Phio Pharmaceuticals Corp.
Q1 2016 Earnings Call Transcript

Published: 13 May 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the RXi Pharmaceuticals’ First Quarter 2016 Earnings Conference Call. Today’s call is being recorded. At this time, I’d like to turn the call over to Ms. Tamara McGrillen, Head of Investor Relations for RXi. Ma’am, the floor is yours.

[Tamara McGrillen:]

Thank you, operator. Good afternoon ladies and gentlemen. Thank you for participating on our call today. We are joined today by our President and CEO, Dr. Geert Cauwenbergh; our Chief Development Officer, Dr. Pamela Pavco; and Principal Accounting Officer, Ms. Caitlin Kontulis. I would like to remind listeners that this call will contain certain statements concerning RXi’s future expectations, plans, and processes which constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements and as a result of various important factors including those discussed in our most recent Form 10-Q filed today with the SEC. In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. Now, I would like to turn the call over to our President and CEO, Dr. Cauwenbergh.

[Geert Cauwenbergh:]

Thank you, Tammie, and good afternoon to everybody. Thank you all for being on our quarterly update call. Before handing the call over to Caitlin and Pam, I will briefly focus on the four core aspects that drive our company. Number one, financials. Q1 of 2016 has been a quarter during which we once again have carefully managed our expenses, resulting in a net loss that was $700,000 lower than the Q1 of last year. We ended the quarter with $7.7 million in cash, and we have evaluated our project priorities in terms of their timing to having data available and we have been able to adjust our spending accordingly. That has resulted in an extension of our cash run rate in to Q2 of 2017, excluding additional financing activities or cash from corporate development or business development projects. As we access additional financial resources, we will take into account our strong desire to also generate value for our existing shareholders. In the past quarter, we have been able to clean up our cap structure by receiving the green light from our shareholders to implement a one-for-ten reverse split. I want to thank our shareholders for voting in favor of this reverse split. Thanks to their vote, RXI has received the letter from NASDAQ that we are back in compliance with their listing requirements. Number two, clinical development. We currently have three clinical studies ongoing. For RXI-109, in the preventional hypertrophic scars at the scar revision surgery, our Phase II study 1402 is now 75% enrolled and we hope to finish enrollment before the end of 2016. Our first clinical Phase I/II study in ophthalmology is a new way with the first two low dose cohorts enrolled. So far, the intraocular injections with RXI-109 have been well tolerated with no significant side effects observed or clinical complaints received from the study subjects. The Samcyprone Phase II study in cutaneous warts is underway. To expedite the study, we are in the process of adding an additional study site. We expect to have a first readout for that study before the end of the year. Number three, research and preclinical development. In recent months, we have put significant effort into topical delivery of our sd-rxRNA compounds into the skin and on to the eye. This has resulted in some promising data that were presented at ARVO in early May for ocular delivery and at the SID meeting this week for dermal delivery. In both instances, we have visualized solid penetration of the sd-rxRNA molecules into those tissues. That provides us with an opportunity for topical delivery in the treatment of corneal scarring with RXI-109, as well as management of skin conditions, such as skin paging, skin laxity and uneven pigmentation of the skin. These latter components being in the area of consumer healthcare and cosmetics require safety testing in vitro because animal testing for this kind of consumer healthcare products is not allowed in many countries. The first set of tests using in vitro systems that are generally accepted by the regulatory agencies in the U.S. and Europe, because of their predictability of toxicity and tolerability for human skin, have shown no cell toxicity or irritation potential at concentrations 100 times higher than the intended concentration for use in humans. These low and safe concentrations still show remarkable activity against the biological targets for those two compounds

[Caitlin Kontulis:]

Thank you, Geert, and good afternoon everyone. The company filed its Form 10-Q for the first quarter of 2016 today with the SEC. The filing includes detailed information on the company’s financial performance. I will present an overview of the select financial highlights from the filing. The company had net revenues of $10,000 for the three months ended March 31, 2016. The revenues during the quarter were due to the company’s out-licensed technology agreement with MirImmune. Net revenues for the three months ended March 31, 2015, totaled $34,000 and were due to the Company’s government grants with the NIH. All the work under this grant was completed during the first quarter of 2015. Research and development expense was $1.3 million for the quarter ended March 31, 2016, as compared with $2.1 million for the quarter ended March 31, 2015. The decrease in research and development expense was primarily due to the cash and equity fees payable to Hapten Pharmaceuticals, upon the close of the exclusive license agreement from Samcyprone, as well as for toxicology studies performed in connection with the company’s IND for our retinal scarring clinical trial. Both of which were completed in the first quarter of 2015. General and administrative expense for the quarter ended March 31, 2016 was $1 million, as compared with $0.9 million for the quarter ended March 31, 2015. The increase in general and administrative expense was primarily due to an increase in the use of professional service providers as the company has increased its focus on business development activities in line with our key corporate initiatives during the first of this year as compared with the same period in the prior year. The company’s net loss for the quarter ended March 31, 2016 was $2.2 million, compared with $2.9 million for the quarter ended March 2015. Net loss decreased from the prior year quarter, primarily due to the decreases in research and development expense as just discussed. The company’s net cash used in operating expenses for the three months ended March 31, 2016 was $2.9 million, compared with $2 million for the three months ended March 31, 2015. The increase in net cash used in operating expenses was primarily due to changes in our working capital driven by payments during the quarter for our recent drug manufacturing batches of RXI-109 and Samcyprone. As a result of these large payments, we did see an increase in our quarterly cash burn rate to about $3 million for the first quarter of 2016. The company has a strong fiscal track record and has been very diligent and consistent with our spending year-in and year-out. We expect going forward that our quarterly cash burn will be in line with our historical burn rate of about $2 million per quarter. Cash flows from the company’s investing and financing activities were minimal during the first quarter of the year. At March 31, 2016, the company had available cash of $7.7 million, compared with $10.6 million at December 31, 2016. As Geert mentioned, we have assessed our current budget plan and have adjusted our spending according to our project priorities as a function of time to data. As a result, we believe that our existing cash should be sufficient to fund operations for at least one year. We are mindful of our future cash needs and are looking into strategic options to extend our financial position that would create value for both the company and our shareholders. As we had discussed the prior quarter calls, the non-compliance notice from the NASDAQ stock market, that we were not in compliance with a $1 bid price listing requirements. On April 18, the company completed a reverse stock split of our common stock at a ratio of one-for-ten. This reduced the company’s issued and outstanding common stock from 65.3 million shares to 6.5 million shares. There were no changes to the company’s authorized shares as a result of the split. Further, all share and per share amounts disclosed in the company’s Form 10-Q filed today have an adjusted to reflect the reverse stock split. On May 2 following the implementation of the reverse stock split, the company received written notice from NASDAQ that we had regained compliance with the minimum bid price requirements for continued listing on the NASDAQ capital market. And with that I will turn the call over to Pam, who will discuss the company’s R&D activities.

[Pamela Pavco:]

Thank you, Caitlin, and hello everyone. I am happy to update you today on the progress RXi has made since the last earnings call in March. At that time, I gave a comprehensive overview of our ongoing programs. This time I will focus on the progress we have made in several of our research areas and update you on the ongoing trials. I will start with ophthalmology. First of all, RXi very recently presented data at ARVO, the Association for Research in Vision and Ophthalmology that gave an update on our success in topical delivery of sd-rxRNA in a wounded cornea. One main function of the cornea is to serve as a protective layer covering the front of your eyes, protecting them from foreign matter such as dust, water, bacteria and participles. In situations where the cornea is damaged either from keratitis and inflammation of the cornea, infection or from injuries such as abrasion and laceration during surgical procedures, sometimes the healing process is accompanied by scarring. If so the otherwise clear cornea will become hazy or opaque and the result can be permanently impaired vision, because the cornea not only protects our eye, but serves to bend or refract the income light on to the lens that plays a crucial part in your vision. Our goal is to reduce the scarring compound and subsequent blindness of corneal injury or disease with RXI-109 independent of its many causes. So, connected tissue growth factor or CTGF is known to be involved in the fibrosis pathway in the cornea and we have already demonstrated proof-of-concept in previous studies that RXI-109 can significantly do the CTF protein present in the normal monkey retina and cornea for at least a week following an intravitreal injection. We had been working to develop a topical delivery system as a non-invasive way to deliver RXI-109 to corneal injuries with a goal of presenting vision loss associated with the scar formation on the surface of the eye. We have developed eye drops and thermo-reversible gel formulation and have tested both for delivery to cells within the cornea. On the model we use, the outer most layer of the eye is slightly damaged as is in injury to the cornea has occurred and the eye drops or the gel containing a fluorescent labeled sd-rxRNA as defined. In this case, we’re using rabbit for this model. Update of the – uptake of the compound across all layers of the cornea is measured after 24 hours or 48 hours. In the wounded rabbit cornea, we saw significant delivery across the cornea layers at these time points. And we also learn that the gel formulation was optimal in two ways

[Tamara McGrillen:]

Thank you, Pam. This now concludes the formal presentation for today. Operator, we would like to now go for questions please.

[Tamara McGrillen:]

Well, once again, ladies and gentlemen, thank you for participating in our call today. That will be it. This concludes our call.

[Geert Cauwenbergh:]

Thank you. Good evening all.

[Operator:]

This does conclude today’s webinar. We thank you for your participation. You may disconnect your lines at this time and have a great day.

[Tamara McGrillen:]

Thank you.