Phio Pharmaceuticals Corp.

For the quarter ended September 30, 2018, RXi reported grant revenues of $57,000, versus no such revenue in the prior-year quarter. R&D expense was $0.8 million, down from $1.5 million year over year, and G&A expense was $0.7 million, down from $1.0 million year over year. Net loss was $1.5 million versus $2.5 million in the same quarter of 2017. Cash was $3.2 million at September 30, 2018, compared with $3.6 million at December 31, 2017. After quarter-end, the company completed an underwritten public offering that raised $15 million gross and about $13.3 million net, and management said this provides an additional 6 to 7 quarters of cash and should fund operations into the second half of 2020. Management also said burn has been around $2 million per quarter and expects that to continue early next year, with costs likely to start increasing toward the end of 2019 as the company moves into the clinic.

Geert Cauwenbergh said the quarter reflected improved finances, lower losses, and an extended cash runway after the financing. He emphasized that the company is actively working to sell or out-license dermatology and ophthalmology assets to bring in non-dilutive cash, and said the process has accelerated as final clinical data became available. He also framed the company’s strategic shift around the upcoming name change to Phio Pharmaceuticals, saying it better reflects the company’s commitment to its self-delivering RNAi platform in immuno-oncology.

Caitlin Kontulis walked through the quarter’s financial decline in spend, noting grant revenue of $57,000, R&D of $0.8 million, G&A of $0.7 million, and net loss of $1.5 million. She said the lower expenses were mainly due to reduced clinical-trial activity and lower payroll tied to headcount reductions. On liquidity, she said cash was $3.2 million at quarter-end, the October offering added $15 million gross and about $13.3 million net, and the company believes it now has sufficient cash to fund operations into the second half of 2020; she also said the company expects about a $2 million quarterly burn early next year, with spending ramping later as clinical work begins.

Analysts focused on cash burn, the timing of higher expenses as the company approaches the clinic, and the status of the dermatology/ophthalmology monetization process. Management said burn should stay around $2 million per quarter at the start of next year, then likely rise toward the end of 2019 as clinical development ramps. On asset sales, management said it could not give a valuation range because there is active due diligence and different dynamics between dermatology and ophthalmology, but described interest as strong and said the company wants to maximize terms rather than rush a deal. They also addressed NASDAQ compliance, saying the company must regain a $1 closing price for 10 consecutive business days by May 13, 2019, and that the name change was not intended to affect short sellers or force buybacks.