Phio Pharmaceuticals Corp. (filed as RXi Pharmaceuticals Corporation) — FY 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. This is an annual filing, not a standalone fourth-quarter report. Financial statements compare FY 2017 with FY 2016; amounts below are in U.S. dollars.
Business context
RXi was a development-stage biotechnology company focused on self-delivering RNA interference (sd-rxRNA) therapeutics. After acquiring MirImmune in January 2017, it shifted its planned focus to immuno-oncology and adoptive cell transfer (ACT), while intending to partner or out-license its dermatology and ophthalmology programs. Its lead immuno-oncology candidates, RXI-762 (PD-1) and RXI-804 (TIGIT), were in preclinical development.
Financial performance and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $15,000 | $19,000 |
| Research and development expense | $5.370 million | $5.415 million |
| Acquired in-process R&D expense | $4.696 million | — |
| General and administrative expense | $4.011 million | $3.619 million |
| Total operating expenses | $14.077 million | $9.034 million |
| Operating loss | $14.062 million | $9.015 million |
| Net loss | $12.452 million | $8.994 million |
| Net loss per common share, basic and diluted | $5.52 | $16.41 |
| Cash used in operating activities | $9.514 million | $7.760 million |
Revenue was immaterial and there was no commercial product revenue; therefore, a meaningful operating margin is not applicable. The company reported no borrowings in the balance-sheet information presented. At December 31, 2017, cash and cash equivalents were $3.581 million, restricted cash was $50,000, total current assets were $3.832 million, current liabilities were $2.265 million, total assets were $4.098 million, and stockholders’ equity was $1.833 million.
Material changes and unusual items
- Operating expenses rose $5.043 million year over year, principally because of the $4.696 million MirImmune acquisition-related in-process R&D charge. G&A increased $392,000; R&D decreased $45,000.
- The $1.621 million income tax benefit related to the MirImmune acquisition. FY 2016 included a $2.075 million preferred-stock accretion charge, explaining why the net loss attributable to common stockholders differed from net loss that year.
- Cash declined from $12.906 million at year-end 2016 to $3.581 million at year-end 2017. Financing cash flow was only $292,000 in 2017, versus $10.203 million in 2016, when the company completed a public offering.
- The company sold 60,000 shares to Lincoln Park Capital in 2017 for approximately $365,000 gross proceeds (approximately $290,000 net in the equity note). It reported an additional 225,000 shares sold after year-end for approximately $788,000 net proceeds.
- A 1-for-10 reverse stock split took effect January 8, 2018; share and per-share amounts in the filing were retrospectively adjusted.
Outlook, risks and contingencies
- Management and the auditor disclosed substantial doubt about the company’s ability to continue as a going concern for at least the next 12 months. Management said additional capital, partnerships, or other funding would be needed; financing availability and terms were uncertain. Failure to obtain funding could force the company to reduce or end operations or pursue a merger or sale.
- Management expected to advance RXI-762 into clinical development as part of ACT for solid tumors within 12–18 months, subject to preclinical progress and funding. The company planned to complete ongoing RXI-109 and Samcyprone studies and seek partners or licensees for those programs.
- RXI-109’s Phase 2a hypertrophic-scar study reported positive results in one treatment arm, including statistically significant scar-assessment results and favorable patient/investigator rankings. Final results for the retinal-scarring RXI-109 study and Samcyprone wart study were expected in the first half of 2018.
- Immuno-oncology candidates remained preclinical; the filing emphasizes scientific, clinical, regulatory, manufacturing, competition, intellectual-property, collaboration, and financing risks. The company had no approved products or product-sale revenue.
- Management identified a material weakness in income-tax accounting controls and concluded internal control over financial reporting and disclosure controls were not effective at year-end. The related tax adjustments were corrected before issuance; management described remediation steps, but their effectiveness was not yet established.
- License commitments included $1.495 million in stated future cash payments, excluding contingent milestones and royalties. The MirImmune agreement also provided for potential milestone shares or cash if specified milestones were achieved; none had been met by year-end. No material legal proceedings were reported.
Most important facts for investors to verify
- Available cash, ongoing monthly cash burn, and whether subsequent financing or partnerships provide adequate runway.
- Progress and timing of RXI-762/RXI-804 preclinical work and any clinical-trial start; the 12–18-month timing was forward-looking.
- Final results and any partner or out-license outcomes for RXI-109 and Samcyprone.
- Whether the income-tax control weakness was remediated and whether future filings report effective controls.
- Potential dilution from the Lincoln Park facility, outstanding warrants, and MirImmune milestone consideration.