What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-10 compared with 2022-08-11 · 197 added, 237 removed, 146 unchanged (75% of the section changed)

7 unchanged sentences

This management’s discussion and analysis

of financial condition as of June 30, 2022 and results of operations for the three and six months ended June 30, 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,

of financial condition as of September 30, 2022 and results of operations for the three and nine months ended September 30, 2022 and 2021

should be read in conjunction with the audited 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.

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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.

that occur after the date of this report except as required by law.

Phio Pharmaceuticals Corp.

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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.

of RNA therapeutics to the treatment of cancer where other modalities may be ineffective.

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

Our INTASYL-based therapeutics are designed to:

(1) directly modify cells in the tumor microenvironment (the “ TME ”)

to weaken a tumor’s defense mechanisms and (2) strengthen immune cells, including those administered as part of adoptive cell therapy

We believe these two strategies will 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.

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

Multiple inhibitory mechanisms restrain immune cells from effectively

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

The immunosuppressive TME can pose a formidable

barrier to immune cell infiltration and function.

By using INTASYL-based therapeutics administered directly, we believe we can reprogram

cells in the TME to help overcome these immunosuppressive mechanisms.

Furthermore, by using our INTASYL technology during the manufacturing

of ACT cell products we believe we can improve the characteristics and function of these cells, potentially leading to better therapeutic

Direct Therapeutic Use of INTASYL

Cancer cells have evolved

natural defenses that can suppress the immune system surrounding the tumor, 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 genes and are 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 cell’s

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.

lead product candidate, and our most advanced program in human clinical trials being developed by us in our direct therapeutic programs,

PH-762 is an INTASYL compound designed to activate 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, which are immune cells that protect the body from cancer cells and infections,

from attacking certain cells in the body, such as cancer cells.

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

the expression of PD-1 can thereby reduce the ability of cancer cells to avoid T cell detection.

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

Preclinical studies conducted by us

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

In vivo data has shown that intratumoral treatment with PH-762 inhibits tumor growth in a dose dependent fashion in PD-1

responsive and refractory models.

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

Importantly, local administration of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic

anti-tumor response.

We believe these data further support the potential for PH-762 to provide a strong local immune checkpoint blockade

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

In January 2022, we were 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 subjects with melanoma at the Gustave Roussy Institute, one of the largest cancer centers

This first clinical trial with PH-762 is 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 subjects.

The clinical trial features a dose escalation of PH-762 monotherapy with a maximum of 5 dose escalation cohorts

and up to a maximum of 21 subjects.

Subjects eligible for enrollment include those with Stage IIIB/IIIC or Stage IV resectable oligometastatic

Enrolled subjects 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.

initiated dosing of subjects and the site is open for continued enrollment.

We anticipate top-line data from the first group of subjects

in the first quarter of 2023, however, the impact of the ongoing coronavirus pandemic on the enrollment of subjects 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 therapeutic product candidate is PH-894.

PH-894 is an INTASYL compound designed to silence 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.

have presented data demonstrating that PH-894 resulted in a strong, concentration dependent and durable silencing of BRD4 in T cells,

and in various cancer cells.

Data published with PH-894 in a hepatocellular carcinoma model demonstrated 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 therapeutic activity.

Similar to PH-762, we have shown that local administration of PH-894 in vivo has

resulted in a systemic anti-tumor response.

After local administration of PH-894 in in vivo studies conducted in colon and liver

cancer models, strong anti-tumor activity was seen in directly treated and in distant untreated tumors.

Additionally, PH-894 enhanced

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

data, there is potential for PH-894 to be used in treating patients who do not respond to anti-PD-1 therapy, or with 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.

We currently expect

to finalize IND-enabling studies for PH-894 in the fourth quarter of 2022.

Use of INTASYL To Improve Adoptive Cell

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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).

cells, dendritic cells 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, chimeric antigen receptor (“ CAR ”)

T cells, or CAR-NK cells).

Regardless of the source,

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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.

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, 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

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

In March 2021, the Company

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

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

Data has demonstrated 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, which improves their ability to destroy tumor cells.

Preclinical studies have shown 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 patients.

In March 2021, we 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 ”)

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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 of up

to $4 million 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.

support to AgonOx under the Clinical Agreement has not yet commenced.

The Company expects to initiate the clinical trial evaluating the

Based on these 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

of up to $4 million 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.

We expect to initiate the clinical trial evaluating the

use of PH-762 and DP TILs in ACT in the fourth 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 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 address

intracellular as well as extracellular gene targets with a high level of specificity, we believe there is potential for PH-894 to play

a role in boosting the potency of the next generation of T cell products to enhance ACT for solid tumors, and without using genetic manipulation.

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).

Recent preclinical

data was presented showing that silencing BRD4 with PH-894 may be used to improve the characteristics of CAR-T cell products during the

activation and expansion phases of the cell manufacturing process.

These data demonstrate that PH-894 could enhance the activity of CAR-T

cells by improving the quality of the final CAR-T cell product by overcoming immunosuppression, reversing exhaustion, and preserving the

characteristics associated with cell persistence.

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.

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

Cancer cells have evolved

natural defenses that can suppress the immune system surrounding the tumor, 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 gene 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 cell’s

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 in human clinical trials being developed by the Company in our direct therapeutic programs, is PH-762.

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.

In vivo data has shown 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.

Importantly, local administration of PH-762 resulted in activity

against distant untreated tumors, indicative of a systemic anti-tumor response.

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.

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 subjects 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 subjects.

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 subjects.

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

resectable oligometastatic melanoma.

Enrolled subjects 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 Company has initiated dosing of subjects and the site is open for continued enrollment.

The Company anticipates

top-line data from the first group of subjects in the first quarter of 2023, however, the impact of the ongoing coronavirus pandemic on

the enrollment of subjects 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.

We have presented data demonstrating that PH-894 resulted in a strong, concentration

dependent and durable silencing of BRD4 in T cells, and in various cancer cells.

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 therapeutic activity.

Similar to PH-762, we’ve shown that local

administration of PH-894 in vivo has resulted in a systemic anti-tumor response.

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 in distant

untreated tumors.

Additionally, 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 these data, there is potential for PH-894 to be used in treating patients who do not respond to

anti-PD-1 therapy, or with 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 fourth quarter of 2022.

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 tumor.

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.

As our INTASYL compounds can address intracellular as well as extracellular gene targets with

a high level of specificity, we believe there is potential for PH-894 to play a role in boosting the potency of the next generation of

T cell products to enhance ACT for solid tumors, and without using genetic manipulation.

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).

Recent preclinical data was presented

showing that silencing BRD4 with PH-894 may be used to improve the characteristics of CAR-T cell products during the activation and expansion

phases of the cell manufacturing process.

These data demonstrate that PH-894 could enhance the activity of CAR-T cells by improving the

quality of the final CAR-T cell product by overcoming immunosuppression, reversing exhaustion, and preserving the characteristics associated

with cell persistence.

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 and six months ended June 30, 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 and six months ended June 30, 2022.

continue to respond to and monitor the ongoing coronavirus pandemic.

Our corporate headquarters and research facility have

seen limited impact and, during the three and nine months ended September 30, 2022, continued to operate with safety measures in place

for the health and well-being of our employees, such as working remotely and flexible scheduling, in accordance with guidance from federal,

state and local authorities.

We believe that that coronavirus pandemic has not had a significant impact on our financial condition and

results of operations for the three and nine months ended September 30, 2022.

the extent to which the coronavirus pandemic may materially impact our financial results and operations will depend on a number of factors,

including the availability of supplies and services we rely on, the ability to enroll subjects in our clinical trials and the duration

of the coronavirus pandemic, which remain difficult to predict and are highly uncertain.

While we believe that the coronavirus

pandemic has not had a significant impact on our financial condition and results of operations at this time, the potential economic impact

brought by the coronavirus pandemic, which may be exacerbated by the global macroeconomic uncertainty from the ongoing conflict between

Russia and Ukraine, is difficult to assess or predict.

There may be developments outside of our control that require us to adjust our

operating plans.

Given the nature of the situation, we cannot reasonably estimate the impact of the coronavirus pandemic on our financial

condition, results of operations or cash flows in the future.

including the availability of supplies and services we rely on, the ability to enroll subjects in our clinical trials, the emergence

of variant strains of the coronavirus, the development, availability, and public acceptance of effective treatments and vaccines,

and the duration of the coronavirus pandemic, which remain difficult to predict and are highly uncertain.

While we believe that the coronavirus pandemic has not had a significant impact on our financial condition and results of operations at

this time, the potential economic impact brought by the coronavirus pandemic, which may be exacerbated by the global macroeconomic uncertainty

from the ongoing conflict between Russia and Ukraine, is difficult to assess or predict.

There may be developments outside of our control

that require us to adjust our operating plans.

Given the nature of the situation, we cannot reasonably estimate the impact of the coronavirus

pandemic on our financial condition, results of operations or cash flows in the future.

has increased during the period covered by this report and is expected to continue to remain at elevated levels or even increase for the

Inflation generally affects us by increasing our cost of labor and certain research and development contract costs.

not believe inflation has had a material effect on our results of operations during the three and six months ended June 30, 2022.

Inflation generally affects us by increasing our cost of labor and third party contract costs.

We do not believe inflation

has had a material effect on our results of operations during the three and nine months ended September 30, 2022.

Critical Accounting Policies and Estimates

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Results of Operations

The following data summarizes the results of our

The following table summarizes the results of our

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, 2022 and

Comparison of the Three and Nine Months Ended September 30, 2022

Operating Expenses

1 unchanged sentence

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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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 June 30, 2022 decreased 16% as compared with the three months ended June 30, 2021.

The decrease in research and development expenses was primarily due to the completion of the preclinical studies with PH-762 required

for the Company’s clinical trial as a direct therapeutic and the manufacturing costs of PH-894 totaling approximately $315,000 in

the prior year period offset by an increase of approximately $77,000 in personnel-related expenses as a result of a higher headcount.

and development expenses for the six months ended June 30, 2022 decreased 28% as compared with the six months ended June 30, 2021.

decrease in research and development expenses was primarily due to the completion of the preclinical studies with PH-762 required for

the Company’s clinical trial as a direct therapeutic and the manufacturing costs for PH-762 and PH-894 totaling approximately $1,460,000

offset by an increase of approximately $149,000 in personnel-related expenses as a result of a higher headcount and increased third-party

professional service fees of approximately $207,000 as the Company prepared for and began its clinical trial with PH-762.

and development expenses for the three months ended September 30, 2022 decreased 6% as compared with the three months ended September

The decrease in research and development expenses was primarily due to manufacturing costs for PH-762 and PH-894 totaling approximately

$828,000 and the expense of $736,000 related to the preclinical studies required for our PH-762 intratumoral clinical trial incurred in

the prior year period offset by increases in research and development expenses for the preclinical studies required for our planned clinical

trial with PH-894 conducted in the current year period of approximately $1,465,000.

and development expenses for the nine months ended September 30, 2022 decreased 19% as compared with the nine months ended September 30,

The decrease in research and development expenses was primarily due to manufacturing costs for PH-762 and PH-894 totaling approximately

$1,296,000 and the expense of $1,717,000 related to the preclinical studies required for our PH-762 intratumoral clinical trial incurred

in the prior year period offset by increases in research and development expenses for the preclinical studies required for our planned

clinical trial with PH-894 conducted in the current year period of approximately $1,500,000 and PH-762 intratumoral clinical trial expenses

General and Administrative

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General and administrative

expenses for the three months June 30, 2022 increased 8% as compared with the three months ended June 30, 2021.

The increase in general

and administrative expenses was primarily due to a total net increase of $130,000 in payroll and executive search-related expenses as

a result of the departure of the Company’s CEO.

expenses for the three months September 30, 2022 overall were consistent with the three months ended September 30, 2021.

in our payroll-related expenses as a result of the departure of our former Chief Executive Officer of $103,000 were offset by increases

in legal fees of $44,000 and the use of outside consultants to support operations of $55,000.

General and administrative

expenses for the six months ended June 30, 2022 decreased 3% as compared with the six months ended June 30, 2021.

The decrease in general

and administrative expenses was primarily due to decreases in legal and patent fees of approximately $255,000 offset by a total net increase

of $130,000 in payroll and executive search-related as a result of the departure of the Company’s CEO.

expenses for the nine months ended September 30, 2022 decreased 2% as compared with the nine months ended September 30, 2021.

in general and administrative expenses was primarily due to decreases in legal and patent fees of approximately $197,000 offset by increases

in Board of Directors and recruiting fees of $114,000 to support our operations as a result of the departure of our former Chief Executive

Total Other (Expense) Income

Total other expense for the

three months ended June 30, 2022 and 2021 was consistent quarter over quarter.

Total other income for the six months ended June 30, 2022

decreased by $240,000 as compared with the six months ended June 30, 2021, primarily due to the full forgiveness of the Company’s

PPP loan in the first quarter of 2021.

three months ended September 30, 2022 and 2021 was consistent quarter over quarter.

Total other income for the nine months ended September

30, 2022 decreased by $242,000 as compared with the nine months ended September 30, 2021, primarily due to the full forgiveness of the

Company’s Paycheck Protection Program (“ PPP ”) loan in the first quarter of 2021.

Liquidity and Capital Resources

Historically, the Company’s

primary source 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.

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

Historically, our primary

source of funding has been through the sale of our 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 June 30, 2022, we had cash of $18,020,000 as compared with $24,057,000 at December 31, 2021.

At September 30, 2022, we had cash of $14,484,000 as compared with $24,057,000 at December 31, 2021.

We believe that our existing

cash at June 30, 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.

cash at September 30, 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.

For information regarding

our cash commitments related to the clinical co-development agreement with AgonOx, see Note 9 to our condensed consolidated financial

In August 2019, the Company

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

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

certain limitations and conditions set forth in the agreement.

The Purchase Agreement expired in May 2022 and no shares of common stock

were sold to LPC under the Purchase Agreement.

In August 2019, we entered

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

to which we had the right to sell to LPC up to $10,000,000 in shares of our common stock, subject to certain limitations and conditions

set forth in the Purchase Agreement.

The Purchase Agreement expired in May 2022 and no shares of common stock were sold to LPC under the

Purchase Agreement.

The following table summarizes

our cash flows for 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 used in operating

activities decreased primarily due to a decrease in net loss of $921,000 offset by the changes in operating assets and liabilities of

$608,000 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 and PH-894 and $310,000 in non-cash related items primarily due to the full forgiveness of the Company’s PPP loan

in the prior year period.

activities for the nine months ended September 30, 2022 increased as compared with the nine months ended September 30, 2021, primarily

due to an increase of $1,392,000 in the changes in operating assets and liabilities primarily due to payments made for the required preclinical

studies for PH-894 and for the manufacturing of clinical supply batches of PH-762 and PH-894 offset by decreases in net loss of $1,087,000

and non-cash related items of $268,000 as a result of the full forgiveness of the Company’s PPP loan in the prior year period offset.

Net Cash Flow from Investing Activities

Net cash used in investing

activities was primarily related to an increase of $93,000 in purchases of laboratory and computer equipment for the Company’s facility

as compared to the prior year period.

activities for the nine months ended September 30, 2022 increased as compared with the nine months ended September 30, 2021, primarily

due to an increase of $70,000 in purchases of laboratory and computer equipment for the Company’s facility as compared to the prior

Net Cash Flow from Financing Activities

Net cash from financing activities

decreased primarily due to the net proceeds of $21,723,000 received by the Company from capital raising activities and warrant exercises

in the comparable prior year period.

for the nine months ended September 30, 2022 decreased as compared with the nine months ended September 30, 2021, primarily due to the

net proceeds of $21,723,000 received by the Company from capital raising activities and warrant exercises in the comparable prior year

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis