What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-10 · 277 added, 357 removed, 72 unchanged (90% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this document, “we,” “our,” “ours,”

“us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp.

and our subsidiary, MirImmune,

LLC and the ongoing business operations of Phio Pharmaceuticals Corp.

In this report, “we,” “our,”

“ours,” “us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp.

and our subsidiary,

MirImmune, LLC and the ongoing business operations of Phio Pharmaceuticals Corp.

and MirImmune, LLC, whether conducted through Phio Pharmaceuticals

or MirImmune, LLC.

This management’s discussion and analysis of financial condition

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 management’s discussion and analysis

of financial condition as of March 31, 2022 and results of operations for the three months ended March 31, 2022 and 2021 should be read

in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was

filed with the Securities and Exchange Commission (the “ SEC ”) on March 22, 2022.

This report contains forward-looking statements

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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;

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.

In contrast to other RNA

technologies and platforms, the self-delivering nature of our INTASYL platform makes it ideally suited for use with adoptive cell therapy

(“ ACT ”) treatments as well as for direct therapeutic use.

ACT consists of the infusion of immune cells with antitumor

properties, after growing them in a lab to large numbers.

These cells can be derived from unmodified (i.e.

naturally occurring) immune

cells, immune cells isolated from resected tumors or genetically engineered immune cells that recognize tumor cells.

Regardless of the

source of immune cells (ACT or naturally occurring immune cells), in patients with solid tumors, these cells have several shortcomings

that inhibit their full therapeutic potential.

By using INTASYL technology during the manufacturing of such ACT cell products we can improve

the phenotype and function of these cells, potentially leading to better therapeutic outcomes.

Multiple inhibitory mechanisms restrain

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

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

and function.

By using INTASYL based drugs administered directly, we can also reprogram cells in the TME to help overcome these immunosuppressive

We have developed a product

platform based on our INTASYL technology that allows easy, precise, rapid and selective non-genetically modified programming of ACT cells

( ex vivo , during manufacturing) and of the TME ( in vivo , by local application), resulting in reduced immune inhibition and

in improved immunotherapy.

INTASYL Use To Improve Adoptive Cell Therapy

ACT is a form of immune

therapy based on the use of immune cells, isolated from patients, donors or retrieved from allogeneic immune cell banks.

They are grown

in a lab to large numbers and subsequently administered to patients to fight cancer.

Sometimes, immune cells that naturally recognize

a tumor are used, while other times immune cells are modified or “genetically engineered” to make them recognize and kill

the cancer cells.

There are several types of ACT, including:

a.) non-engineered cell therapy in which immune cells are grown from the

patient’s tumor or blood, such as tumor infiltrating lymphocytes (“ TILs ”), or from donor blood or tissue such

as natural killer (“ NK ”) cells, dendritic cells (“ DC ”) and macrophages, and b.) genetically engineered

immune cells that are genetically modified to recognize specific tumor proteins and to remain in an activated state (such as T cell receptor

technology (“ TCRs ”), chimeric antigen receptor (“ CAR ”) T cells, or CAR-NK cells).

Multiple inhibitory mechanisms

restrain immune cells used in ACT from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence,

and other barriers to immune cell infiltration and function mainly in solid tumors.

We believe our INTASYL compounds are ideally suited

to be used in ACT products.

With INTASYL compounds, we can unlock the full potential of ACT, by improving 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.

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.

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 pandemic, 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

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,

2021 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 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.

Phio Pharmaceuticals Corp.

(“ Phio ,” “ we ,” “ our ” or the “ Company ”) strives to address

the biggest challenges in immuno-oncology by working to create new pathways to a cancer-free future for patients.

We are developing therapeutics

that leverage our INTASYL™ technology to target both tumor and immune cells by regulating genes to strengthen a patient’s

immune system while weakening tumor defense mechanisms.

With our INTASYL self-delivering RNAi technology, we aim to bring the benefits

of RNA therapeutics into cancer care where other modalities may fall short.

are developing a pipeline of immuno-oncology therapies using our INTASYL technology, which has the ability to attack cancers in multiple

Our INTASYL-based therapeutics are used to:

(1) strengthen immune cells, including those administered as part of adoptive cell therapy

(“ ACT ”), and (2) directly modify cells in the tumor microenvironment (the “ TME ”) to weaken a tumor’s

defense mechanisms.

These two strategies allow for multiple therapeutic applications of our INTASYL products.

contrast to other RNA technologies and platforms, we believe the self-delivering nature of our INTASYL platform makes it ideally suited

for use with ACT treatments, as well as for direct therapeutic use.

By using our INTASYL technology during the manufacturing of ACT cell

products we can improve the phenotype and function of these cells, potentially leading to better therapeutic outcomes.

Multiple inhibitory

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

Furthermore, the immunosuppressive TME can pose a formidable barrier to immune cell infiltration and function.

By using INTASYL-based

therapeutics administered directly, we can also reprogram cells in the TME to help overcome these immunosuppressive mechanisms.

Use of INTASYL To Improve

Adoptive Cell Therapy Products

ACT consists of the administration

of immune cells with antitumor properties to patients to fight cancer after growing the cells in a lab to large numbers.

There are several

types of ACT, including:

1.) non-engineered cell therapy in which immune cells are grown from the patient’s tumor or blood, such

as tumor infiltrating lymphocytes (“ TILs ”), or from donor blood or tissue such as natural killer (“ NK ”)

cells, dendritic cells (“ DC ”) or macrophages and 2.) genetically engineered immune cells that are genetically modified

to recognize specific tumor proteins and to remain in an activated state (such as T cell receptor technology (“ TCRs ”),

chimeric antigen receptor (“ CAR ”) T cells, or CAR-NK cells).

Regardless of the source,

most of the immune cells used for ACT have several shortcomings that inhibit their full therapeutic potential in patients with solid tumors,

which we believe can be overcome with INTASYL-based therapeutics.

For example, multiple inhibitory mechanisms restrain immune cells used

in ACT from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence in addition to other

barriers to immune cell infiltration and function occurring mainly in solid tumors.

When used in ACT, we believe our INTASYL compounds

can improve 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.

approach builds on well-established methodologies of ACT and involves the treatment of immune cells with our INTASYL compounds ex

vivo while they are growing in the lab and before administering them to the patient.

In contrast to other RNA technologies, our

INTASYL compounds do not require a delivery vehicle or specialized delivery tools to deliver the RNA drugs into the cells.

we are able to enhance the function of these cells by merely adding our INTASYL compounds during the expansion process and without the

need for genetic engineering, complex delivery vehicles or formulations, or additional complex manufacturing steps, which in themselves

may be detrimental to the cells.

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.

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

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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.

to overcome tumor resistance mechanisms, which improves 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

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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.

In March 2021, the Company

entered into a clinical co-development collaboration agreement (the “ Clinical Agreement ”) with AgonOx, Inc.

to develop novel T cell-based therapies using PH-762 and AgonOx’s “double positive” TIL (“ DP TIL ”)

AgonOx has demonstrated that its DP TIL enriched cell populations have increased tumor killing activity when compared to TILs

that were not enriched prior to expansion.

Further, 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, we expect the

use of PH-762 treated DP TILs to enhance therapeutic responses in cancer patients.

Based on this data, our collaboration with AgonOx will

focus on conducting a clinical trial for PH-762 treated DP TILs.

Under the Clinical Agreement, we will provide financial support to AgonOx

to conduct a clinical trial in ACT with their DP TIL technology and PH-762.

We will be entitled to certain future development milestones

and low single-digit sales-based royalty payments from AgonOx’s licensing of its DP TIL technology.

Financial support to AgonOx

under the Clinical Agreement has not yet commenced.

The Company expects to start the clinical trial evaluating the use of PH-762 and DP

TILs in ACT in the third 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.

We presented in vivo data

showing that PH-762 significantly enhanced the antitumor efficacy of HER2-targeted CAR-T cells (“ HER2CART ”) in solid

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 tumors.

Our 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.

Like other 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 specificity.

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 phenotype).

We have demonstrated that the application of PH-894 can 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.

5 unchanged sentences

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

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

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 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.

Direct Therapeutic Use of INTASYL Towards the

Tumor Microenvironment

Cancer cells have evolved

natural defenses that can suppress the immune system surrounding the tumor, in an area called the TME, 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, including by local administration and activation of immune cells in the TME, and/or lowering the tumor cells

Therefore, we believe INTASYL-based therapeutics can be 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.

most advanced program being developed by the Company in our direct therapeutic 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 demonstrated that local

administration of PH-762 through intratumoral injection resulted in potent anti-tumoral effects.

Treated animals showed a complete and

statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential tumor growth.

has shown that intratumoral treatment with PH-762 inhibits tumor growth in a dose dependent fashion in PD-1 responsive and refractory

Furthermore, on-target efficacy was supported by modulation of immune cell populations toward anti-tumor phenotypes.

local administration of PH-762 resulted in activity against distal untreated tumors, indicative of a systemic anti-tumor response.

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.

In January 2022, the Company

was granted clinical trial authorization by the French National Agency for the Safety of Medicines and Health Products to proceed

with our first in-human clinical trial for PH-762 to treat patients with melanoma at the Gustave Roussy Institute, one of the largest

cancer centers in Europe.

This first clinical trial with PH-762 will be a Phase 1b study to evaluate the safety, tolerability, pharmacokinetics

and anti-tumor activity of PH-762 in a neoadjuvant setting in subjects with advanced melanoma.

Currently, there are no neoadjuvant treatment

options approved for these patients.

The clinical trial will feature a dose escalation of PH-762 monotherapy with a maximum of 5 dose

escalation cohorts and up to a maximum of 21 patients.

Patients eligible for enrollment include those with Stage IIIB/IIIC or Stage IV

resectable oligometastatic melanoma.

Enrolled patients will receive a weekly dose of PH-762 for four weeks and receive surgical resection

surgery of their tumor(s) four weeks after treatment with PH-762.

The clinical trial design allows for a data driven evaluation of the

recommended Phase 2 dose.

The clinical trial site is open for enrollment and the Company anticipates top-line data from the first group

of patients in the first quarter of 2023.

However, the impact of the ongoing coronavirus pandemic on the enrollment of patients in the

clinical trial is not yet known and highly difficult to predict and therefore, may result in delays to our expected timelines.

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

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 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

As a result of the coronavirus

pandemic, certain of our third-party suppliers and service providers on which we rely have seen impacts to their operations.

has undertaken efforts to mitigate potential future impacts by identifying and engaging alternative third-party service providers and

suppliers, and because of that, the Company had been able to limit the impact of delays from our third-party service providers to our

program’s anticipated timelines.

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

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 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 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.

In a study conducted in collaboration with the Karolinska Institutet in Sweden, we

demonstrated that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells, and in various cancer

Data published with PH-894 in a hepatocellular carcinoma model showed potent and statistically significant anti-tumoral effects

when administered locally.

These data show that our PH-894 compound can reprogram T cells and other cells in the TME to provide enhanced

immunotherapeutic activity.

In vivo data by the Company has shown that local administration of PH-894 also resulted in a systemic

anti-tumor response, similar to PH-762.

Data recently presented at the 2022 American Association for Cancer Research Annual Meeting demonstrated

that PH-894 provided abscopal efficacy toward untreated distal tumors and potentiated the efficacy of systemic anti-PD-1 antibody therapy.

After local administration of PH-894 in in vivo studies conducted in colon and liver cancer models, strong anti-tumor efficacy

was seen in directly treated, as well as distal untreated tumors.

Additionally, intratumoral treatment with PH-894 enhanced the anti-tumor

efficacy of systemic anti-PD-1 antibody therapy for both the locally treated tumors and the untreated tumors.

With this data, there is

potential for PH-894 to be used in treating patients who do not respond to anti-PD-1 therapy, or patients who progress after initially

responding to such therapy.

PH-894 demonstrates 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 finalize IND-enabling studies for PH-894 in the second half of 2022.

We are also investigating

the use of INTASYL to target multiple genes in a single formulation.

New study data showed that PH-3861, a dual-targeting INTASYL towards

PD-1 and BRD4, elicited a 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 the clearance of untreated distal tumors.

The animals which showed a 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 than the original

All of the animals 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 local administration of PH-3861 provides a durable

and systemic anti-tumor immune response that can combat tumor growth.

of the Coronavirus Pandemic

Company continues to respond to and monitor the ongoing coronavirus pandemic.

The Company’s corporate headquarters and research

facility have seen limited impact and, during the three months ended March 31, 2022, continued to

operate with safety measures in place for the health and well-being of its employees, such as working remotely and flexible scheduling,

in accordance with guidance from federal, state and local authorities.

The Company believes that that coronavirus pandemic has not had

a significant impact on its financial condition and results of operations for the three months ended March 31, 2022.

However, the Company

may experience delays in enrollment with its current clinical trial and with its clinical trial expected to commence in the middle of

The extent to which the coronavirus pandemic will materially impact our financial results and operations will depend on a number

of factors, including delays in our operations due to the limited availability of supplies and services we rely on, the ability to enroll

patients in our clinical trials and the duration of the coronavirus pandemic, which remain difficult to predict and are highly uncertain.

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 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 .

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 condensed consolidated 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, 2021 .

Results of Operations

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operations for the periods indicated, in thousands:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended

Operating expenses

Operating loss

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

Comparison of the Three Months Ended March 31, 2022 and 2021

Operating Expenses

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expenses, for the periods indicated, in thousands:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended

Research and development

2 unchanged sentences

Research and Development Expenses

and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies,

external services, costs to acquire technology licenses, research activities under our research collaborations, expenses associated

with preclinical and clinical development activities and other operating costs.

Our research and development programs are focused on the

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

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

administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional

Research and development expenses

relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services, costs

to acquire technology licenses, research activities under our research collaborations, expenses associated with preclinical and clinical

development activities and other operating costs.

Our research and development programs are focused on the development of immuno-oncology

therapeutics based on our INTASYL therapeutic platform.

Since we commenced operations, research and development expenses have been a significant

portion of our total operating expenses and are expected to constitute the majority of our spending for the foreseeable future.

and development expenses for the three months ended March 31, 2022 decreased 35% as compared with the three months ended March 31, 2021.

The decrease in research and development expenses was primarily due to the preclinical studies required for the Company’s clinical

trial with PH-762 as a direct therapeutic and manufacturing costs for PH-762, both of which were conducted in the prior year period, offset

by increases in CRO costs in preparation for the start of the Company’s clinical trial with PH-762 as a direct therapeutic and personnel-related

expenses due to an increase in headcount as compared to the prior year period.

General and Administrative

and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional

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

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 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.

and administrative expenses for the three months ended March 31, 2022 decreased 13% as compared with the three months ended March 31,

2021, primarily due to decreases in legal and patent fees offset by an increase in stock-based compensation expense.

income for the three months ended March 31, 2022 decreased by $233,000 as compared with the three months ended March 31, 2021, primarily

due to the full forgiveness of the Company’s PPP loan in the first quarter of 2021.

Liquidity and Capital Resources

1 unchanged sentence

of funding has been through the sale of its securities.

In the future, we will be dependent on obtaining funding from third parties,

such as proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our operations.

reported recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations

for the foreseeable future.

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 ”),

In the future, we will be dependent on obtaining funding from third parties, such

as proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our operations.

We have reported

recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations for

the foreseeable future.

At March 31, 2022, we had cash of $20,459,000 as compared with $24,057,000 at December 31, 2021.

For information regarding our cash commitments related to the clinical

co-development agreement with AgonOx, see Note 10 to our condensed consolidated financial statements.

In August 2019, the Company

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

pursuant to which the Company has the right to sell to LPC up to $10,000,000 in shares of the Company’s common stock, subject to

5 unchanged sentences

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

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

The following table summarizes our cash flows for

the periods indicated, in thousands:

Nine Months Ended

September 30,

We believe that our existing

cash at March 31, 2022 should be sufficient to fund operations for at least the next 12 months from the date of the release of the

associated financial statements.

The following table summarizes

our cash flows for the periods indicated, in thousands:

Three Months Ended

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash and restricted cash

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and restricted cash

Net Cash Flow from Operating Activities

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 used in operating

activities increased primarily due to the changes in operating assets and liabilities due to prepayments made for the required IND-enabling

studies for PH-894 and payments for the manufacturing of clinical supply batches of PH-762 partially offset by a decrease in net loss

Net Cash Flow from Investing Activities

Net cash used in investing activities was $51,000

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 used in investing

activities was primarily related to the purchase of laboratory and computer equipment for the Company’s facility for the three months

ended March 31, 2022 and 2021.

Net Cash Flow from Financing Activities

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

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

In connection

with certain license agreements, we are required to indemnify the licensor for certain damages arising in connection with the intellectual

property rights licensed under the agreement.

In addition, we are a party to a number of agreements entered into in the ordinary course

of business that contain typical provisions that obligate us to indemnify the other parties to such agreements upon the occurrence of

certain events.

These indemnification obligations are considered off-balance sheet arrangements in accordance with ASC Topic 460, “ Guarantor’s

Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others .” To date, we

have not encountered material costs as a result of such obligations and have not accrued any liabilities related to such obligations in

our financial statements.

See Note 8 to our consolidated financial statements included in our Annual Report on Form 10-K for the year

ended December 31, 2020, which was filed with the SEC on March 25, 2021, for further discussion of these indemnification agreements.

Net cash from financing activities

decreased primarily due to the net proceeds received by the Company from capital raising activities and warrant exercises in the comparable

prior year period.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required

to provide this information.

As a smaller reporting company,

we are not required to provide this information.

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