10-K
1
phio_10k-123120.htm
FORM 10-K
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
For the fiscal year ended December 31,
2020
Or
For the transition period from to
Commission File Number 001-36304
PHIO PHARMACEUTICALS CORP.
(Exact name of registrant as specified
in its charter)
257 Simarano Drive, Suite 101, Marlborough,
Massachusetts 01752
(Address of principal executive offices
and Zip Code)
(508) 767-3861
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value, $0.0001 per share PHIO The Nasdaq Capital Market
Securities registered pursuant to Section 12(g)
of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Act. ☐ Yes ☒ No
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report
on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The aggregate market value of the registrant’s
common stock, $0.0001 par value per share (“Common Stock”), held by non-affiliates of the registrant, based on the
closing sale price of the registrant’s Common Stock on June 30, 2020, was $12,583,469. Shares of Common Stock held by
each officer and director and by each person who is known to own 10% or more of the outstanding Common Stock have been excluded
in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily
a conclusive determination for other purposes.
As of March 18,
2021, the registrant had 13,531,941 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions
of the Definitive Proxy Statement to be filed for Phio Pharmaceuticals Corp.’s 2021 Annual Meeting of Stockholders are incorporated
by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PHIO PHARMACEUTICALS CORP.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31,
2020
Page
PART I.
Item 1. BUSINESS 2
Item 1A. RISK FACTORS 13
Item 1B. UNRESOLVED STAFF COMMENTS 26
Item 2. PROPERTIES 26
Item 3. LEGAL PROCEEDINGS 26
Item 4. MINE SAFETY DISCLOSURES 26
PART II.
Item 6. SELECTED FINANCIAL DATA 27
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 37
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 37
Item 9A. CONTROLS AND PROCEDURES 38
Item 9B. OTHER INFORMATION 38
PART III.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 39
Item 11. EXECUTIVE COMPENSATION 39
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 39
PART IV.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 40
Signatures 43
i
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
can be identified by words such as “intends,” “believes,” “anticipates,” “indicates,”
“plans,” “expects,” “suggests,” “may,” “would,” “should,”
“potential,” “designed to,” “will,” “ongoing,” “estimate,” “forecast,”
“predict,” “could,” and similar references, although not all forward-looking statements contain these words.
Forward-looking statements are neither historical facts nor assurances of future performance. These statements are based only on
our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future,
they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which
are outside of our control. Risks that could cause actual results to vary from expected results expressed in our forward-looking
statements include, but are not limited to:
· we rely upon third parties for the manufacture of our product candidates;
· the price of our common stock has been and may continue to be volatile.
Our actual results and financial condition
may differ materially from those indicated in the forward-looking statements as a result of the foregoing factors, including those
identified in this Annual Report on Form 10-K under the heading “Risk Factors,” for the reasons described elsewhere
in this Annual Report on Form 10-K and in other filings Phio Pharmaceuticals Corp. periodically makes with the Securities and Exchange
Commission. Therefore, you should not rely unduly on any of these forward-looking statements. Forward-looking statements contained
in this Annual Report on Form 10-K speak as of the date hereof and Phio Pharmaceuticals Corp. does not undertake to update any
of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this
report.
PART I
Unless otherwise noted, (1) the
term “Phio” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune, LLC and (2) the terms “Company,”
“we,” “us” and “our” refer to the ongoing business operations of Phio and MirImmune, LLC, whether
conducted through Phio or MirImmune, LLC.
ITEM 1. BUSINESS
Overview
Phio
Pharmaceuticals Corp. (“Phio,” “we,” “our” or the
“Company”) is a biotechnology company developing the next generation of immuno-oncology therapeutics based
on its self-delivering RNAi (“INTASYLTM”) therapeutic platform. The Company's efforts are
focused on silencing tumor-induced suppression of the immune system through its proprietary INTASYL platform
with utility in immune cells and the tumor micro-environment. The Company’s goal
is to develop powerful INTASYL therapeutic compounds that can weaponize immune effector cells to overcome tumor immune
escape, thereby potentially providing patients a powerful new treatment option that goes beyond current treatment
modalities.
Our Development Pipeline
We have developed a
product platform based on our INTASYL technology that allows easy, precise, rapid, and selective non-genetically modified
programming of adoptive cell therapy (“ACT”) cells (ex vivo, during manufacturing) and of the tumor
micro-environment (the “TME”) (in vivo, by local application), resulting in reduced immune
inhibition and in improved immunotherapy. The table below sets forth the Company’s stage of development for its
programs and product candidates:
We believe our INTASYL platform uniquely
positions the Company in the field of immuno-oncology for the following reasons:
· Does not require permanent genetic modification;
· Favorable clinical safety profile of INTASYL with local administration; and
· Can be readily manufactured under current good manufacturing practices.
The self-delivering nature of our compounds makes INTASYL ideally
suited for use with ACT treatments as well as for direct therapeutic use. ACT consists of the infusion of immune cells with antitumor
properties, after growing them in a lab to large numbers. These cells can be derived from unmodified (i.e. naturally occurring)
immune cells, immune cells isolated from resected tumors, or genetically engineered immune cells that recognize tumor cells. Regardless
of the source of immune cells (ACT or naturally occurring immune cells), in patients with solid tumors, these cells have several
shortcomings that inhibit their full therapeutic potential. By using INTASYL technology during the manufacturing of such ACT cell
products we can improve the phenotype and function of these cells, potentially leading to better therapeutic outcomes. Multiple
inhibitory mechanisms restrain immune cells from effectively eradicating tumors, including immune checkpoints, reduced cell fitness
and cell persistence. Furthermore, the immunosuppressive TME can pose a formidable barrier to immune cell infiltration and function.
By using INTASYL based drugs administered directly, we can reprogram cells in the TME to help overcome these immunosuppressive
mechanisms.
INTASYL Use To Improve Adoptive Cell Therapy Products
ACT is a form of immune therapy based on
the use of immune cells, isolated from patients, donors or retrieved from allogeneic immune cell banks. They are grown in a lab
to large numbers, followed by administering them to the patient to fight cancer. Sometimes, immune cells that naturally recognize
a tumor are used, while other times immune cells are modified or “genetically engineered” to make them recognize and
kill the cancer cells. There are several types of ACT, including: a.) non-engineered cell therapy in which immune cells are grown
from the patient’s tumor or blood, such as tumor infiltrating lymphocytes (“TILs”), or from donor blood
or tissue such as natural killer (“NK”) cells, dendritic cells (“DC”) and macrophages, and
b.) genetically engineered immune cells that are genetically modified to recognize specific tumor proteins and to remain in an
activated state (such as T cell receptor technology (“TCRs”), chimeric antigen receptor (“CAR”)
T cells, or CAR-NK cells).
Multiple
inhibitory mechanisms restrain immune cells used in ACT from effectively eradicating tumors, including immune checkpoints, reduced
cell fitness and cell persistence, and other barriers to immune cell infiltration and function mainly in solid tumors. We believe
our INTASYL compounds are ideally suited to be used in ACT products. With INTASYL compounds, we can unlock the full potential of
ACT, by improving the immune cell function, differentiation and metabolism, in order to make these immune cells more effective
without the need for additional complicated manufacturing steps and/or genetic engineering.
Our
approach builds on well-established methodologies of ACT and involves the treatment of immune cells with our INTASYL compounds
ex vivo while they are grown in the lab and before administering them to the patient. Because our INTASYL compounds do
not require a delivery vehicle to penetrate into the cells, we are able to enhance the function of these cells by merely adding
our INTASYL compounds during the expansion process and without the need for genetic engineering, without the need for complex
delivery vehicles or formulations, and without additional needed complex manufacturing steps. By adding INTASYL to the cell culture
media used during the cell expansion, we can reduce or eliminate the expression of genes that make the immune cells less effective.
For example, with our INTASYL compounds, we can reduce the expression of immunosuppressive proteins by the therapeutic immune
cells, potentially enabling them to overcome tumor resistance mechanisms and thus improving their ability to destroy the tumor
cells. In various types of immune cells tested to date, INTASYL treatment results in potent silencing with close to 100% transfection
efficiency and while maintaining nearly full cell viability. After expanding these cells and enhancing them with INTASYL ex
vivo, they are returned to the patient for treatment.
Considering the significant growth of cell-based
immunotherapy, a technology that can reprogram the immune cells used in ACT, such as INTASYL technology, is of key interest. In
comparison to other technologies available, reprogramming cells with INTASYL does not require genetic engineering, its use is not
limited to specific cell types and it can be easily integrated with cell manufacturing approaches.
Our lead product candidate and
most advanced program being developed in ACT is PH-762, an INTASYL compound that targets the checkpoint protein PD-1. Checkpoint
proteins, such as PD-1, normally act as a type of “off switch” that prevent T cells from attacking certain cells, such
as cancer cells, in the body. Our T cells are immune cells that protect the body from cancer cells and infections.
Data developed by Phio and with collaborators
has shown that PH-762 silences PD-1 checkpoint expression, thereby removing the “off switch” and resulting in enhanced
T cell activation and tumor cytotoxicity. Experimental data shows that PH-762 can silence the expression of PD-1 in target human
T cells in a potent and durable manner, and can increase the function of patient derived TILs for use in ACT, showing that PH-762
is applicable for use in both ACT and as a standalone direct therapeutic.
In March 2021, the Company announced that
it entered into a clinical development collaboration with AgonOx, Inc. (“AgonOx”), a private company developing
a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. Under the agreement, the companies
will collaborate on the development of novel T cell-based therapies using PH-762 and AgonOx’s “double positive”
(DP) TIL technology. AgonOx has demonstrated that their DP CD8+ T cells isolated from human solid tumors (DP TILs) have increased
tumor killing activity when compared to TILs that were not enriched prior to expansion. Preclinical data from AgonOx in collaboration
with Phio has shown that treating DP TIL with PH-762 increases the tumor killing activity of the DP TILs even further (a two-fold
increase). As a result, the use of PH-762 treated DP TILs is expected to enhance therapeutic responses in cancer data. Based on
these data showing that the combination of our technologies can result in TIL therapeutics, our collaboration will focus on conducting
a clinical study for PH-762 treated DP TILs. Under the terms of the collaboration agreement, AgonOx will receive financial support
for the clinical trial from Phio and Phio will be entitled to certain future development milestones and sales-related royalty payments
from AgonOx’s DP TIL technology. The clinical trial in ACT with PH-762 and AgonOx’s DP TIL technology is expected to
start in the third quarter of 2021.
Our second product
candidate in ACT is PH-894, an INTASYL compound that targets BRD4 which is a regulator of gene expression impacting cell differentiation.
In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active
state (stem-cell like memory phenotype). Data, completed in partnership with the Karolinska Institutet in Sweden, demonstrated
that the application of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to
confer superior anti-tumor activity, for example by improving T cell persistence. With this data, we expanded our collaboration
with the Karolinska Institutet to build upon these findings and develop INTASYL compounds for additional targets and cell types
toward clinical application in areas of the Karolinska Institutet’s ongoing clinical research.
We are also developing
our INTASYL compound PH-804 for use in ACT. PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint protein
present on T cells and NK cells. We have shown that PH-804 can silence the expression of TIGIT in NK cells and T cells, overcoming
their “off switch” and the cells becoming “weaponized” to kill cancer cells.
Direct Therapeutic Use of INTASYL Towards the Tumor Micro-Environment
The
TME is the environment that surrounds and feeds a tumor, including normal cells, blood vessels, immune cells, and the extracellular
matrix. The TME is an immunosuppressive environment that inhibits the immune system’s natural ability to recognize and destroy
tumor cells by negatively impacting how immunosuppressive cells are being attracted and activated. Reprogramming different components
of the TME may overcome resistance to immunotherapy. Such reprogramming of the TME by INTASYL compounds through direct local administration
into the tumor, could potentially become an important form of therapy. The Company has previously shown in a clinical setting that
our INTASYL compounds are safe and well-tolerated following local administration, therefore we believe that our INTASYL technology
can not only be used with ACT, but can also be used as an independent therapeutic platform.
We are developing our PH-762, PH-894 and
PH-804 INTASYL compounds also for use as direct therapeutics to reprogram the TME through in situ transfection and activation
of immune cells in the TME.
Animal studies
conducted by the Company showed that local administration of PH-894 or the mouse version of PH-762 through intra-tumoral injection
resulted in potent anti-tumoral effects. The treated animals showed a complete and statistically significant inhibition of tumor
growth, whereas placebo treated animals displayed exponential tumor growth. In vivo studies performed by the Company with
PH-804 showed that intra-tumoral injection of a mouse version of PH-804 reduced the tumor growth in colorectal carcinoma tumor
bearing mice, which was shown to inhibit tumor growth and was correlated with the silencing of TIGIT mRNA expression and in increase
in cytotoxic effector T cells in the TME.
The combined PH-804,
PH-762, and PH-894 data further shows that INTASYL compounds can trigger associated changes in the TME such as an increase of TILs,
including CD8+ T cells responsible for tumor cell killing, and an increase of activation markers on these cells. These preclinical
findings demonstrate that direct injection of INTASYL compounds can successfully infiltrate solid tumors and impact the TME by
activating the immune response in animal models of solid tumors resulting in reduced tumor growth. A key challenge for many other
immunotherapy platforms is to be able to achieve an adequate therapeutic effect in solid tumors with an acceptable safety profile.
Many of the available systemic immuno-therapeutics indeed come with dose limiting immune-related adverse events, which we believe
can be mitigated with local INTASYL treatment.
Based on our positive preclinical data, the Company is preparing for a clinical study with PH-762
using intra-tumoral administration for patients with advanced melanoma. The required preclinical studies and steps needed to initiate
the clinical trial with PH-762 as a direct therapeutic are continuing and ongoing. The clinical trial will be conducted at the
Gustave Roussy Institute, which is France’s largest cancer center and Dr. Caroline Robert will be our lead principal investigator.
The Company expects to start the clinical trial evaluating the use of PH-762 as a direct therapeutic in the fourth quarter of 2021.
We are also investigating
other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1. PD-L1 is a protein formed by cancer
cells that activate the PD-1 “off switch” on immune cells. Our approach with PH-790 is to block the formation of the
PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer. Recent data presented demonstrated
that the antitumoral efficacy of our individual pipeline products, PH-762, PH-790 and PH-804, can be further improved by combining
them in a single drug treatment. We have shown that, in contrast to other technology platforms, we can efficiently target multiple
proteins, in a single drug treatment without negative consequences related to the potency of the individual components. Animal
data showed that the combination of our INTASYL compounds in a single formulation (at suboptimal doses of the individual agents)
inhibited tumor growth without having a negative impact on the tolerability of the treatment.
Our INTASYL Platform
Our development efforts are based on our
broadly patented INTASYL technology platform. Our INTASYL compounds do not require a delivery vehicle to penetrate into tissues
and cells and are designed to “silence” or down-regulate, the expression of a specific gene which is over-expressed
in cancer.
Diseases are often related to the wrong
protein being made, excessive amounts of a specific protein being made, or the correct protein being made but at the wrong location
or time. Overall, RNA is involved in the synthesis, regulation and expression of proteins. RNA interference (“RNAi’)
is a biological process in which specific RNA molecules inhibit gene expression or translation into proteins. RNAi offers a novel
approach to drug development because RNAi compounds can be designed to silence any one of the thousands of human genes, many of
which are “undruggable” by other modalities. The potential of RNAi as a powerful drug development platform has been
shown by several RNAi based drugs becoming approved over the last few years.
The first design of RNAi compounds to be
pursued for the development of human therapeutics were short, double-stranded RNAs that included limited modifications, known as
small-interfering RNA (“siRNA”). Since the initial discovery of RNAi, drug delivery has been the primary challenge
in developing RNAi-based therapeutics. One solution to the delivery problem involves encapsulation of siRNA into a lipid-based
formulations, such as liposomes, to improve cellular uptake. Another approach is to use chemical conjugations of a ligand, such
as GalNAC, for cell specific delivery limited to hepatocytes. We have developed an alternative approach where delivery and drug-like
properties are built directly into the RNAi compound itself, whereby the RNAi uptake is neither dependent on complex formulation
nor limited to addressing a specific cell type. These novel compounds are termed self-delivering RNAi compounds, or INTASYL.
Our INTASYL compounds are hybrid oligonucleotide
compounds that the Company believes combines the beneficial properties of both conventional RNAi and antisense technologies. In
an attempt to combine the best properties of both technologies, INTASYL compounds have a single-stranded phosphorothioate region,
a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical modifications. The combination of
these features allows INTASYL compounds to achieve efficient spontaneous cellular uptake and potent, long-lasting intracellular
activity.
The key to therapeutic success with RNAi lies in delivering
intact RNAi compounds to the target tissue and the interior of the target cells. To accomplish this, our chemically synthesized
INTASYL compounds are optimized for stability and efficacy and have unique properties that improve tissue and cell uptake.
Intellectual Property
We protect our proprietary information by
means of United States and foreign patents, trademarks and copyrights. In addition, we rely upon trade secret protection and contractual
arrangements to protect certain of our proprietary information and products. We have pending patent applications that relate to
potential drug targets, compounds we are developing to modulate those targets, methods of making or using those compounds and proprietary
elements of our drug discovery platform.
Much of our technology and many of our processes
depend upon the knowledge, experience and skills of key scientific and technical personnel. To protect our rights to our proprietary
know-how and technology, we require all employees, as well as our consultants and advisors when feasible, to enter into confidentiality
agreements that require disclosure and assignment to us of ideas, developments, discoveries and inventions made by these employees,
consultants and advisors in the course of their service to us.
We have also obtained rights to various
patents and patent applications under licenses with third parties, which require us to pay royalties, milestone payments, or both.
The degree of patent protection for biotechnology products and processes, including ours, remains uncertain, both in the United
States and in other important markets, because the scope of protection depends on decisions of patent offices, courts and lawmakers
in these countries. There is no certainty that our existing patents or others, if obtained, will afford us substantial protection
or commercial benefit. Similarly, there is no assurance that our pending patent applications or patent applications licensed from
third parties will ultimately be granted as patents or that those patents that have been issued or are issued in the future will
stand if they are challenged in court. We assess our license agreements on an ongoing basis and may from time to time terminate
licenses to technology that we do not intend to employ in our technology platforms, or in our product discovery or development
activities.
Patents and Patent Applications
We are actively seeking protection for our
intellectual property and are prosecuting a number of patents and pending patent applications covering our compounds and technologies.
A combined summary of these patents and patent applications is set forth below in the following table:
Pending Applications Issued Patents
Other Markets 19 9
Our portfolio includes 119 issued patents,
66 of which cover our INTASYL platform. There are 16 patent families broadly covering both the composition and methods of use of
our self-delivering platform technology and uses of our INTASYL compounds targeting immune checkpoint, cellular differentiation
and metabolism targets for ex vivo cell-based cancer immunotherapies. These patents are scheduled to expire between 2029
and 2038. Furthermore, there are 67 patent applications, encompassing what we believe to be important new RNAi compounds and their
use as therapeutics, chemical modifications of RNAi compounds that improve the compounds’ suitability for therapeutic uses
(including delivery) and compounds directed to specific targets (i.e., that address specific disease states). The patents
and any patents that may issue from these pending patent applications will, if issued, be set to expire between 2022 and 2038,
not including any patent term extensions that may be afforded under the Federal Food, Drug, and Cosmetic Act (“FFDCA”)
(and the equivalent provisions in foreign jurisdictions) for any delays incurred during the regulatory approval process relating
to human drug products (or processes for making or using human drug products).
Intellectual
Property LicenseAgreements
As we develop our own proprietary compounds,
we continue to evaluate our in-licensed portfolio as well as the field for new technologies that could be in-licensed to further
enhance our intellectual property portfolio and unique intellectual property position.
Advirna LLC. On September 24, 2011,
we entered into an agreement with Advirna, LLC (“Advirna”) pursuant to which Advirna assigned to us its existing
patent and technology rights related to the INTASYL technology and we granted back to Advirna a license for use of the assigned
patent and technology rights outside of human therapeutics and diagnostics. Under the terms of the agreement, in April 2012, the
Company issued to Advirna shares of common stock equal to 5% of the Company’s fully-diluted shares outstanding at the time
of issuance and paid a one-time milestone payment of $350,000 in 2014 upon the issuance of the first patent under the agreement.
The Company also pays to Advirna an annual maintenance fee of $100,000 and is required to pay a low single-digit royalties on any
license revenue received by the Company with respect to future licensing of the assigned Advirna patent and technology rights.
To date, royalties owed to Advirna have been minimal.
Our rights under the Advirna agreement will
expire upon the later of: (i) the expiration of the last-to-expire of the “patent rights” (as defined therein)
or (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance with the provisions
of the agreement. We may terminate the Advirna agreement at any time upon 90 days’ written notice to Advirna, and Advirna
may terminate the agreement upon 90 days’ prior written notice in the event that we cease using commercially reasonable efforts
to research, develop, license or otherwise commercialize the patent rights or “royalty-bearing products” (as defined
therein), provided that we may refute such claim within such 90-day period by showing budgeted expenditures for the research, development,
licensing or other commercialization consistent with other technologies of similar stage of development and commercial potential
as the patent rights or royalty-bearing products. Further, either party at any time may provide to the other party written notice
of a material breach of the agreement. If the other party fails to cure the identified breach within 90 days after the date of
the notice, the aggrieved party may terminate the agreement by written notice to the party in breach.
Research and Development
Our research and development expense primarily
consists of compensation and benefits for research and development personnel, facility-related expenses, supplies, external services,
costs to acquire technology licenses, expenses associated with preclinical and clinical development activities and other operating
costs.
Total research and development expense for
the years ended December 31, 2020 and 2019 was $4,431,000 and $4,300,000, respectively.
Competition
The biotechnology and pharmaceutical industries,
including the immuno-oncology field, are a constantly evolving landscape with rapidly advancing technologies and significant competition.
There are a number of competitors in the immuno-oncology field including large and small pharmaceutical and biotechnology companies,
academic institutions, government agencies and other private and public research organizations.
A variety of cell-based autologous and allogeneic
approaches are being researched and developed, including but not limited to: CAR-T cells, TCR-T cells, Gamma Delta T cells, CAR-NK
cells, NK cells, NKT cells and cytotoxic T cells. We believe that competitors in this field include, but are not limited to: Achilles
Therapeutics UK Ltd., Adicet Bio, Inc., AgonOx, Inc., Allogene Therapeutics, Inc., Atara Biotherapeutics, Inc., Autolus Therapeutics
plc, Baylor College of Medicine, Bellicum Pharmaceuticals, Inc., bluebird bio, Inc., Celyad S.A., Celgene Corporation, Cell Medica
Ltd., Cellectis S.A., Celularity, Inc., CiMaas B.V., CRISPR Therapeutics AG, Fate Therapeutics, Inc., Fortress Biotech, Inc., GAIA
Biomedicine Inc., Glycostem Therapeutics BV, Green Cross LabCell Corp., Immatics Biotechnologies GmbH, Iovance Biotherapeutics,
Inc., Janssen Biotech, Inc., Kite Pharma, Inc.(a Gilead company), Medigene AG, Mustang Bio, Inc., NantKwest, Inc., BioNTech NE,
Novartis International AG, Precigen, Inc., Refuge Biotechnologies, Inc., Sorrento Therapeutics, Inc., Tactiva Therapeutics, Inc.,
TC BioPharm Limited, Turnstone Biologics Corp. and Ziopharm Oncology, Inc.
A number of technological approaches to
modulating gene expression in the field of immuno-oncology have been identified and are being researched and developed, including
but not limited to: antisense oligodeoxynucleotides, RNAi, zinc-finger nucleases, transcription activator-like effector nucleases,
mRNA, and genetic engineering techniques such as clustered regularly interspaced short palindromic repeats, or CRISPR, and various
others. We believe that competitors in this field include, but are not limited to: Avidity Biosciences, BioNTech NE, Cellectis
S.A., CRISPR Therapeutics AG, Dicerna Pharmaceuticals, Inc., Editas Medicine, Inc., eTheRna immunotherapies NV, Exicure Inc., Horizon
Discovery Group plc, Intellia Therapeutics, Inc., Kymera Therapeutics Inc., miRagen Therapeutics, Inc., Moderna, Inc., Noxxon Pharma
N.V., Obsidian Therapeutics, Inc., OliPass Corporation, OncoSec Medical Incorporated, Mateon Therapeutics, Inc., PTC Therapeutics,
Inc., Sangamo Therapeutics, Inc., Sirnaomics, Inc., Stemirna Therapeutics Co., Ltd. and Takara Bio Inc.
Government Regulation
The United States and many other countries
extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion,
export, marketing and distribution of drugs and biologic products. The U.S. Food and Drug Administration (“FDA”)
regulates pharmaceutical and biologic products under the FFDCA, the Public Health Service Act and other federal statutes and regulations.
To obtain approval of our future product
candidates from the FDA, we must, among other requirements, submit data supporting safety and efficacy for the intended indication
as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive
laboratory tests and preclinical and clinical trials. The collection of these data, as well as the preparation of applications
for review by the FDA involve significant time and expense. The FDA also may require post-marketing testing to monitor the safety
and efficacy of approved products or place conditions on any approvals that could restrict the therapeutic claims and commercial
applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards
or if we encounter problems at any time following initial marketing of our products.
The first stage of the FDA approval process
for a new biologic or drug involves completion of preclinical studies and the submission of the results of these studies to the
FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data and other information submitted
to the FDA in an investigational new drug (“IND”) application, must become effective before human clinical trials
may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and animal studies
to assess the efficacy and safety of the product candidate.
After the IND becomes effective, a company
may commence human clinical trials. These are typically conducted in three sequential phases, but the phases may overlap. Phase
1 trials consist of testing the product candidate in a small number of patients or healthy volunteers, primarily for safety at
one or more doses. Phase 2 trials, in addition to safety, evaluate the efficacy of the product candidate in a patient population
somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for safety and clinical efficacy in an
expanded population at multiple test sites. A company must submit to the FDA a clinical protocol, accompanied by the approval of
the Institutional Review Board (“IRB”) at the institutions participating in the trials, prior to commencement
of each clinical trial.
To obtain FDA marketing authorization, a
company must submit to the FDA the results of the preclinical and clinical testing, together with, among other things, detailed
information on the manufacture and composition of the product candidate, in the form of a new drug application (“NDA”),
or, in the case of a biologic, a biologics license application (“BLA”).
The amount of time taken by the FDA for
approval of an NDA or BLA will depend upon a number of factors, including whether the product candidate has received priority review,
the quality of the submission and studies presented, the potential contribution that the compound will make in improving the treatment
of the disease in question and the workload at the FDA.
The FDA may, in some cases, confer upon
an investigational product the status of a fast track product. A fast track product is defined as a new drug or biologic intended
for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for
this condition. The FDA can base approval of an NDA or BLA for a fast track product on an effect on a surrogate endpoint, or on
another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data suggests that
a fast track product may be effective, the FDA may initiate review of entire sections of a marketing application for a fast track
product before the sponsor completes the application.
We anticipate that our products will be
manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect
the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in
compliance with the FDA’s current good manufacturing practice regulations (“cGMP”), which are regulations
that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must comply with the FDA’s
general biological product standards. Our manufacturers also will be subject to regulation under the Occupational Safety and Health
Act, the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act and the Resource Conservation and Recovery Act
and other applicable environmental statutes. Following approval, the FDA periodically inspects drug and biologic manufacturing
facilities to ensure continued compliance with the cGMP. Our manufacturers will have to continue to comply with those requirements.
Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension
of manufacturing or recall or seizure of product. Adverse patient experiences with the product must be reported to the FDA and
could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn
if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur
following approval.
The labeling, advertising, promotion, marketing
and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission requirements which
include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities,
promotional activities involving the internet, and direct-to-consumer advertising. We also will be subject to a variety of federal,
state and local regulations relating to the use, handling, storage and disposal of hazardous materials, including chemicals and
radioactive and biological materials. In addition, we will be subject to various laws and regulations governing laboratory practices
and the experimental use of animals. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including
the ability to levy fines and civil penalties, suspend or delay issuance of product approvals, seize or recall products and deny
or withdraw approvals.
We will also be subject to a variety of
regulations governing clinical trials and sales of our products outside the United States. Whether or not FDA approval has been
obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained
prior to the commencement of marketing the product in those countries. The approval process varies from one regulatory authority
to another and the time may be longer or shorter than that required for FDA approval. In the European Union, Canada and Australia,
regulatory requirements and approval processes are similar, in principle, to those in the United States.
Environmental Compliance
Our research and development activities
involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive
compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of
these materials and specific waste products. We are also subject to numerous environmental, health and workplace safety laws and
regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous
materials. The cost of compliance with these laws and regulations could be significant and may adversely affect capital expenditures
to the extent we are required to procure expensive capital equipment to meet regulatory requirements.
Human Capital Management
As of December 31, 2020, we had ten full-time
employees at our facility in Marlborough, Massachusetts. None of our employees are represented by a labor union or covered by a
collective bargaining agreement nor have we experienced any work stoppages.
We expect to add additional employees in
fiscal year 2021 to increase our expertise and resources available in our preclinical and clinical research and development. We
continually evaluate our business needs and weigh the use of in-house expertise and capacity with outsourced expertise and capacity.
The Company currently outsources substantial preclinical and clinical trial work to third party contract research organizations
and drug manufacturing contractors.
Our ability to
identify, attract, retain and integrate additional qualified key personnel is also critical to our success and the competition
for skilled research, product development, regulatory and technical personnel is intense. To attract qualified applicants to the
Company, we offer a total rewards package consisting of base salary and cash target bonus based on geography and size of company,
a comprehensive benefit package and equity compensation for every employee. Bonus opportunity and equity compensation increase
as a percentage of total compensation based on level of responsibility. Actual bonus payout is based on performance.
A large majority
of Phio’s employees have obtained advanced degrees in their professions and we support our employees’ further development
with individualized development plans, mentoring, coaching, group training, conference attendance and financial support including
tuition reimbursement.
Corporate Information
On January 10, 2020, the Board of Directors
of the Company approved a 1-for-55 reverse stock split of the Company’s outstanding common stock, which was effected on January 15,
2020. All share and per share amounts have been adjusted to give effect to the reverse stock split.
We were incorporated in the state of Delaware
in 2011 as RXi Pharmaceuticals Corporation. On November 19, 2018, the Company changed its name to Phio Pharmaceuticals Corp., to
reflect its transition from a platform company to one that is fully committed to developing groundbreaking immuno-oncology therapeutics.
Our executive offices are located at 257 Simarano Drive, Suite 101, Marlborough, MA 01752, and our telephone number is (508) 767-3861.
The Company’s website address is http://www.phiopharma.com.
We make available on our website, free of charge, copies of our annual reports on Form 10-K, our quarterly reports on Form 10-Q
and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as soon as reasonably practicable after
these reports are filed electronically with, or otherwise furnished to, the Securities and Exchange Commission (the “SEC”).
We also make available on our website the charters of our audit committee, compensation committee and nominating and corporate
governance committee, as well as our corporate code of ethics and conduct.
You may read and copy any materials the
Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding Phio and other issuers that file electronically with
the SEC. The SEC’s website address is http://www.sec.gov. The contents of these websites are not incorporated by reference
into this report and should not be considered to be part of this report.
ITEM 1A. RISK FACTORS
Risks Relating to Our Business and Industry
Our business and operations may be
materially and adversely affected by the coronavirus pandemic.
In December 2019, a novel strain of coronavirus
that causes COVID-19 was reported to have surfaced in Wuhan, China and has since spread to other parts of the world, including
the United States. In March 2020, the World Health Organization declared the outbreak a pandemic. The coronavirus pandemic is affecting
the United States and global economies and as a result, government authorities have implemented restrictions and limited certain
operations, such as limits on the number of people at a gathering, travel restrictions and stay-at-home orders, to try to slow
the spread of coronavirus. The Company’s facilities remain operational and are operating in accordance with federal and state
governmental authority guidelines and with the implementation of safety measures such as social distancing protocols, suspending
travel, the wearing of masks and frequently disinfecting our workspaces. Employee personnel who do not need to be physically present
on our premises are continuing to work remotely, but have the ability to be on site as required. While the majority of these mandates
have specific end dates, they may be modified or extended and as a result there is uncertainty regarding the length of time that
such measures will be place. We believe the impact to our internal operations has not been material thus far, however, current
and future restrictions may further impact our operations and may slow or diminish our research and development activities.
As
a result of the coronavirus pandemic, certain of our third-party suppliers and service providers on which we rely have seen impacts
to their operations. If the impact to their operations continue or extend, it may in turn affect our operations. The
Company does not expect a material impact to its program’s anticipated timelines as a result of potential delays from our
third-party service providers and believes that we have a sufficient supply of our INTASYL compounds to conduct our ongoing preclinical
studies and initial clinical activities. However, the ultimate impact to the third parties on which we rely is highly uncertain
and subject to change. If the measures to contain the outbreak are extended or further expanded, it could reduce or delay the availability
of supplies and services that we purchase and outsource, which may in turn slow or delay our preclinical and clinical activities,
and/or result in higher costs. The extent to which the coronavirus pandemic impacts our results will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus
and the actions to contain the coronavirus or treat its impact, among others.
Additionally, while the potential economic
impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus
pandemic on the global financial markets may reduce the Company’s ability to access capital and negatively affect our future
liquidity.
The coronavirus pandemic continues to evolve
and change rapidly. The ultimate impact of the coronavirus pandemic, or a similar public health emergency, is highly uncertain
and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing
activities, preclinical studies, clinical trial activities or the global economy as a whole. However, these effects could have
a material impact on the Company’s liquidity, results of operations and financial condition.
Our product
candidates are in an early stage of development and may fail or experience significant delays or may never advance to the clinic,
which may materially and adversely impact our business.
All of our pipeline programs are currently
in the preclinical development stage and our future success heavily depends on the successful development of our INTASYL product
candidates, which may never occur. These product candidates could be delayed, not advance into the clinic or unexpectedly fail
at any stage of development. Before we can commence clinical trials for a product candidate, we must conduct extensive preclinical
and other non-clinical tests in order to support an IND application, including IND-enabling good laboratory practice toxicology
studies, in the United States or their equivalents with regulatory authorities in other jurisdictions. Preclinical studies and
clinical trials are expensive, difficult to design and can take many years. There is no assurance that we will be able to successfully
develop our product candidates, and we may focus our efforts and resources on product candidates that may prove to be unsuccessful.
We cannot be certain of the outcome of preclinical
testing and clinical studies and results from these studies may not predict the results that will be obtained in later phase trials
of our product candidates. Even if we are able to complete our preclinical studies and planned clinical trials in line with our
projected timelines, results from such studies and trials may be not replicated in subsequent preclinical studies or clinical trial
results. Additionally, such studies may be delayed due to events beyond our control including as a result of natural disasters,
epidemics or pandemic outbreaks such as the novel coronavirus pandemic. While the steps for us to initiate our clinical trials
with PH-762 in the second half of 2021 are continuing and ongoing, the FDA, or equivalent regulatory authority, may not accept
the results of our preclinical studies or proposed clinical study designs and may require the Company to complete additional preclinical
studies or impose stricter approval conditions than we expect. As a result, we cannot guarantee that we will be able to submit
INDs, or similar applications, within our projected timelines, if at all, or that the FDA, or similar regulatory authorities, will
allow us to commence clinical trials.
We are dependent on collaboration
partners for the successful development of our adoptive cell therapy product candidates.
We are not a cell therapy company and expect
to depend on third-party collaborators to support the clinical development of our ACT product candidates. We have entered into
a clinical collaboration development agreement with AgonOx, Inc. for the clinical development of our PH-762 product candidate in
ACT and have entered into research agreements with our academic and industry collaborators, each of which is terminable by the
relevant party at any time, subject to applicable notice periods. The success of our collaborations depends upon the efforts of
our collaboration partners, and their performance in achieving the development activities to the extent they are responsible under
our collaboration agreements. Each of our partners may not be successful in performing these activities, including completing the
required preclinical studies and other information to be included in an IND application (or foreign equivalent), obtaining approval
to initiate clinical trials, conducting the necessary clinical trials and arranging for the manufacturing or contract research
organization (“CRO”) relationships and obtaining marketing authorization. Our partners work with other companies,
potentially including some of our competitors, and their corporate objectives may not align with ours, they may change their strategic
focus or pursue alternative technologies. If our collaborations are not successful or a partner terminates our collaboration agreement,
our business, financial condition, results of operations could be materially and adversely affected.
Further, we may not be successful in negotiating
agreements with these collaborators or with future collaborators for the development and commercialization of our ACT product candidates
through collaborations such as joint development or licensing agreements. Our ability to successfully negotiate such agreements
will depend on, among other things, potential partners’ evaluation of the superiority of our technology over competing technologies,
the quality of preclinical data that we have generated, the perceived risks specific to developing our product candidates and our
partners’ own strategic and corporate objectives. If we fail to negotiate these agreements, we may not be able commence clinical
trials with our ACT product candidates or we may be required to obtain licenses from cell therapy companies and our business, financial
condition, results of operations and prospects could be materially and adversely affected.
We rely upon third-party relationships
to conduct preclinical studies, and any future clinical trials, for our product candidates and may not be able to establish or
maintain the third-party relationships that are necessary to support their development.
We depend upon third-party CROs, medical
institutions, clinical investigators, consultants and other third parties to support our preclinical research efforts such as
through managing and conducting research studies, formulating our product candidates and manufacturing our product candidates
and expect to rely on the same for our future clinical trials. Because we rely on these third parties, we cannot necessarily control
the timing, quality of work or amount of resources that our contract partners will devote to these activities and we cannot guarantee
that these parties will fulfill their obligations to us under these arrangements. Furthermore, we compete with many other companies
for the resources of these third parties, some of which may be our competitors, and may detract from our programs. Additionally,