What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-10 compared with 2021-08-12 · 293 added, 260 removed, 136 unchanged (80% of the section changed)

7 unchanged sentences

This management’s discussion and analysis of financial condition

as of June 30, 2021 and results of operations for the three and six months ended June 30, 2021 and 2020 should be read in conjunction

as of September 30, 2021 and results of operations for the three and nine months ended September 30, 2021 and 2020 should be read in conjunction

with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the

Securities and Exchange Commission (the “ SEC ”) on March 25, 2021.

This report 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.

Risks that could cause actual results to vary from expected

results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by the

ongoing coronavirus outbreak, the development of our product candidates, our ability to execute on business strategies, our ability to

develop our product candidates with collaboration partners, and the success of any such collaborations, the timeline and duration for

advancing our product candidates into clinical development, results from our preclinical and clinical activities, the timing or likelihood

of regulatory filings and approvals, the commercialization of our product candidates if approved, our ability to manufacture and supply

our product candidates for clinical activities and for commercial use if approved, the scope of protection we are able to establish and

maintain for intellectual property rights covering our technology platform, and our ability to obtain future financing.

Our actual results

and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important

factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Risk

Factors” and in other filings the Company periodically makes with the SEC.

Therefore, you should not rely on any of these forward-looking

Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company 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.

Phio Pharmaceuticals Corp.

is a biotechnology company

developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi (“ INTASYL™ ”)

therapeutic platform.

Our efforts are focused on silencing tumor-induced suppression of the immune system through our proprietary INTASYL

platform with utility in immune cells and the tumor micro-environment.

Our 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 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.

that our INTASYL platform uniquely positions the Company in the field of immuno-oncology for the following reasons:

Efficient uptake of INTASYL by target cells obviating the need for facilitated delivery (mechanical or formulation);

Does not require permanent genetic modification;

This report 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.

Risks that could cause actual

results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our

business and operations by the ongoing coronavirus outbreak, the development of our product candidates, our ability to execute on business

strategies, our ability to develop our product candidates with collaboration partners, and the success of any such collaborations, the

timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities,

the timing or likelihood of regulatory filings and approvals, the success of our efforts to commercialize our product candidates if approved,

our ability to manufacture and supply our product candidates for clinical activities, and for commercial use if approved, the scope of

protection we are able to establish and maintain for intellectual property rights covering our technology platform, and our ability to

obtain future financing.

Our actual results and financial condition may differ materially from those indicated in the forward-looking

statements as a result of a number of important factors, including those identified in our Annual Report on Form 10-K for the year ended

December 31, 2020 under the heading “Risk Factors” and in other filings the Company periodically makes with the SEC.

you should not rely on any of these forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form

10-Q speak as of the date hereof and the Company 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.

Pharmaceuticals Corp.

is a biotechnology company developing the next generation of immuno-oncology therapeutics based on our self-delivering

RNAi (“ INTASYL™ ”) therapeutic platform.

Our efforts are focused on silencing tumor-induced suppression of the

immune system through our proprietary INTASYL platform with utility in immune cells and the tumor microenvironment.

Our 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.

INTASYL compounds can be used as drugs

to be administered directly to patients (direct therapeutic use), or as a modality to improve certain forms of cell-based immunotherapy

(adoptive cell therapy).

development efforts are based on our broadly patented INTASYL technology platform.

Our INTASYL compounds are designed to “silence”

or down-regulate, the expression of a specific gene which is over-expressed in cancer.

Our INTASYL technology does not require genetic

modifications, and, unlike other RNA and DNA-based technologies, our INTASYL compounds do not require a delivery vehicle to penetrate

into tissues and cells.

We believe that our INTASYL platform uniquely positions the Company in the field of immuno-oncology for the following

Can target multiple genes (i.e.

multiple immunosuppression pathways) in a single therapeutic entity;

Gene silencing by INTASYL has been shown to have a sustained, or long-term, effect in vivo ;

Results in a sustained, or long-term, effect in vivo ;

Favorable clinical safety profile of INTASYL with local administration;

Efficient uptake of INTASYL by target cells, obviating the need for

facilitated delivery (mechanical or formulation);

Can be readily manufactured under current good manufacturing practices.

14 unchanged sentences

immune cells from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence.

the immunosuppressive tumor micro-environment (the “ TME ”) can pose a formidable barrier to immune cell infiltration

the immunosuppressive tumor microenvironment (the “ TME ”) can pose a formidable barrier to immune cell infiltration

and function.

23 unchanged sentences

to be used in ACT products.

With INTASYL compounds, we can unlock the full potential of ACT, by improving the immune cell function,

With INTASYL compounds, we can unlock the full potential of ACT, by improving 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, in contrast to other RNA technologies, 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, complex delivery vehicles or formulations, and

additional 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 cell viability and cell growth rate.

After expanding these

cells and enhancing them with INTASYL ex vivo , they are returned to the patient for treatment.

Our lead product

candidate, and our 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.

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, and of CAR-T cells

used 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 TILs with PH-762 increases the tumor killing activity of the DP TILs even further (a two-fold increase).

a result, the use of PH-762 treated DP TILs is expected to enhance therapeutic responses in cancer data.

Based on this 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.

In collaboration with AgonOx, we are planning a clinical trial in ACT with PH-762 and AgonOx’s DP TIL technology.

As a result of

impacts from the coronavirus pandemic, the availability of certain materials for the clinical trial are delayed.

Based upon current information,

the Company expects to start the clinical trial evaluating the use PH-762 and DP TILs in adoptive cell therapy in the second quarter of

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.

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.

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, in contrast to other RNA technologies, 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, complex delivery vehicles or formulations, or additional 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 cell viability and cell growth rate.

After expanding these cells and enhancing

them with INTASYL ex vivo , they are returned to the patient for treatment.

lead product candidate, and our most advanced program being developed by the Company in ACT, is PH-762.

PH-762 is an INTASYL compound

that activates immune cells to better recognize and kill cancer cells by reducing the expression of the checkpoint protein PD-1, a clinically

validated target for immunotherapy.

Checkpoint proteins, such as PD-1, normally act as a type of “off switch” that prevent

T cells, immune cells that protect the body from cancer cells and infections, from attacking certain cells in the body, such as cancer

The expression of PD-1 enables the cancer cell to evade the T cell.

Reducing the expression of PD-1 can thereby reduce the ability

of cancer cells to avoid T cell detection.

has shown that PH-762 silences PD-1 checkpoint expression in T cells, thereby removing the “off switch” and enabling T cells

to overcome tumor resistance mechanisms, and thus improving their ability to destroy tumor cells.

Preclinical studies show that PH-762

can silence the expression of PD-1 in target human T cells in a potent and durable manner and can increase their tumor cell-killing ability.

Patient derived T cells treated with PH-762, in comparison to untreated T cells, were shown to have increased tumor killing potency against

tumor cells of the same patient.

As a result, we believe that PH-762 in ACT is well-positioned to enhance therapeutic responses in cancer.

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, in which

the companies will collaborate on the development of novel T cell-based therapies using PH-762 and AgonOx’s “double positive”

TIL (“ DP TIL ”) technology.

Per the terms of the clinical development agreement, AgonOx will receive financial support

from Phio to conduct a clinical trial in ACT with their DP TIL technology and PH-762, and Phio will be entitled to certain future development

milestones and sales-related royalty payments from AgonOx’s DP TIL technology.

AgonOx has demonstrated that their DP TIL enriched

cell populations have increased tumor killing activity when compared to TILs that were not enriched prior to expansion.

Preclinical data

from our research collaboration with AgonOx has shown that treating DP TILs 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

Based on this data, our clinical development collaboration will focus on conducting a clinical study for PH-762 treated DP

As a result of impacts from the coronavirus pandemic, the availability of certain materials for the clinical trial are delayed.

Based upon current information, the Company expects to start the clinical trial evaluating the use of PH-762 and DP TILs in ACT in the

second quarter of 2022.

use in ACT is not limited to TILs, but can also be used on other forms of T cell-based cell therapy.

We recently presented in

vivo data showing that PH-762 significantly enhanced the antitumor efficacy of HER2-targeted CAR-T cells

(“ HER2CART ”) in solid tumors.

Compared to untreated HER2CART cells, HER2CART cells treated with PH-762 showed a

statistically significant and durable inhibition of tumor growth.

Analysis of the PH-762 treated HER2CART cells isolated from the

tumors suggest that PH-762 enhances CAR-T function through multiple mechanisms including enhanced efficiency, degranulation and

promotion of memory/stem populations.

We believe that this data provides proof of concept for the application of PD-1 checkpoint

silencing with INTASYL in CAR-T cells prior to ACT to enhance the therapeutic efficacy of CAR-T cell therapy in solid

second product candidate in development for use in ACT is PH-894.

PH-894 is an INTASYL compound that silences the epigenetic protein

BRD4, which is an intracellular regulator of gene expression that impacts cell differentiation, and hence, cell function.

epigenetic targets, BRD4 is a protein that has been shown to be difficult to target with current drug modalities.

Since BRD4 is an

intracellular protein, antibody therapies cannot be used and small molecule inhibitors tested to date typically lack the required

As our INTASYL compounds can target intracellular proteins, as well as extracellular proteins, with a high level of

specificity, we believe that PH-894 has significant potential.

In collaboration with the Karolinska Institutet in Sweden, 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

We have demonstrated that the application of PH-894 is shown to silence BRD4 in human T cells during expansion for ACT,

which has the potential to confer superior anti-tumor activity.

INTASYL compound PH-804 is also being developed for use in ACT.

PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint

protein present on immune cells, such as T cells and NK cells.

Similar to PD-1, cancer cells can suppress the activity of these immune

cells by activating TIGIT.

This triggers an “off switch,” resulting in tumor immune evasion, which can be prevented by blocking

or silencing TIGIT.

PH-804 provides powerful dose-dependent silencing of TIGIT that can be seen in both T cells and NK cells and we have

shown that PH-804 can silence the expression of TIGIT in these cells, overcoming their “off switch” and thereby 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.

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, in addition to being used in combination with ACT, 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, for example by 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 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

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

The required preclinical studies and regulatory submission needed to initiate the clinical trial with PH-762 as a direct therapeutic

are being finalized.

However, these timelines are impacted by limited availability in certain services and supplies as a consequence of

the coronavirus pandemic.

The clinical trial will be conducted at the Gustave Roussy Institute, which is one of the largest cancer centers

in Europe, with Dr.

Caroline Robert as our lead principal investigator.

The Company currently expects to start the clinical trial evaluating

the use of PH-762 as a direct therapeutic in the first quarter of 2022.

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 activates 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.

Data has 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 we can efficiently and potently target multiple proteins in a single drug treatment.

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.

the Tumor Microenvironment

cells have evolved natural defenses that can suppress the immune system surrounding the tumor, in an area called the tumor microenvironment,

which decreases the effectiveness of many traditional immunotherapies.

Reprogramming different cell types in the TME, such as cancer

cells and immune cells, may overcome these natural tumor defenses and decrease resistance to immunotherapy.

An optimal treatment therapy

should have the ability to address targets both inside and on the surface of tumor and immune cells, creating multiple ways to prevent

tumors from evading immune detection.

Our INTASYL compounds can target both intracellular and extracellular targets, and are also being

developed for use as direct therapeutics to reprogram the TME, for example, by in situ transfection and activation of immune cells

Therefore, INTASYL-based drug therapy is a novel way of fighting cancer by reprogramming the cells in the TME to make cancer

more responsive to a patient’s immune system and to other anti-cancer drugs.

lead product candidate, and our most advanced program being developed by the Company in our direct to tumor therapy programs, is PH-762.

We have shown that we can reprogram the TME with PH-762 and achieve local activation of immune cells.

Preclinical studies conducted by

the Company showed that local administration of PH-762 through intratumoral injection resulted in potent anti-tumoral effects.

animals showed a complete and statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential

tumor growth.

Recently announced in vivo data showed that intratumoral treatment with PH-762 inhibits tumor growth in a dose dependent

fashion in PD-1 responsive and refractory models.

Furthermore, on target efficacy was supported by modulation of immune cell populations

toward anti-tumor phenotypes.

The Company believes this data further supports the potential for PH-762 to provide a strong local immune

checkpoint blockade without the dose immune-related adverse effects seen with systemic antibody therapy.

Company is preparing for a first-in-human clinical study with PH-762 as a directly administered drug for patients with advanced melanoma

at the Gustave Roussy Institute, one of the largest cancer centers in Europe.

The required preclinical studies and regulatory submission

needed to initiate the clinical trial with PH-762 as a direct therapeutic are being finalized.

However, these timelines have been impacted

by the limited availability of certain services and supplies as a consequence of the coronavirus pandemic.

The Company currently expects

to start the clinical trial evaluating the use of PH-762 as a direct therapeutic in the first quarter of 2022.

second direct to tumor product candidate is PH-894.

Data published with PH-894 in a hepatocellular carcinoma model showed potent and statistically

significant anti-tumoral effects when administered locally.

In a further study conducted in collaboration with the Karolinska Institutet,

we demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells, which in an in

vivo study translated to pronounced and dose-associated inhibition of tumor growth.

These data show that our PH-894 compound can reprogram

T cells and other cells in the TME to provide enhanced immunotherapeutic activity.

PH-894 shows the power of our INTASYL compounds to

modulate the expression of intracellular and/or commonly considered “undruggable” targets, a limitation for small molecule

and antibody therapies.

The Company currently expects to file a clinical trial application for PH-894 in the second half of 2022.

are also investigating the use of dual-targeting INTASYL compounds in a single formulation to reprogram the TME and achieve local

activation of immune cells.

New study data showed that PH-3861, a dual-targeting INTASYL towards PD-1 and BRD4, elicited complete

cure of tumors in an in vivo hepatoma model, and outperformed the efficacy of the small molecule and antibody control

treatments toward the same targets.

In addition, local INTASYL therapy was shown to induce a systemic anti-tumor response with

clearance of untreated distal tumors.

The animals which showed complete cure of their tumors were then rechallenged over two months

after the original treatment of PH-3861 by re-implanting hepatoma cancer cells at a different location to the original tumor.

the mice that were rechallenged with new tumors were cured again without requiring further treatment, while tumors grew steadily in

the control group as expected.

We believe that these data demonstrate that PH-3861 provides a durable and systemic anti-tumor immune

response that can combat tumor growth.

Impact of COVID-19 on our Business

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 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

In March 2020, the World Health Organization (the “ WHO ”) declared the outbreak a pandemic.

Health and Safety

From the first signs of

the outbreak, we have taken proactive measures intended to protect the health and safety of our employees.

We have implemented safety

measures following the guidance provided by the WHO, the Centers for Disease Control (the “ CDC ”) and governmental

authorities, such as working remotely and flexible scheduling.

We expect to continue following these safety measures and may take further

actions as we require, as government authorities require or recommend, or as we determine to be in the best interests of our employees.

Our operations are being

conducted in accordance with federal and state government, WHO and CDC guidelines.

While measures to contain and prevent the spread

of coronavirus may be modified or extended, we expect that our activities, including our internal research and development functions,

will continue to remain largely operational, though we have started to and may continue to experience delays in our clinical activities.

Current and future pandemic-related restrictions may further impact our operations and may slow or diminish our research and development

From the first signs of the outbreak, we have taken

proactive measures intended to protect the health and safety of our employees.

We have implemented safety measures following the guidance

provided by the WHO, the Centers for Disease Control (the “ CDC ”) and governmental authorities, such as working remotely

and flexible scheduling.

We expect to continue following these safety measures and may take further actions as we require, as government

authorities require or recommend, or as we determine to be in the best interests of our employees.

Our operations are being conducted in accordance

with federal and state government, WHO and CDC guidelines.

While measures to contain and prevent the spread of coronavirus may be modified

or extended, we expect that our activities, including our internal research and development functions, will continue to remain largely

operational, though we have experienced and may continue to experience delays in our clinical activities.

Current and future pandemic-related

restrictions may further impact our operations and may slow or diminish our research and development activities.

Supply and Services

5 unchanged sentences

However, the continued impacts to our third-party service providers, including, for example, limited

availability in certain services and supplies, have now started to significantly affect our operations in the second quarter of 2021 resulting

in delays to certain of our clinical program timelines.

Further, while the steps required for us to initiate our clinical trials with

PH-762 are continuing and ongoing, the commencement of new clinical trials and the enrollment and participation of patients in clinical

trials were impacted as a result of the coronavirus pandemic, and the Company does not yet know the full extent of similar potential delays

or impacts related to its planned clinical activities.

If measures to contain the pandemic are insufficient, the availability of supplies

availability of certain services and supplies, began to significantly affect our operations in the second quarter of 2021, resulting in

delays to certain of our clinical program timelines.

Further, while the steps required for us to initiate our clinical trials with PH-762

are continuing and ongoing, the commencement of new clinical trials and the enrollment and participation of patients in clinical trials

were impacted as a result of the coronavirus pandemic, and the Company does not yet know the full extent of similar potential delays or

impacts related to its planned clinical activities.

If measures to overcome the pandemic are insufficient, the availability of supplies

and services that we purchase and rely on could be further reduced or delayed, which may in turn further slow or delay our preclinical

and clinical activities.

Liquidity and Capital

While we believe that

the coronavirus pandemic has not had a significant impact on our financial condition to date, 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 actions to contain the coronavirus or treat its impact, among others.

Liquidity and Capital Resources

While we believe that the coronavirus pandemic

has not had a significant impact on our financial condition to date, 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 actions to contain the coronavirus or treat its impact, among others.

Due to our uncertainty

about our ability to access the capital markets to provide the necessary working capital to fund our long-term operations as a result

of the coronavirus pandemic, the Company applied for and received a loan of $231,252 in May 2020 under the Paycheck Protection Program

(the “ PPP ”) as part of the Coronavirus Aid, Relief and Economic Security (the “ CARES Act ”).

Company carefully assessed the requirements for application under the program and believed that the loan was necessary to support our

The Company believed it used the loan proceeds for eligible purposes and applied for full loan forgiveness.

In February 2021,

the Small Business Administration (the “ SBA ”) approved the Company’s

application for full loan forgiveness, and the full amount of the PPP loan was remitted to the lender for forgiveness.

In connection with

and addition to the PPP, the Company took other proactive steps to control costs in response to the coronavirus pandemic, which included

the reduction of senior management salaries by 10% from May to December 2020.

We believe these savings helped to mitigate the financial

impact to us of the coronavirus pandemic on our financial condition.

do not yet know the full extent of potential delays or impacts on our business, financial condition or our preclinical and clinical trial

activities, and there may be developments outside of our control that require us to adjust our operating plans and, therefore, given the

nature of the situation, we cannot reasonably estimate the impact of the coronavirus on our financial condition, results of operations

or cash flows in the future.

about our ability to access the capital markets to provide the necessary working capital to fund our long-term operations as a

result of the coronavirus pandemic, the Company applied for and received a loan of $231,252 in May 2020 under the Paycheck

Protection Program (the “ PPP ”) as part of the Coronavirus Aid, Relief and Economic Security Act (the

“ CARES Act ”).

The Company carefully assessed the requirements for application under the program and believed that

the loan was necessary to support our operations.

The Company believed it used the loan proceeds for eligible purposes and applied

for full loan forgiveness.

In February 2021, the Small Business Administration (the “ SBA ”) approved the

Company’s application for full loan forgiveness, and the full amount of the PPP loan was remitted to the lender for

In connection with and addition to the PPP, the Company took other proactive steps to control costs in response to the

coronavirus pandemic, which included the reduction of senior management salaries by 10% from May to December 2020.

We believe these

savings helped to mitigate the financial impact to us of the coronavirus pandemic on our financial condition.

We do not yet know the full extent of potential

delays or impacts on our business, financial condition or our preclinical and clinical trial activities, and there may be developments

outside of our control that require us to adjust our operating plans and, therefore, given the nature of the situation, we cannot reasonably

estimate the impact of the coronavirus on our financial condition, results of operations or cash flows in the future.

Critical Accounting Policies and Estimates

The discussion

and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States .

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets,

liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our

estimates and base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported

been no material changes to our critical accounting policies and estimates as compared to those disclosed in the Company’s most

recent Annual Report on Form 10-K for the year ended December 31, 2020.

The discussion and analysis of our financial condition

and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with

accounting principles generally accepted in the United States.

The preparation of these financial statements requires us to make estimates

and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets

and liabilities.

On an ongoing basis, we evaluate our estimates and base our estimates on historical experience and various other assumptions

that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions and could have a material impact on our reported results.

There have been no material changes to our critical

accounting policies and estimates as compared to those disclosed in the Company’s most recent Annual Report on Form 10-K for the

year ended December 31, 2020 .

Results of Operations

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operations for the periods indicated, in thousands:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating expenses

Operating loss

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Comparison of the Three and Nine Months Ended September 30, 2021

Operating Expenses

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expenses, for the periods indicated, in thousands:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development

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development of immuno-oncology therapeutics based on our INTASYL therapeutic platform.

and development expenses for the three months ended June 30, 2021 increased 113% as compared with the three months ended June 30, 2020.

Research and development expenses for the six months ended June 30, 2021 increased 115% as compared with the six months ended June 30,

The increase in research and development expenses for both periods was primarily due to manufacturing costs and fees for the required

preclinical studies in support of the Company’s planned clinical trials for PH-762 as compared to the same period in the prior

The Company expects its research and development expenses to continue to increase in support of, and as the Company commences its

clinical trial activities with PH-762.

and development expenses for the three months ended September 30, 2021 increased 123% as compared with the three months ended September

The increase in research and development expenses was primarily due to manufacturing costs for the Company’s PH-762 and

PH-894 INTASYL compounds and fees for the required preclinical studies in support of the Company’s clinical trials for PH-762 as

compared to the same period in the prior year.

and development expenses for the nine months ended September 30, 2021 increased 118% as compared with the nine months ended September

The increase in research and development expenses was primarily due to manufacturing costs for the Company’s PH-762 and

PH-894 INTASYL compounds, fees for the required preclinical studies in support of the Company’s clinical trials for PH-762 and CRO

and consulting related costs to support the initiation of the Company’s clinical trials as compared to the same period in the prior

Company expects its research and development expenses to continue to increase in support of, and as the Company commences its clinical

trial activities for PH-762.

General and Administrative Expenses

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fees for legal, audit, tax and consulting services, as well as other general corporate expenses.

administrative expenses for the three months ended June 30, 2021 increased 15% as compared with the three months ended June 30, 2020,

primarily due to an increase in stock-based compensation expense as no equity awards were granted in the same period in the prior

administrative expenses for the six months ended June 30, 2021 increased less than 1% as compared with the six months ended June 30, 2020

primarily due an increase in stock-based compensation, as noted above, offset by a decrease in legal fees .

and administrative expenses for the three months ended September 30, 2021 decreased 11% as compared with the three months ended September

30, 2020, primarily due to a decrease in legal fees partially offset by increased stock-based compensation expense as the Company

did not grant equity awards in the same period in the prior year.

and administrative expenses for the nine months ended September 30, 2021 decreased 4% as compared with the nine months ended September

30, 2020 primarily due to a decrease in legal fees partially offset by increased stock-based compensation expense as the Company

did not grant equity awards in the same period in the prior year .

Other income consists

primarily of interest income and expense and various income or expense items of a non-recurring nature.

Other income for the six

months ended June 30, 2021 increased by $226,000 as compared with the six months ended June 30, 2020, primarily due to the full forgiveness

of the Company’s PPP loan by the SBA in the first quarter of 2021.

Other income for the nine

months ended September 30, 2021 increased by $226,000 as compared with the nine months ended September 30, 2020, primarily due to the

full forgiveness of the Company’s PPP loan by the SBA in the first quarter of 2021.

Liquidity and Capital Resources

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for the foreseeable future.

At June 30, 2021, we had cash of $29,425,000 as compared with cash of $14,244,000 at December 31, 2020.

At September 30, 2021, we had cash of $26,529,000 as compared with cash of $14,244,000 at December 31, 2020.

2019, the Company entered into a purchase agreement (the “ Purchase Agreement ”) with Lincoln Park Capital, LLC (“ LPC ”),

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To date, no shares of common stock have been sold to LPC under the Purchase Agreement.

We believe that our existing cash at June 30, 2021

We believe that our existing cash at September

30, 2021 should be sufficient to fund operations for at least the next 12 months from the date of the release of the associated financial

1 unchanged sentence

the periods indicated, in thousands:

Six Months Ended

Nine Months Ended

September 30,

Net cash used in operating activities

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Net Cash Flow from Operating Activities

Net cash used in operating activities was $6,288,000

for the six months ended June 30, 2021 as compared with $4,208,000 for the six months ended June 30, 2020.

The increase in cash used in

operating activities was primarily due to increases in net loss and changes in operating assets and liabilities as a result of increased

spending primarily related to the Company’s preclinical studies in support of and for the planned clinical trials for PH-762.

Net cash used in

operating activities was $9,387,000 for the nine months ended September 30, 2021 as compared with $6,179,000 for the nine months

ended September 30, 2020.

The increase in cash used in operating activities was primarily due to increases in net loss and changes

in operating assets and liabilities as a result of increased spending primarily related to the Company’s manufacturing

activities and preclinical studies in support of the clinical trials for PH-762.

Net Cash Flow from Investing Activities

Net cash used in investing activities was $51,000

for the six months ended June 30, 2021 as compared with $10,000 for the six months ended June 30, 2020.

The increase in cash used in investing

activities was primarily related to laboratory and computer equipment purchases.

for the nine months ended September 30, 2021 as compared with $18,000 for the nine months ended September 30, 2020.

The increase in cash

used in investing activities was primarily related to laboratory and computer equipment purchases.

Net Cash Flow from Financing Activities

Net cash provided by financing activities was $21,723,000

for the six months ended June 30, 2021, as compared with $16,148,000 for the six months ended June 30, 2020.

The increase in cash provided

by financing activities was primarily due to the net proceeds received by the Company from capital raising activities and warrant exercises.

for the nine months ended September 30, 2021, as compared with $16,131,000 for the nine months ended September 30, 2020.

in cash provided by financing activities was primarily due to the net proceeds received by the Company from capital raising activities

and warrant exercises.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis