Business context and reporting period
RXi Pharmaceuticals Corporation filed this unaudited Form 10-Q for the quarter ended March 31, 2016. It was a clinical-stage RNAi company developing treatments in dermatology and ophthalmology, including RXI-109 for dermal and ocular scarring and Samcyprone for skin disorders. The company reported minimal revenue and no product revenue to date.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | $0.010 | $0.034 |
| Research and development expense | $1.305 | $2.107 |
| General and administrative expense | $0.950 | $0.873 |
| Total operating expense | $2.255 | $2.980 |
| Operating loss | $(2.245) | $(2.946) |
| Net loss | $(2.231) | $(2.945) |
| Net loss applicable to common stockholders | $(2.231) | $(3.130) |
| Basic and diluted loss per share | $(0.34) | $(1.32) |
| Operating cash flow | $(2.925) | $(1.972) |
Cash and cash equivalents were $4.192 million at March 31, 2016, and short-term investments were $3.500 million; an additional $0.050 million was restricted. Cash, cash equivalents, and short-term investments totaled $7.692 million, down from $10.617 million at December 31, 2015. Total assets were $8.174 million, current liabilities $1.221 million, and stockholders’ equity $6.953 million. The balance sheet reported no debt. Gross or operating margins are not meaningful given the company’s very small revenue and development-stage operations.
Material changes and management commentary
- Revenue fell by $24,000, primarily because a National Cancer Institute grant ended in 2015. Q1 2016 revenue came from an out-licensed technology agreement with MirImmune.
- R&D expense declined $802,000 (38%), mainly because Q1 2015 included Samcyprone licensing-related fees and retinal-scarring toxicology work, as well as higher stock compensation.
- G&A expense rose $77,000 (9%), primarily due to greater use of professional services related to business development.
- Despite the lower net loss, operating cash use increased $953,000 year over year. Management attributed the increase mainly to working-capital changes, including payments for RXI-109 and Samcyprone drug manufacturing.
- Investing cash inflow of $2.000 million reflected maturities of short-term investments; there was no financing cash flow in Q1 2016. Cash and cash equivalents declined by $0.925 million during the quarter.
- Management said existing cash, investments, and the company’s LPC purchase agreement should fund operations for at least 12 months. It also cautioned that additional funding may be needed and may not be available on acceptable terms, or at all; failure to obtain funding could require scaling back, terminating operations, or pursuing a merger or acquisition.
Outlook, risks, and unusual items
- The company expected significant losses to continue, particularly as it advanced RXI-109 and Samcyprone. It expected R&D expense to increase as discovery, preclinical, and clinical activities expanded.
- Clinical updates and plans described in the filing included ongoing enrollment in RXI-109 studies for hypertrophic scars and retinal scarring, and an expectation to fully enroll the Samcyprone wart study before the end of 2016. The company also planned to complete testing to initiate human testing of one consumer-health target by year-end 2016. These are management plans, not financial guidance.
- Key risks include clinical-trial safety, tolerability, and efficacy; trial completion and regulatory uncertainty; and the availability of funds and resources. Forward-looking statements are subject to these and other risks.
- On April 18, 2016, after quarter-end, the company effected a 1-for-10 reverse stock split and regained compliance with Nasdaq’s minimum bid-price requirement. Share and per-share amounts in the filing were retroactively adjusted for the split.
- Potential indemnification obligations under license and other agreements were disclosed as off-balance-sheet arrangements; the company reported no material costs to date and no related accrual. The filing reported no legal proceedings and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the reported cash runway remains adequate, given quarterly operating cash use of $2.925 million and the company’s dependence on future external funding.
- Current cash and investment balances, subsequent financing activity, and the availability and terms of the LPC purchase agreement.
- Enrollment, results, safety, and timing for the RXI-109 and Samcyprone clinical programs, including whether stated study milestones were achieved.
- The post-split share count, warrant overhang, and any subsequent equity issuance or potential dilution.
- Whether clinical, regulatory, licensing, or indemnification developments have created new costs or contingencies since the filing.