PHIO PHARMACEUTICALS CORP. 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, 2024
Or
For the transition period from to
Commission File Number 001-36304
PHIO PHARMACEUTICALS CORP.
(Exact name of registrant as specified in its charter)
11 Apex Drive, Suite 300A PMB 2006, Marlborough,
Massachusetts01752
(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 Section 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate
by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the 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 Common Stock on June 28, 2024, was approximately $3.2 million. 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 20, 2025 the registrant had 4,778,154 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PHIO PHARMACEUTICALS CORP.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2024
Page
PART I.
Item 1. BUSINESS 1
Item 1A. RISK FACTORS 10
Item 1B. UNRESOLVED STAFF COMMENTS 22
Item 1C. CYBERSECURITY 22
Item 2. PROPERTIES 24
Item 3. LEGAL PROCEEDINGS 24
Item 4. MINE SAFETY DISCLOSURES 24
PART II.
Item 6. RESERVED 25
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 33
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 33
Item 9A. CONTROLS AND PROCEDURES 34
Item 9B. OTHER INFORMATION 35
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 35
PART III.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 36
Item 11. EXECUTIVE COMPENSATION 38
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 47
PART IV.
Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 48
Signatures 54
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,” “target,”
“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. Our actual results may
differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including, but
not limited to:
· the price of our Common Stock has been and may continue to be volatile.
The risks set forth above are not exhaustive and additional
factors, including those identified in this Annual Report on Form 10-K under the heading “Risk Factors,” for 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, could adversely affect our business and financial performance. 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, except as required by law.
ii
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 clinical stage biotechnology company whose
proprietary INTASYL® small interfering RNA gene silencing technology is designed to make immune cells more effective in killing tumor
cells. We are developing therapeutics that are designed to leverage INTASYL to precisely target specific proteins that reduce the body’s
ability to fight cancer, without the need for specialized formulations or drug delivery systems. We are committed to discovering and developing
innovative cancer treatments for patients by creating new pathways toward a cancer-free future. The Company operates with a single operating
segment and a single reporting segment – the Clinical segment.
PH-762 is an INTASYL compound designed
to reduce the expression of cell death protein 1 (“PD-1”). PH-762 is currently being evaluated in a U.S. multi-center Phase
1b dose-escalating clinical trial through the intratumoral injection of PH-762 for the treatment of patients with cutaneous squamous cell
carcinoma, melanoma and Merkel cell carcinoma. The trial (NCT 06014086) is designed to evaluate the safety and tolerability of neoadjuvant
use of intratumorally injected PH-762, assess the tumor response, and determine the dose or dose range for continued study of PH-762 and
is expected to enroll up to 30 patients. In May and December 2024, respectively, a Safety Monitoring Committee (SMC) reviewed data from
the first and second dose cohorts treated with PH-762, and in both instances recommended escalation to the next dose concentration. A
total of 7 patients with cutaneous carcinomas have been enrolled in dose cohorts 1 and 2. The second cohort enrolled a total of 4 patients
who were diagnosed with cutaneous squamous cell carcinoma. At Day 36 (tumor excision), while patients in the first cohort had stable disease,
a complete response (100% tumor clearance) was reported for 2 patients with cutaneous squamous cell carcinoma. Partial response (90% tumor
clearance) was reported for 1 patient with cutaneous squamous cell carcinoma and 1 patient had stable disease, having not progressed.
In this trial to date, intratumoral injection of PH-762 has been well tolerated in all enrolled patients and there were no dose-limiting
toxicities or clinically relevant treatment-emergent adverse effects in the patients receiving intratumoral PH-762. The third dose cohort
is fully enrolled and patients in this cohort are currently in the treatment or follow-up phase of the study. We expect to complete enrollment
of all patients in the study in the third quarter of 2025.
INTASYL Technology
Overall, RNA is involved in the synthesis, regulation
and expression of proteins. RNA takes the instructions from DNA and turns those instructions into proteins within the body’s cells.
RNA interference, or RNAi, is a biological process that inhibits the expression of genes or the production of proteins. Diseases are often
related to the incorrect protein being made, excessive amounts of a specific protein being made, or the correct protein being made, but
at the wrong location or time. 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 considered “undruggable” by traditional therapeutics.
Our development efforts are based on our proprietary
INTASYL small interfering RNA technology. It is a patented technology from which specific patented compounds are developed. INTASYL compounds
are comprised of a unique sequence of chemically modified nucleotides (modified small interfering RNA, or siRNAs) that target a broad
range of cell types and tissues. The compounds are designed to effectively silence genes that tumors use to evade the immune system.
Since the initial discovery of RNAi, drug delivery
has been the primary challenge in developing RNAi-based therapeutics. Other siRNA technologies require cell targeting chemical conjugates
which limit delivery to specific cell types. INTASYL is based on proprietary chemistry that is designed to maximize the activity and adaptability
of the compound and is unique in that it can be delivered to any cell type or tissue without the need to modify the chemistry. This is
designed to eliminate the need for formulations or delivery systems (for example, nanoparticles or electroporation). This provides efficient,
spontaneous, cellular uptake with potent, long-lasting intracellular activity.
We believe
that our INTASYL technology provides the following benefits including, but not limited to:
· Ability to target a broad range of cell types and tissues;
· Ability to target both intracellular and extracellular protein targets;
· Efficient uptake by target cells, avoiding the need for assisted delivery;
· Sustained, or long-term, effect in vivo;
· Ability to target multiple genes in one drug product;
· Favorable clinical safety profile with local administration; and
· Readily manufactured under current good manufacturing practices.
Our Pipeline
INTASYL compounds are designed
to precisely target specific proteins that reduce the body’s ability to fight cancer, without the need for specialized formulations
or drug delivery systems, and are designed to make immune cells more effective in killing tumor cells. Our efforts are focused on developing
immuno-oncology therapeutics using our INTASYL technology. We have demonstrated preclinical activity against multiple gene targets including
PD-1, BRD4, CTLA-4, TIGIT and CTGF and have demonstrated preclinical efficacy in both direct-to-tumor injection and adoptive cell therapy
(“ACT”) applications with our INTASYL compounds.
The following table
summarizes our product pipeline. Below we provide important information and context regarding each compound.
PH-762
PH-762 is an INTASYL compound designed to reduce the
expression of PD-1. PD-1 is a protein that inhibits T cells’ ability to kill cancer cells and is a clinically validated target in
immunotherapy. Decreasing the expression of PD-1 can thereby increase the capacity of T cells, which protect the body from cancer cells
and infections, to kill cancer cells.
Our preclinical studies have demonstrated
that direct-to-tumor application of PH-762 resulted in potent anti-tumoral effects and have shown that direct-to-tumor treatment with
PH-762 inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory models. Importantly, direct-to-tumor administration
of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic anti-tumor response. We believe these data further
support the potential for PH-762 to provide a strong local immune response without the dose immune-related adverse effects seen with systemic
antibody therapy.PH-762 is currently being evaluated in a U.S. multi-center Phase 1b dose-escalating clinical trial through the intratumoral
injection of PH-762 for the treatment of patients with cutaneous squamous cell carcinoma, melanoma and Merkel cell carcinoma. The trial
(NCT 06014086) is designed to evaluate the safety and tolerability of neoadjuvant use of intratumorally injected PH-762, assess the tumor
response, and determine the dose or dose range for continued study of PH-762 and is expected to enroll up to 30 patients. In November
2023, we announced the dosing of the first patient under a previously cleared Investigational New Drug (“IND”) application
by the U.S. Food and Drug Administration, and the trial is currently open for the continued enrollment of patients. In May and December
2024, respectively, a Safety Monitoring Committee (SMC) reviewed data from the first and second dose cohorts treated with PH-762, and
in both instances recommended escalation to the next dose concentration. A total of 7 patients with cutaneous carcinomas have been enrolled
in dose cohorts 1 and 2. The second cohort enrolled a total of 4 patients who were diagnosed with cutaneous squamous cell carcinoma. At
Day 36 (tumor excision), while patients in the first cohort had stable disease, a complete response (100% tumor clearance) was reported
for 2 patients with cutaneous squamous cell carcinoma. Partial response (90% tumor clearance) was reported for 1 patient with cutaneous
squamous cell carcinoma and 1 patient had stable disease, having not progressed.
Intratumoral injection of PH-762 has
been well tolerated in all patients enrolled in the trial to date. There were no dose-limiting toxicities or clinically relevant treatment-emergent
adverse effects in the patients receiving intratumoral PH-762. The third dose cohort is fully enrolled and patients in this cohort are
currently in the treatment or follow-up phase of the study. We expect to complete enrollment of all patients in the study in the third
quarter of 2025. Due to INTASYL’s ease of administration, we have shown that our compounds can easily be incorporated into current
ACT manufacturing processes. In ACT, immune cells such as T cells, natural killer cells or dendritic cells are taken from a patient’s
or donor’s blood or tumor tissue, grown in large numbers in a laboratory, and then given back to the patient to help the immune
system fight cancer. By treating a patient’s T cells with our INTASYL compounds while they are being grown outside the body, we
believe our INTASYL compounds can improve these immune cells to make them more effective in killing cancer. Preclinical data generated
in collaboration with AgonOx, Inc. (“AgonOx”), a private company developing a pipeline of novel immunotherapy drugs
targeting key regulators of the immune response to cancer, demonstrated that treating AgonOx’s “double positive” tumor
infiltrating lymphocytes (“DP TIL”) with PH-762 increased their tumor killing activity by two-fold.
In February 2021, we entered into a
clinical co-development collaboration agreement (the “Clinical Co-Development Agreement”) with AgonOx to develop a
T cell-based therapy using PH-762 and AgonOx’s DP TIL. Under the Clinical Co- Development Agreement, we had agreed to reimburse
AgonOx up to $4 million in expenses incurred to conduct a Phase 1 clinical trial of PH-762 treated DP TIL in patients with advanced melanoma
and other advanced solid tumors.
In May 2024, we terminated the Clinical
Co-Development Agreement with AgonOx, which such termination was effective immediately. Effective as of the date of termination, the Clinical
Co-Development Agreement and our continuing obligations and those of AgonOx thereunder were terminated in their entirety. We are no longer
required to provide financial support for the development of costs incurred under the Clinical Co-Development Agreement and we are no
longer entitled to future development milestones or royalty payments from AgonOx’s licensing of its DP TIL technology. We agreed
to pay to AgonOx all monetary obligations that accrued prior to the termination of the Clinical Co-Development Agreement. Remaining payments
to be made to AgonOx as of December 31, 2024 totaled $34,320, which primarily relate to accrued obligations for patient fees and other
miscellaneous costs as of the date of termination. Pursuant to the terms of the Clinical Co-Development Agreement, each of the Company
and AgonOx shall be responsible for its own costs and expenses incurred in connection with the wind-down of the Phase 1 clinical trial.
Prior to the termination of the Clinical
Co-Development Agreement with AgonOx, PH-762 treated DP TIL were being evaluated in a Phase 1 clinical trial in the U.S. with up to 18
patients with advanced melanoma and other advanced solid tumors by AgonOx. The primary trial objectives were to evaluate the safety and
to study the potential for enhanced therapeutic benefit from the administration of PH-762 treated DP TIL. AgonOx had enrolled three patients.
The first two patients were treated with DP TIL only and a third patient was treated with a combination of DP TIL and PH-762. Clinical
results for the single patient who received a combination of DP TIL and PH-762 showed tumor size reductions of 65%, 100% and 81%, respectively,
in three melanoma lesions.
PH-894
PH-894 is an INTASYL compound that is designed to silence
BRD4, a protein that controls gene expression in both T cells and tumor cells, thereby affecting the immune system as well as the tumor.
Intracellular and/or commonly considered “undruggable” targets, such as BRD4, represent a challenge for small molecule and
antibody therapies. Therefore, what sets this compound apart is its dual mechanism: PH-894 suppression of BRD4 in T cells results in T
cell activation, and suppression of BRD4 in tumor cells results in tumors becoming more sensitive to being killed by T cells.
Preclinical studies conducted have demonstrated that
PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells and in various cancer cells. Similar to
PH-762, preclinical studies have also shown that direct-to-tumor application of PH-894 resulted in potent and statistically significant
anti-tumoral effects against distant untreated tumors, indicative of a systemic anti-tumor response. These preclinical data indicate that
PH-894 can reprogram T cells and other cells in the tumor microenvironment to provide enhanced immunotherapeutic activity. We have completed
the IND-enabling studies and are in the process of finalizing the study reports required for an IND submission with PH-894. As a result
of the reprioritization to advance our clinical trial with PH-762 in the U.S., we have elected to defer the IND submission for PH-894.
Synergies With Other Therapies
Preclinical studies with our INTASYL compounds in combination
with antibodies resulted in enhanced potency in vivo. The combination of INTASYL with antibodies may also increase the number of addressable
drug targets. Unlike other antibody combination approaches, INTASYL can target multiple protein drug targets in a specific therapeutic
dose, thereby enhancing potency while maintaining a favorable tolerability and safety profile.
We have demonstrated preclinical efficacy with INTASYL
in ACT applications. In preclinical studies, INTASYL was shown to enhance the activity of ACT therapies, including with tumor infiltrating
lymphocytes and natural killer cells. As demonstrated in these preclinical studies, INTASYL is easily incorporated into current ACT manufacturing
processes.
Intellectual Property
INTASYL compounds have a single-stranded phosphorothioate
region, a short duplex region, and contain a variety of nuclease-stabilizing and lipophilic chemical modifications that we believe combine
the beneficial properties of both conventional RNAi and antisense technologies. 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.
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 U.S. 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 1 7
Our portfolio includes 77 issued patents, 69 of which
cover our INTASYL technology. There are 19 patent families broadly covering both the composition and methods of use of our self-delivering
INTASYL platform technology and uses of our INTASYL compounds targeting immune checkpoints for cancer therapy, as well as cellular differentiation
and metabolism targets for Adoptive Cell Therapy cancer immunotherapies. The INTASYL technology patents are scheduled to expire between
2029 and 2038.
Furthermore, there are 26 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 that may issue from these pending patent applications will, if issued, be set to expire
between 2029 and 2044, 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).
Key Intellectual Property License Agreements
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.
In September 2011, the Company entered into an agreement
with Advanced RNA Technologies, LLC (“Advirna”), pursuant to which Advirna assigned to us its existing patent and technology
rights related to the INTASYL technology in exchange for an annual maintenance fee, a one-time milestone payment upon the future issuance
of the first patent with valid claims covering the assigned patent and technology rights and the issuance of shares of Common Stock equal
to 5% of the Company’s fully-diluted shares outstanding at the time of issuance. In 2012, we issued shares of Common Stock to Advirna
equal to 5% of our fully-diluted shares outstanding at the time of issuance and paid $350,000 to Advirna upon the issuance of the first
patent in 2014. Additionally, we also pay to Advirna an annual maintenance fee of $100,000 and are required to pay low single-digit royalties
on any licensing revenue received by us with respect to future licensing of the assigned Advirna patent and technology rights. To date,
any royalties owed to Advirna under the Advirna agreement 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) included in the
Advirna agreement and (ii) the abandonment of the last-to-be abandoned of such patents, unless earlier terminated in accordance with
the provisions of the Advirna agreement. Further, the Company also granted back to Advirna a license under the assigned patent and technology
rights for fields of use outside human therapeutics.
Manufacturing and Supply
We do
not have any manufacturing capability and therefore we currently rely on and intend to continue to rely on contract manufacturing organizations
to produce our product candidates in accordance with regulatory requirements.
We currently rely on and contract with third parties
for the manufacture of drug substances and drug products for use in our preclinical studies and clinical trials in accordance with regulatory
requirements. We expect that we will continue to rely on and contract with third parties to manufacture our product candidates in the
future.
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. Many of these companies are larger than us and
have greater financial resources and human capital to develop competing products.
Government Regulation
Review and Approval of Drugs in the United States
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,
preclinical studies 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 through
an IND, must become effective before human clinical trials may commence. Preclinical studies generally involve evaluation of product characteristics
and animal studies to assess the efficacy and safety of the product candidate. Many of these studies must be conducted in accordance with
the FDA’s current Good Laboratory Practices, the Animal Welfare Act, and other applicable regulations.
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 to approve 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 agency resources.
The FDA maintains several programs to facilitate and
expedite the development and review of applications that are intended for the treatment of a serious or life-threatening disease or condition
that meet certain other criteria, including Fast Track Designation, Breakthrough Designation, Priority Review, and the Accelerated Approval
pathway.
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 and certain state agencies periodically inspect 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 state and local requirements governing
the manufacturing and distribution of pharmaceutical products. In addition, we 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, failure to comply with the applicable requirements could result in administrative or judicial enforcement
action, which could include refusal to permit clinical trials, refusal to approve an application, withdrawal of an approval, issuance
of a warning letter, product recall, product seizure, suspension of production or distribution, fines, refusals of government contracts,
and restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse
effect on us.
In the future, we may also be subject to a variety
of regulations governing clinical trials and sales of our products outside the U.S. 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, the United Kingdom, Canada and Australia, regulatory requirements
and approval processes are similar, in principle, to those in the U.S.
European Union Data Laws for Review and Approval of Drugs in the European
Union Including France
The collection and use of personal health data and
other personal information in the European Union (“EU”) is governed by the provisions of the General Data Protection
Regulation (“GDPR”), which came into force in May 2018, and related implementing laws in individual EU Member States.
In addition, following the United Kingdom’s (“UK”) formal departure from the EU on January 31, 2020, and the
end of the transition period on December 31, 2020, the UK has become a “third country” for the purposes of EU data protection
law. A “third country” is a country other than the EU Member States and the three additional European Economic Area countries
(Norway, Iceland and Liechtenstein) that have adopted a national law implementing the GDPR. However, the trade and cooperation agreement
(“TCA”) entered into between the EU and UK following the end of the transition period includes a provision, whereby
the transfer of personal data from the EU to the UK will not be considered as a transfer to a “third country” for a period
of four months starting from the entry into force of the TCA. This period will be extended by two further months, unless the EU or the
UK objects. Under the GDPR, personal data can only be transferred to third countries in compliance with specific conditions for cross-border
data transfers. Appropriate safeguards are required to enable transfers of personal data from the EU Member States. This status has a
number of significant practical consequences, in particular for international data transfers, competent supervisory authorities and enforcement
of the GDPR. The GDPR increased responsibility and liability in relation to personal data that we process.
The GDPR imposes a number of strict obligations and
restrictions on the ability to process (processing includes collection, analysis and transfer of) personal data, including health data
from clinical trials and adverse event reporting. The GDPR also includes requirements relating to the consent of the individuals to whom
the personal data relates, the information provided to the individuals prior to processing their personal data or personal health data,
notification of data processing obligations to the national data protection authorities and the security and confidentiality of the personal
data. The GDPR also prohibits the transfer of personal data to countries outside of the EU that are not considered by the EU to provide
an adequate level of data protection, except if the data controller meets very specific requirements. These countries include the United
States, and following the end of the six month period as laid out in the TCA, it may include the UK if no adequacy decision is given prior
to this. Following the Schrems II decision of the Court of Justice of the European Union on July 16, 2020, there is uncertainty as to
the general permissibility of international data transfers under the GDPR. In light of the implications of this decision we may face difficulties
regarding the transfer of personal data from the EU to third countries. The European Data Protection Board has adopted draft recommendations
for data controllers and processors who export personal data to third countries regarding supplementary measures to ensure compliance
with the GDPR when transferring personal data outside of the EU. These recommendations were submitted to public consultation until December
21, 2020, however it is unclear when and in which form these recommendations will be published in final form.
Failure to comply with the requirements of the GDPR
and the related national data protection laws of the EU Member States may result in significant monetary fines, other administrative penalties
and a number of criminal offenses (punishable by uncapped fines) for organizations and in certain cases their directors and officers as
well as civil liability claims from individuals whose personal data was processed. Data protection authorities from the different EU Member
States may still implement certain variations, enforce the GDPR and national data protection laws differently, and introduce additional
national regulations and guidelines, which adds to the complexity of processing personal data in the EU. Guidance developed at both EU
level and at the national level in individual EU Member States concerning implementation and compliance practices are often updated or
otherwise revised.
There is, moreover, a growing trend towards required
public disclosure of clinical trial data in the EU which adds to the complexity of obligations relating to processing health data from
clinical trials. Such public disclosure obligations are provided in the new EU Clinical Trials Regulation, EMA disclosure initiatives
and voluntary commitments by industry. Failing to comply with these obligations could lead to government enforcement actions and significant
penalties against us, harm to our reputation, and adversely impact our business and operating results. The uncertainty regarding the interplay
between different regulatory frameworks, such as the Clinical Trials Regulation and the General Data Protection Regulation, further adds
to the complexity that we face with regard to data protection regulation.
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. However, to date, compliance with such environmental laws and regulations
has not had a material impact on our capital expenditures.
Human Capital Management
As of December 31, 2024, we had five full-time employees.
One employee utilizes a rented lab space, and the other four employees are primarily remote. 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 continually evaluate our business needs and weigh
the use of in-house expertise and capacity with outsourced expertise and capacity. We currently outsource the functions of our accounting
and finance department to a third-party consulting organization. We currently outsource substantially all 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, we offer a total rewards package consisting
of base salary and cash target bonus, a comprehensive benefit package and equity compensation. Bonus opportunity and equity compensation
increase as a percentage of total compensation based on level of responsibility. Actual bonus payouts are based on performance.
A 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, and conference attendance.
Corporate Information
Effective July 5, 2024, the Company
completed a 1-for-9 reverse stock split of the Company’s outstanding Common Stock, including reclassifying an amount equal to the
reduction in par value to additional paid-in capital. The reverse stock split did not reduce the number of authorized shares of the Company’s
common or preferred stock. 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, we changed our name to Phio Pharmaceuticals Corp., to reflect our transition from a platform company to one that is
fully committed to developing groundbreaking immuno-oncology therapeutics.
In 2023, we implemented a cost rationalization program
driven by our transition from discovery research to product development. This resulted in a decision not to renew the lease for office
and laboratory space in Marlborough, Massachusetts, which expired on March 31, 2024. Beginning in April 2024, we have continued operations
as a remote business with a laboratory facility in Worcester, Massachusetts. Our executive offices are located at 11 Apex Drive, Suite
300A PMB 2006, Marlborough, Massachusetts 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, compensation, nominating and governance committees, as well as our corporate code of ethics
and conduct.
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 this website, and our website, 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
We are dependent on the success of our INTASYL
technology, and our product candidates based on this platform, which is unproven and may never lead to approved and marketable products.
Our efforts have been focused on the development of
product candidates based on our INTASYL technology. We have invested, and we expect to continue to invest, significant financial resources
and efforts developing our product candidates. Our ability to eventually generate revenue is highly dependent on the successful development,
regulatory approval and commercialization of our INTASYL product candidates by us or by collaborative partners, which may not occur for
the foreseeable future, if ever, and is highly uncertain and depends on a number of factors, many of which are beyond our control. Therefore,
it is difficult to accurately predict challenges we may face with our product candidates as they move through the discovery, preclinical
and clinical development stages. We will spend large amounts of money developing our INTASYL technology and may never succeed in obtaining
regulatory approval. In addition, our research methodology may be unsuccessful in identifying product candidates and results from preclinical
studies and clinical trials may not predict the results that will be obtained in later phase trials of our product candidates or our product
candidates may interact with patients in unforeseen or harmful ways that may make it impractical or impossible to manufacture, receive
regulatory approval or commercialize. If we are not successful in bringing an INTASYL product candidate to market, it will negatively
impact our business and financial condition and we may not be able to identify and successfully implement an alternative product development
strategy.
Our product candidates
are in an early stage of development and we may fail, experience significant delays, never advance clinical development or not be successful
in our efforts to identify or discover additional product candidates, which may materially and adversely impact our business.
Our success depends heavily on the successful development
of our product candidates, which may never occur. Our product candidates, which are in early stages of development, could be delayed,
not advance into the clinic, or unexpectedly fail at any stage of development. Our ability to identify, develop and commercialize product
candidates is dependent on extensive preclinical and other non-clinical tests in order to support an IND in the United States, or the
equivalent with regulatory authorities in other jurisdictions, if applicable. These research programs to identify new product candidates
require substantial financial and human resources, are difficult to design and can take many years to complete.
We cannot be certain of the outcome of our research
studies and clinical trials and the results from these studies and clinical trials may not predict the results that will be obtained in
later stages of development and we may focus our efforts and resources on product candidates that may prove to be unsuccessful. There
is no assurance that we will be able to successfully develop our product candidates, and we may forego opportunities with certain product
candidates or for indications that later prove to have greater commercial potential. If we are not able to successfully develop our product
candidates, we may be forced to abandon or delay our development efforts, which may materially and adversely affect our business, financial
condition, and results of operations.
Further, the FDA may not accept the results of our
preclinical studies or clinical trials and may require us to complete additional studies or impose stricter approval conditions than we
expect, which could impact the value of a particular program, the approvability or commercialization of the particular product candidate
or product and our Company in general. Because of these factors, it is difficult to predict the time and cost of the development of our
product candidates. Any delay or failure in obtaining required approvals may prevent us from completing our preclinical studies or clinical
trials and could have a material adverse effect on our ability to initiate or commercialize drug or biologic candidate on a timely basis,
or at all. Additionally, preclinical studies and clinical trials are lengthy and expensive and if our cash resources become limited, we
may not be able to commence, continue or complete such preclinical studies or clinical trials.
If we experience delays or difficulties in identifying
and enrolling patients in clinical trials, it may lead to delays in generating clinical data and the receipt of necessary regulatory approvals.
Clinical trials of a new drug or biologic candidate
require the enrollment of a sufficient number of patients, including patients who are suffering from the disease or condition the drug
or biologic candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors,
and delays in patient enrollment can result in increased costs and longer development times, which could materially and adversely impact
our business and financial condition. We may experience slower than expected patient enrollment in our current or future clinical trials.
In addition, clinical trials for drug or biologic candidates that treat the same indications as our product candidates may result in patients
who would otherwise be eligible for our clinical trials instead enrolling in clinical trials for other drug or biologic candidates.
Topline data may not accurately reflect or may
materially differ from the complete results of a clinical trial.
From time to time, we may publicly disclose topline
or interim data from our clinical trials based on a preliminary analysis of then-available data, of which the results, related findings
and conclusions are subject to change following a more comprehensive review of the data related to the particular trial. We also make
assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity
to fully and carefully evaluate all data. Preliminary observations made in early stages of clinical trials are not necessarily indicative
of results that will be obtained when full data sets are analyzed or in subsequent clinical trials. As a result, topline data may differ
from future results from the same studies or different conclusions may qualify such results once additional data has been received and
evaluated. Topline or interim data also remain subject to audit and verification procedures that may result in the final data being materially
different from the preliminary data that we publicly disclose and should be viewed with caution until the complete data is available.
If the topline data we report differs from future analysis of results, or if others, including regulatory authorities, disagree with the
conclusions reached, our business, financial condition, and results of operations could be materially and adversely affected.
We rely upon third-parties to conduct our clinical
trials and other studies for our product candidates, and if they do not successfully fulfill their obligations, the development of our
product candidates may be materially impacted.
We rely upon third-party CROs, medical institutions,
collaborators, clinical investigators, consultants and other third-parties to support and conduct our clinical trials and we rely on these
third-party CROs for the execution of certain of our preclinical studies and expect to continue to do so. 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.
We, our collaborators, and our CROs are responsible for ensuring that our clinical trials are conducted in accordance with applicable
regulations and protocols. If we, our collaborators, or our CROs fail to comply with these applicable regulations, the FDA may not accept
these data and may require us to complete additional preclinical studies and clinical trials, which could result in significant additional
costs and delays to us.
As we only control certain aspects of their activities,
we cannot guarantee that these partners will fulfill their obligations to us under these arrangements. If these third-parties do not successfully
carry out their responsibilities, as well as within a timely fashion, our clinical trials and preclinical studies may be delayed, unsuccessful
or otherwise adversely affected. If we have to enter into alternative arrangements it may delay or adversely affect the development of
our product candidates and our business operations. This could be difficult, costly or impossible, and our preclinical studies or clinical
trials may need to be extended, delayed, terminated or repeated, and we may not be able to obtain regulatory approval in a timely fashion,
or at all, for the applicable drug or biologic candidate, or to commercialize such drug or biologic candidate being tested in such studies
or trials.
Changes in U.S. and international trade policies
may adversely impact our business and operating results.
From time to time, proposals are made to significantly
change existing trade agreements and relationships between the U.S. and other countries. In recent years, the U.S. government has implemented
substantial changes to U.S. trade policies, including import restrictions, increased import tariffs and changes in U.S. participation
in multilateral trade agreements. Because some of our vendors, manufactures and suppliers are located in other foreign countries, we are
exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, laws, rules and regulations
of the United States or foreign governments, as well as political unrest or unstable economic conditions in foreign countries. The U.S.
government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate,
certain existing bilateral or multi-lateral trade agreements. For example, on February 1, 2025, President Donald Trump signed executive
orders imposing a 25% tariff on certain imports from Mexico and Canada, and a 10% tariff on certain imports from China, which were to
take effect on February 4, 2025. President Donald Trump also announced a plan for reciprocal tariffs which are to take effect on April
2. Our supply may in the future be subject to these tariffs, which could increase our manufacturing costs and could make our products,
if successfully developed and approved, less competitive than those of our competitors whose inputs are not subject to these tariffs.
We may otherwise experience supply disruptions or delays, and our suppliers may not continue to provide us with clinical supply in our
required quantities, to our required specifications and quality levels or at attractive prices. Such disruption could have adverse effects
on the development of our product candidates and our business operations.
A number of different factors could prevent us
from advancing into clinical development, obtaining regulatory approval, and ultimately commercializing our product candidates on a timely
basis, or at all.
Before obtaining regulatory approval for the sale of
any drug or biologic candidate, we must conduct extensive preclinical tests and successful clinical trials to demonstrate the safety and
efficacy of our product candidates in humans. Before human clinical trials may commence, we must submit to the FDA an IND. An IND involves
the completion of preclinical studies and the submission of the results, together with proposed clinical protocols, manufacturing information,
analytical data and other data in the IND submission. The FDA may require us to complete additional preclinical studies or disagree with
our clinical trial study design. Also, animal models may not exist for some of the disease areas we choose to develop our product candidates
for. As a result, our clinical trials may be delayed or we may be required to incur more expense than we anticipated.