PHIO: Two Compounds Entering Clinic in 2020

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By John Vandermosten, CFA

NASDAQ:PHIO

READ THE FULL PHIO RESEARCH REPORT

Phio Pharmaceuticals Corp. (NASDAQ:PHIO) reported first quarter 2019 results and filed its Form 10-Q on May 14, 2019. Since the beginning of the year, the company has announced a new collaborations with Glycostem Therapeutics, the promotion of Dr. Gerrit Dispersyn to CEO and the appointment of Dr. John Barrett as CDO. Phio is focusing its efforts on two assets in two indications designated PH-762 and PH-804 for melanoma and other cancers using checkpoint inhibition in adoptive cell transfer and modifying the tumor micoenvironment.

Phio’s lead candidate, RXI-762, is pursuing immuno-oncology indications in collaboration with Center for Cancer Immune Therapy (CCIT) and Iovance Biotherapeutics. Development efforts are centered on reducing the immune checkpoints that appear on the surface of tumor infiltrating lymphocytes (TILs) in an approach that can be layered on to current manufacturing processes. In-vitro efficacy and safety data is being generated and regulatory work is underway in order to prepare the investigational new drug (IND) application. Phio is currently developing the data set needed to satisfy the requirements for the IND and we expect a further update on progress in a few months.

Revenues of $21,000 were recognized in the quarter and reflect the work performed in the collaboration with BioAxone to treat spinal cord injury. 1Q:19 expenditures fell 4% to $2.2 million as research and development expenditures declines and general and administrative expenses increased. R&D contracted due to headcount reductions, lower payroll expenses and completion of RXI-762 drug manufacture in 1Q:18. G&A expenses rose on greater stock compensation paid to the former CEO in lieu of cash compensation. Net loss was ($2.1) milion or ($0.10) per share, reflecting 20.4 million shares outstanding.

As of March 31, 2019, cash stood at $12.7 million and debt remained at zero. Cash burn was ($2.2) million for the quarter, compared to ($1.9) million in 1Q:18. A small amount was contributed from financing activities representing the exercise of pre-funded warrants. Phio management sees current cash levels as sufficient to fund the company until 2H:20.

Dermatology and Ophthalmology Assets

Phio continues to meet with potential acquirors and partners for RXI-109 and Samcyprone. The company is seeking a large dermatology player for the scarring indication and feedback has been limited. Potential buyers are seeking an advanced asset that can be approved within a short time period or a 505(b)(2) type of asset that is already understood by the regulatory agencies and RXI-109 for scarring is outside of this zone. We continue to see value here and anticipate that Phio will continue meeting with interested suitors until the environment shifts in their favor. Samcyprone can address an unmet need in warts and we think it can fill a niche in the retail space. The asset also can extend into other areas such as genital warts, precancerous lesions and has an orphan designation for skin cancer. No deals have yet been announced for this asset. Data for RXI-109 for retinal fibrosis and corneal scarring was the last to be fully available for review and could have the greatest near term value of the for-sale assets. In April, Regeneron and Alnylam announced a collaboration with $800 million in upfront cash to focus on disease targets expressed in the eye and central nervous system. This demonstrates that there is value recognized for RNAi in ophthalmology indications and we are hopeful that the value of Phio’s asset will also be acknowledged. Despite the slow pace, we are optimistic that Phio will successfully monetize these partially developed assets.

Glycostem Collaboration

On March 28th, Phio announced a collaboration with Glycostem which will combine sd-rxRNA with Glycostem’s oNKord cell therapy products. Glycostem is a Netherlands-based cell therapy company that has developed a platform technology employing ex vivo expansion of natural killer (NK) cells for use in immuno-oncology. The goal of the collaboration is to advance Glycostem’s celular immunotherapies for the treatment of cancer. sd-rxRNA may provide new and effective methods for expanding and differentiating NK cells and address immunosuppressive environments that NK cells may encounter. Glycostem joins other Phio collaborators including CCIT, Medigene AG, Iovance Biotherapeutics and others.

Patent Issued

On May 28th, 2019, the United States Patent and Trademark Office (USPTO) issued patent number 10,300,027 entitled “Effective sensitizing dose of a gelled immunomodulating topical composition.” The patent employs diphenylcyclopropenone (DPCP), otherwise known as Samcyprone, for which Phio has completed a Phase II trial for the indication of common warts. DPCP is an immunomodulator and can provoke an immune response, which has been studied in the treatment of alopecia areata, warts and cutaneous metastases of malignant melanoma. With this patent, Phio has broadened its intellectual property protections in skin cancer and melanoma. Company strategy seeks to protect work the company has done with licensed compounds in other than lead indications. While DPCP is not an active target for Phio, the patent will protect potential advances the company may make in the future.

CEO Appointment and Management Changes

As of March 1st, Gerrit Dispersyn was appointed chief executive officer (CEO). Dr. Dispersyn joined the company in April 2017 as Chief Development Officer and was promoted to President and Chief Operating Officer in 2018. He takes the reins from Dr. Geert Cauwenbergh, who will remain as member of Phio’s board of directors.

On April 10, Phio appointed Dr. John Barrett as Chief Development Officer. Dr. Barrett’s background at Ziopharm Oncology for the past eight years provided experience in drug discovery and in developing cell-based immuno-oncology therapies.

Programs & Partnerships

Phio maintains a relationship with the CCIT at Herlev Hospital to develop tumor-infiltrating lymphocytes (TILs) for cell therapies. Phio’s sd-rxRNA is being used with TILs to modify their use in order to target immune checkpoints in cells from melanoma and other cancer patients. The use of sd-rxRNA with TILs has reduced the number of PD-1 receptors on the TILs’ surface in a pilot study.

Phio is working with Iovance Biotherapeutics to develop and commercialize autologous cellular immunotherapies with tumor-directed TILs. Work with Iovance will combine sd-rxRNA with Iovance’s autologous cell therapy approach in the treatment of cancer. In collaborative efforts, knock-down of PD-1 was associated with phenotypic changes suggesting TIL activation. Future efforts will evaluate the impact of sd-rxRNA on TIL activty.

The Medigene AG collaboration is combining sd-rxRNA with T cell receptors (TCR) to enhance the safety and efficiacy of their use in the treatment of cancer patients. Initial work with Medigene reduced PD-1 levels in T cells and the future goal is to expand to additional targets.


View Exhibit I – Dose Response for PD-1 Silencing Using PH-7621

Combined efforts with Gustave Roussy employ sd-rxRNA in the tumor micro environment (TME). Intra-tumoral injection is applied to silence gene expression. Study results demonstrated an 80 – 85% reduction of the target gene expression in a melanoma mouse model.

Pipeline Candidates

The following exhibit illustrates Phio’s pipeline, which also includes undisclosed compounds in adoptive cell therapy (ACT) and tumor microenvironment. The lead asset is PH-762, which seeks to increase the expression of PD-1 in cell based therapies. Earlier stage programs are targeting the immune receptor TIGIT in solid tumors among other checkpoints. Cell differentiation is another program that is seeking to extend the life of modified immune cells so they will work longer.


View Exhibit II – Phio Pipeline

Milestones:

Addition of partner Glycostem for NK IO treatment development – March 2019
Elevation of Dr. Gerrit Dispersyn to CEO – March 2019
Appointment of Dr. John Barrett to CDO – April 2019
‣ Partnership/Sale of Dermatology and Ophthalmology Programs – TBD
‣ Preparation of IND for PH-762 – 2H:19
‣ New PD-1/PD-L1 product
‣ PH-762 (TILs – Melanoma) into clinic – 1H:20
‣ PH-762 (Intratumoral injection – Melanoma) into clinic – 2H:20
‣ PH-804 (ACT) into clinic – 2H:20


View Exhibit III – Clinical Development Path RXI-7622

Summary

Phio remains in negotiations with potential buyers regarding the dermatology and ophthalmology assets. We are hopeful that execution on this sale will add to cash levels and be reflected in the valuation3. Phio has a multi-pronged approach to its immuno-oncology efforts, with three broad areas of research conducted in collaboration with partners. Immuno-oncology is an attractive area for development as the FDA frequently provides preferential consideration for candidates pursuing a cancer indication and there is broad demand for therapies in this pathology. Phio’s sd-rxRNA has many favorable characteristics, including low cost, a high degree of safety, and the ability to enhance the IP of partner products to name a few. Phio has indicated that they have sufficient cash to support activity until 2H:20, a runway that may be extended with funds generated from asset sales.

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1. Exhibit compares the non-targeting control (NTC) with PH-762 at varying doses from 0 to 2 µM. The declining light blue bars illustrate the dose response in a reduction of PD-1 mRNA while the dark blue bars of the control are relatively steady.
2. As of January 2019
3. We discuss the Samcyprone and PHIO-109 in a previous report found here

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