Phio Pharmaceuticals Corp. (reported as RXi Pharmaceuticals Corporation) — Form 10-Q summary
Reporting period: Quarter ended September 30, 2018; financial statements are unaudited. The filing identifies the issuer as RXi Pharmaceuticals Corporation, not Phio Pharmaceuticals Corp.
Business context
The company is a pre-revenue biotechnology developer of self-delivering RNAi therapeutics, with its strategy shifted in January 2018 to focus on immuno-oncology and adoptive cell therapy. It planned to seek partners or licensees for its dermatology and ophthalmology assets, including RXI-109 and Samcyprone, to help fund its immuno-oncology work.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $57,000 | $0 | $138,000 | $0 |
| Research and development | $838,000 | $1.490 million | $3.382 million | $4.166 million |
| Total operating expenses | $1.549 million | $2.476 million | $5.768 million | $12.071 million |
| Net loss | $1.493 million | $2.476 million | $5.633 million | $10.450 million |
| Basic and diluted loss per share | $0.34 | $1.05 | $1.54 | $4.71 |
Revenue was grant-related work performed as a sub-awardee for a BioAxone project. The filing does not present a meaningful operating margin given the company’s development-stage operations and minimal revenue.
At September 30, 2018, cash and cash equivalents were $3.240 million, restricted cash was $50,000, and total assets were $3.809 million. Current liabilities were $2.059 million; reported current assets were $3.622 million, implying working capital of approximately $1.563 million. No debt balance is reported. Stockholders’ equity was $1.750 million.
For the first nine months, operating cash use was $5.774 million, investing cash flow was zero, and financing provided $5.433 million. Cash, cash equivalents and restricted cash declined by $341,000 to $3.290 million. Management said cash on hand and proceeds from the April and October 2018 offerings should fund operations for at least 12 months, while also warning that continued operations depend on external financing.
Material changes and unusual items
- Q3 operating expenses fell $927,000 year over year; nine-month expenses fell $6.303 million. Management attributed the declines mainly to reduced clinical-trial and manufacturing activity as dermatology and ophthalmology programs ramped down, lower headcount-related costs, and the absence of the $4.696 million MirImmune acquired in-process R&D charge recorded in 2017.
- The 2017 nine-month net loss included a $1.621 million income-tax benefit related to the MirImmune acquisition; there was no tax benefit in 2018.
- The April 2018 registered offering and warrant placement generated $4.210 million in net proceeds. The company also sold shares to Lincoln Park Capital, raising approximately $1.312 million net during the first nine months.
- After quarter-end, the October offering generated approximately $13.3 million in net proceeds. It included common shares and substantial pre-funded and ordinary warrants, creating potential dilution. The filing also reports that 10.534 million pre-funded warrants were converted into shares after quarter-end for $105,000.
- A 1-for-10 reverse stock split took effect in January 2018; presented share and per-share amounts reflect the split.
Outlook, risks and controls
- Management expected to enter clinical development with RXI-762 as part of adoptive cell therapy for solid tumors by the end of 2019. This is a forward-looking target, not a reported clinical milestone.
- The company reported discovery and preclinical programs and described positive research and clinical findings, but these do not establish future efficacy or commercial viability. It intended to pursue collaborations and out-licensing for non-core franchises.
- Management expects recurring operating losses and negative operating cash flows. It cautioned that funding may not be available on acceptable terms or at all; insufficient funding could require scaling back or ending operations or pursuing a merger or sale.
- On November 12, 2018, Nasdaq notified the company that it did not meet the $1.00 minimum bid-price requirement. The filing stated a May 13, 2019 deadline to regain compliance; failure could lead to delisting and impair trading liquidity and future financing.
- Disclosure controls and procedures were deemed ineffective because of an unremediated material weakness in income-tax accounting controls. Management expected remediation by the end of 2018, subject to testing demonstrating effective operation.
- The company disclosed ordinary-course indemnification obligations but no material related costs or accrued liabilities. It reported no material legal proceedings and no market-risk disclosure applicable.
Important facts for investors to verify
- Confirm the issuer identity and any subsequent corporate-name or ticker changes; this filing is under RXi Pharmaceuticals Corporation.
- Track cash burn against the stated 12-month runway and verify subsequent financing needs and actual operating milestones.
- Review the classification, exercise, conversion and dilution impact of the October 2018 warrants and pre-funded warrants.
- Check whether Nasdaq bid-price compliance was regained and whether the income-tax control weakness was remediated and validated.
- Verify progress toward RXI-762 clinical development and any partnership or licensing transactions for the dermatology and ophthalmology assets.