Phio Pharmaceuticals Corp (PHIO)

[The Other Guy]

Considering all the circumstances with RXi right now, this deal does not make sense. RXi is short of cash to move forward. They appear to be short of resources to cover all the irons in the fire. And, up until now, management has been diligent in controlling costs to extend what little cash on hand they did have. If we had more details about the agreement we may feel better but here is what is stated in the Form 8-k:

On October 7, 2016, RXi Pharmaceuticals Corporation (the “Company”) entered into an exclusive option agreement to acquire all outstanding capital stock of MirImmune, Inc. in consideration for a number of shares equal to 19.99% of the then-outstanding shares of common stock of the Company, plus additional potential consideration contingent on MirImmune reaching certain milestones. RXi Pharmaceuticals can exercise the option to acquire MirImmune on the terms set forth in the option agreement at any time prior to April 5, 2017, but has no obligation to do so.

Right now it’s an “option” to acquire MirImmune without an obligation. And they have until April 5,2017 to do so. If there is any value in MirImmune at all, right now would be a good time to make the acquisition. At 20% of current outstanding shares of common stock, this deal would be worth less than $2 million. So you have to ask yourself, if MirImmune is open to this deal, why at such a relatively low dollar amount? Do they have a minimum price built into the contract that prevents such a steal? If the compound has potential in Ovarian cancer as stated in the most recent investor conference, why would they sell out for so little?

On the other hand, if RXi’s current pipeline is not looking good, and they are falling back on MirImmune as a standby, there is no way the company would be able to raise cash enough to run the necessary trials to explore the compound. Dilution would put the company at risk of another RS. This would be devastating knowing how long it takes to push through the FDA trial process. So, it appears the company is grasping at whatever they can to stay viable, right?

The company presented at the Biotech Forum as recently as 9/27. In the presentation, they never once indicated any issues with Dermal, Opthalmological and Consumer projects. So, are we to assume all three programs have gone south in two weeks and forced RXi to apply this new strategy? I doubt it. My inclination is one or more of the current programs is being sold and now the company is reinforcing its pipeline by owning MirImmune outright. As I said before, it will be good to hear more color at next week’s Investor Forum on Tuesday.