By John Vandermosten, CFA

NASDAQ:PHIO

Phio Pharmaceuticals Corp. (NASDAQ:PHIO) reported third quarter 2019 results and filed its Form 10-Q on November 12, 2019. Since the beginning of the year, the company has announced a several new collaborations with partners including Glycostem Therapeutics, Helmholtz Zentrum Munchen and Carisma Therapeutics. Research and development efforts have put the company is on track to launch up to three clinical trial programs in 2020. This includes PH-762 for adoptive cell therapy (ACT) and direct intra-tumoral injection targeting checkpoint inhibitors and PH-804 to activate T cells and natural killer (NK) cells. The company has also designated the proprietary name, INSTASYL, for its self-delivering RNAi platform.

Total expenses in the third quarter of 2019 were $2.1 million, up 36% from the prior year quarter. This was composed of research and development expenditures of $1.0 million, rising 24% on higher consulting and professional service fees and general and administrative expenditures of $1.1 million, up 51% on higher payroll related expenses and legal fees. Net loss was ($2.1) milion or ($0.08) per share, reflecting 25.4 million average diluted shares outstanding.

As of September 30, 2019, cash stood at $8.7 million and debt remained at zero. Cash burn was ($2.1) million for the quarter, up slightly from prior year levels. A small amount of cash was used in financing related to stock issuance costs. Phio management anticipates current cash levels will be sufficient to fund the company for at least the next 12 months.

SITC Posters

Several posters were presented at the Society for Immunotherapy of Cancer (SITC) 2019 Annual Meeting in November, summarizing the work performed both internally and in collaboration with Iovance Biotherapeutics and the Karolinska Institutet. The posters addressed cellular therapies and novel single-agent immunotherapies in presentations given on November 8th and 9th. Poster titles were:

‣ Silencing PD-1 using self-delivering RNAi PH-762 to improve Iovance TIL effector function using Gen 2 manufacturing method

‣ Modulating BRD4 in T cells using self-delivery RNAi to improve adoptive cell therapy of cancer

‣ Local modulation of T cell PD-1 using self-delivering RNAi as a potential immunotherapeutic

New Collaborations & Partnerships

On August 15, 2019, Phio announced a collaboration with Helmholtz Zentrum München, a German research organization focused on studying environmental health issues. The organization incubates promising development projects and promotes their further development in an effort to be an attractive partner for industry. This includes projects in drug discovery and immuno-oncology. The collaboration project between Phio and the research center will design new targets employing sd-rxRNA in cancer immunotherapy. The project will be led by Professor Dr. Elfriede Nößner, an expert in the study of lymphoid and myeloid effector cells. Dr. Nößner believes that Phio’s technology can be effective in inhibiting checkpoints in immune effector cells, such as T cells and NK cells.

The company announced an additional collaboration with Carisma Therapeutics on September 9th. Carisma is a Philadelphia-based chimeric antigen receptor macrophage (CAR-M)-focused biotechnology company. Carisma’s technology uses macrophages, which are naturally drawn to solid tissues, to orient the CAR approach toward addressing solid tumors. Phio will work with Carisma to synergistically modify Carisma’s CAR-Ms to silence key genes that may enhance the immune function of the cells. The combination of technolgies may enhance an immunostimulatory phenotype and promote tumor cell killing.

Pipeline Candidates

Phio’s pipeline includes lead candidate PH-762 for melanoma and PH-804 for a variety of immuno-oncology targets as well as other compounds focused on checkpoint receptor inhibition, adoptive cell therapy (ACT) and tumor microenvironment. Cell differentiation is another program that is seeking to extend the life of modified immune cells to combat exhaustion.

Exhibit II – Phio INTASYL Immuno-Oncology Pipeline¹

NASDAQ Compliance

On November 2, 2018 Phio received a letter from NASDAQ stating that the company was not in compliance with exchange rules which require a minimum bid price of $1.00. The exchange gave the company 180 days to achieve compliance and then another 180 days, extending the requirement target date to November 11, 2019. On November 2nd, 2019 the NASDAQ notified Phio that it remained out of compliance with minimum bid price requirements. The company expects that the NASDAQ will delist the company’s shares after which the company will appeal. If the appeal is unsuccessful, the shares will likely trade on the OTC Bulletin Board or the OTCQX market.

Milestones:

‣ Addition of partner Glycostem for NK IO treatment development – March 2019

‣ Elevation of Dr. Gerrit Dispersyn to CEO – March 2019

‣ Partnership/Sale of Dermatology and Ophthalmology Programs – TBD

‣ Preparation of IND for PH-762 – 2H:19

‣ Collaboration with Helmholtz Zentrum München – August 2019

‣ Collaboration with Carisma Therapeutics – September 2019

‣ Presentation of INTASYL technology at SITC – October 2019

‣ Resignation of Chief Development Officer, John Barrett, Ph.D. – October 2019

‣ PH-762 (TILs – Melanoma) into clinic – 1H:20

‣ PH-762 (Intratumoral injection – Melanoma) into clinic – 2H:20

‣ PH-804 (ACT) into clinic – 2H:20

Summary

Phio continues to advance its pipeline towards the clinic and engage in additional collaborations. Phio has a multi-pronged approach to its immuno-oncology efforts, with three broad areas of research conducted in collaboration with partners. Immuno-oncology is an attractive area for development as the FDA frequently provides preferential consideration for candidates pursuing a cancer indication and there is broad demand for therapies in this pathology. Phio’s sd-rxRNA platform, now designated INTASYL, has many favorable characteristics, including low cost, a high degree of safety, and the ability to enhance the IP of partner products among other benefits. Phio has indicated that they have sufficient cash to support activity until 3Q:20, a runway that may be extended with funds generated from asset sales or accessing funds under purchase agreements.

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1. Source: Phio Corporate Presentation, September 2019