. Warrants outstanding at year-end 2020 covered 3,579,284 shares.
- In March 2021, Phio announced a clinical-development collaboration with AgonOx to study PH-762-treated double-positive tumor-infiltrating lymphocytes. The trial was expected to begin in Q3 2021. A separate intratumoral PH-762 study in advanced melanoma was expected to begin in Q4 2021. These are forward-looking plans, not reported trial results.
- Management described preclinical findings for PH-762, PH-894, PH-804 and PH-790, including enhanced immune-cell activity and reduced tumor growth in animal studies. These findings do not establish clinical efficacy. Phio reported that PH-762-treated AgonOx cells showed a two-fold increase in tumor-killing activity in preclinical work.
- COVID-19 had limited reported impact on internal operations to date, but supplier and service-provider disruptions could delay research or trials, raise costs, or affect access to capital. Management said it believed supply was sufficient for ongoing preclinical work and initial clinical activities.
- Key risks include early-stage development and possible failure or delay; dependence on collaborators, contract research organizations and external manufacturers; regulatory and clinical-trial uncertainty; competition and intellectual-property challenges; ongoing losses and reliance on future financing; and stock-price volatility. The company had no material litigation reported.
- The independent auditor issued an unqualified opinion on the financial statements. The auditor identified accounting for warrants issued with 2020 equity offerings as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Whether the planned PH-762 clinical studies began on schedule, and their regulatory status, enrollment, safety findings and results.
- How much cash remains after operating spend and whether management’s stated 12-month runway remains adequate; the company expects further funding needs.
- The terms and fully diluted impact of the 2021 offerings and outstanding warrants, including the final accounting treatment of January 2021 warrants.
- Whether AgonOx and other research partners meet development milestones and maintain their collaborations.
- Whether third-party supply and COVID-19-related disruptions affect development timelines or costs.