Phio Pharmaceuticals Corp. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Phio is a clinical-stage biotechnology company developing immuno-oncology therapeutics using its self-delivering INTASYL RNAi platform. The company reported no product revenue in the quarter and remains dependent on external financing.
Financial performance
Amounts below are in thousands of dollars, except per-share data.
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $21 |
| Research and development expense | $779 | $1,146 | $1,997 | $2,235 |
| General and administrative expense | $890 | $913 | $2,028 | $1,991 |
| Total operating expenses | $1,669 | $2,059 | $4,025 | $4,226 |
| Net loss | $(1,672) | $(2,035) | $(4,023) | $(4,154) |
| Basic and diluted loss per share | $(0.34) | $(4.62) | $(1.19) | $(10.23) |
Cash and restricted cash totaled $18.914 million at June 30, 2020, including $18.864 million of unrestricted cash, versus $6.984 million at December 31, 2019. Six-month operating cash use was $4.208 million, investing cash use was $10,000, and financing provided $16.148 million. Total liabilities were $2.478 million, including $231,000 of PPP debt and $465,000 of lease liabilities. Working capital was approximately $17.7 million. Profitability and operating margins are not meaningful given the absence of material revenue and continued losses.
Changes and financing
- Q2 operating expenses fell $390,000 year over year, mainly due to lower R&D spending; R&D declined 32% in the quarter. For the first half, operating expenses declined $201,000, while G&A increased $37,000.
- Net loss improved by $363,000 for Q2 and $131,000 for the first half compared with 2019. Six-month operating cash use increased by $100,000 year over year.
- Cash increased primarily from equity and warrant financing: the February registered and underwritten offerings and April offering generated $12.087 million net, and warrant exercises generated $3.864 million. The company issued substantial additional shares; 5,780,226 shares were outstanding at June 30, compared with 669,433 at year-end 2019. The filing also reports 3,579,284 outstanding warrants at June 30, representing potential dilution.
- A 1-for-55 reverse stock split took effect January 15, 2020; share and per-share figures were retrospectively adjusted.
Outlook, risks and notable items
- Management said existing cash was expected to fund operations for at least 12 months from the financial-statement release date. The company nonetheless expects continuing operating losses and negative operating cash flows and will need additional financing over time. Management warned that unavailable or unacceptable financing could force it to scale back or terminate operations, or seek a merger or acquisition.
- The company received a $231,252 Paycheck Protection Program loan on May 11, 2020, at 1% interest, maturing May 11, 2022. It intends to seek forgiveness but cannot assure that the loan will be forgiven; the loan was recorded as long-term debt. Senior management salaries were reduced by 10% through the remainder of 2020 or until market conditions improve.
- COVID-19 had not materially disrupted internal operations or financial results at the filing date, but third-party service providers were beginning to face impacts. Potential supply, outsourced-research, preclinical-study and clinical-trial delays could slow development or increase costs. The company anticipated short-term declines in trial starts and enrollment. Required studies and steps toward initiating PH-762 clinical trials in the 2021 timeframe were ongoing, but could be delayed.
- Pipeline programs described include PH-762 (PD-1), PH-804 (TIGIT), PH-894 (BRD4) and PH-790 (PD-L1). The filing discusses preclinical findings and collaborations; these are not evidence of established clinical efficacy. A March 2020 collaboration and option agreement with Medigene AG and Helmholtz Zentrum München gives Medigene an option for an exclusive license to develop certain candidates.
- The company reported no material legal proceedings and stated that disclosure controls were effective as of June 30, 2020. It reported no material changes in internal control over financial reporting during the first half.
Investor verification points
- Verify the company’s cash runway against actual quarterly cash burn, planned R&D spending and subsequent financing needs; the stated 12-month runway is management’s estimate.
- Track any PPP loan-forgiveness determination and any repayment obligations.
- Assess dilution from shares already issued, outstanding warrants and any further equity financing.
- Monitor COVID-related vendor, supply and trial delays, particularly milestones for PH-762 and the stated 2021 clinical-trial timeframe.
- Review subsequent clinical and preclinical data, collaboration developments, and whether the pipeline advances toward clinical testing.