Executive Summary / Key Takeaways

• Focused Immuno-Oncology Strategy: Phio Pharmaceuticals has strategically pivoted to become a clinical-stage biopharmaceutical company solely dedicated to immuno-oncology (IO) and adoptive cell therapy (ACT), leveraging its proprietary INTASYL® self-delivering siRNA (sd-rxRNA) technology to address significant unmet needs in cancer treatment.
• Promising Clinical Progress with PH-762: The lead product candidate, PH-762, an anti-PD-1 INTASYL compound, is advancing through a Phase 1b dose-escalating clinical trial for skin cancers, with early data showing encouraging pathologic complete responses and a favorable safety profile, and the fifth cohort currently enrolling patients.
• Differentiated Technology with Broad Potential: INTASYL offers a unique precision gene-silencing approach that can target "undruggable" proteins, enhance immune cell function without complex delivery systems, and potentially expand ACT into the vast solid tumor market, positioning Phio as an innovator against larger competitors.
• Liquidity and Funding Outlook: While the company faces recurring losses and a "going concern" risk, recent capital raises, including a July 2025 financing, have extended its cash runway into the second quarter of 2026, providing critical funding for ongoing clinical development.
• Competitive Niche and Strategic Collaborations: Phio operates as a specialized innovator, utilizing collaborations with leading academic and industrial partners to validate its technology, accelerate development, and expand its reach, aiming to overcome the scale advantages of large pharmaceutical players in the IO space.

The Immuno-Oncology Battlefield and PHIO's Strategic Pivot

Phio Pharmaceuticals Corp. stands at a pivotal juncture, having sharpened its focus to the dynamic and rapidly expanding field of immuno-oncology and adoptive cell therapy. This sector, characterized by significant unmet medical needs, particularly in solid tumors which represent approximately 90% of the oncology market, offers substantial value creation opportunities. The company's journey began in 2011 as RXi Pharmaceuticals, initially exploring dermatology and ophthalmology. However, a "bold step" in January 2017, with the acquisition of MirImmune, marked its entry into immuno-oncology.

By early 2018, a comprehensive board review led to a decisive strategic pivot: Phio would solely concentrate on immune-based cancer therapeutics. This shift was driven by the belief that immuno-oncology offered the most rapid and impactful path to value for both patients and shareholders. To fund this new direction, the company initiated efforts to monetize its legacy dermatology and ophthalmology assets, including RXI-109 for hypertrophic scars and retinal scarring, RXI-231 for skin tone, and Samcyprone for cutaneous warts. This strategic realignment culminated in November 2018 with the company officially changing its name to Phio Pharmaceuticals Corp., explicitly signaling its full commitment to this transformative field.

INTASYL: A Precision Weapon in Cancer Immunotherapy

At the heart of Phio's strategy is its proprietary INTASYL® self-delivering small interfering RNA (siRNA) technology. This innovative platform is designed to make immune cells more effective in killing tumor cells by precisely targeting specific proteins that hinder the body's natural anti-cancer response. A key differentiator of INTASYL is its self-delivering nature, which eliminates the need for specialized formulations or complex drug delivery systems, simplifying administration and potentially reducing manufacturing hurdles.

The tangible benefits of INTASYL are compelling. Preclinical studies with PH-762, an anti-PD-1 INTASYL compound, demonstrated potent anti-tumoral effects and dose-dependent inhibition of tumor growth. Crucially, direct-to-tumor application of PH-762 resulted in activity against distant untreated tumors, indicative of a systemic anti-tumor response. This suggests the potential for PH-762 to provide a strong local immune response without the systemic immune-related adverse effects often seen with traditional antibody therapies. Furthermore, INTASYL's precision allows for the selective knockdown of target protein isoforms without affecting related proteins, enabling the targeting of "undruggable" intracellular targets like BRD4, which have proven challenging for small molecule and antibody therapies.

Phio's research and development efforts are structured around three strategic focus areas:

• T-cell based Adoptive Cell Therapy (ACT) with Checkpoint Inhibitors: This involves using INTASYL compounds like PH-762 (anti-PD-1) and RXI-804 (anti-TIGIT) to enhance T-cells in ACT, making them more effective against tumors.
• ACT with Other Immune Cells & Non-Checkpoint Targets: The company is exploring the use of sd-rxRNA in other immune effector cells, such as natural killer (NK) cells and dendritic cells, and targeting proteins involved in cell differentiation, metabolic fitness, or preventing immune cell exhaustion. Internal R&D has shown sd-rxRNA compounds are rapidly and efficiently taken up by NK cells without transfection reagents, suppressing immune checkpoint targets like Cbl-b and TIGIT by up to 95%, thereby "weaponizing" these cells for increased tumor killing. The ability to supply NK cells frozen also avoids the "logistical nightmares" associated with CAR-T cell therapies.
• Direct Tumor/Tumor Microenvironment Therapy: This involves direct intratumoral injection of sd-rxRNA compounds. PH-894, an INTASYL compound designed to silence BRD4, has completed IND-enabling studies. Preclinical data for PH-894 showed strong, concentration-dependent, and durable silencing of BRD4, leading to T-cell activation and increased tumor cell sensitivity to T-cell killing.

For investors, INTASYL's technological differentiation forms a critical competitive moat. Its precision, self-delivery, and ability to tackle previously "undruggable" targets offer the potential for superior therapeutic outcomes, potentially leading to higher pricing power and a stronger market position. This technology roadmap is designed to address fundamental limitations of existing cancer therapies and unlock new avenues for treatment.

Competitive Landscape: Niche Innovator Against Goliaths

Phio Pharmaceuticals operates as a specialized innovator within the highly competitive immuno-oncology market. Its primary direct competitors include large pharmaceutical companies like Merck & Co. (MRK), Bristol-Myers Squibb (BMY), AstraZeneca (AZN), and Regeneron Pharmaceuticals (REGN). These industry giants dominate with established portfolios of checkpoint inhibitors and extensive commercialization capabilities.

Phio's competitive strengths lie in its technological precision through the INTASYL platform. While large pharma offers broad-spectrum immune checkpoint inhibitors, Phio's RNA-based gene silencing can provide more tailored immune responses, potentially offering advantages in specificity and a more favorable side-effect profile. For instance, PH-762's direct-to-tumor application aims to avoid the systemic adverse effects of antibody therapies. Furthermore, INTASYL's ability to target "undruggable" protein isoforms, as seen with PH-894, opens therapeutic avenues inaccessible to conventional small molecule or antibody approaches. The flexibility to combine multiple sd-rxRNA compounds and the logistical advantages of using INTASYL-treated NK cells (which can be frozen) also differentiate Phio from competitors, including those in the CAR-T space.

However, Phio faces significant competitive disadvantages due to its smaller scale, limited commercial presence, and high R&D dependency. Large competitors like Merck and Bristol-Myers Squibb benefit from established revenue streams, vast R&D budgets, and global market reach, which translate into higher revenue growth, superior profitability margins, and robust cash flow generation. Phio's niche focus, while innovative, means it lags in overall market share capture and faces potential pricing pressures from more diversified players.

To counter these scale disadvantages, Phio has strategically built a network of collaborations with leading academic institutions and industrial partners. These include the Center of Cancer Immune Therapy (CCIT) for clinical translation, Iovance Biotherapeutics (IOV) for R&D with TILs and commercial translation, Medigene (MDGKF) for enhancing engineered T-cell technology, Gustave Roussy for direct intratumoral applications, and the Karolinska Institutet for expanding targets beyond immune checkpoints. These partnerships are crucial for validating INTASYL, accelerating development, and expanding its potential applications, particularly in enabling adoptive cell therapies to address the vast solid tumor market, which is currently underserved by existing cell therapies primarily focused on liquid tumors.

Operational Progress and Clinical Milestones

Phio's strategic focus is yielding tangible operational progress, particularly with its lead product candidate, PH-762. The company is actively conducting a U.S. multi-center Phase 1b dose-escalating clinical trial (NCT 06014086) for patients with cutaneous squamous cell carcinoma (cSCC), melanoma, and Merkel cell carcinoma. The dosing of the first patient occurred in November 2023. The Safety Monitoring Committee (SMC) has consistently recommended dose escalation, allowing the trial to advance through the fourth cohort. Currently, the fifth cohort is enrolling patients, with enrollment expected to be completed in the third quarter of 2025.

Early clinical results from 15 patients across Cohorts 1-4 are encouraging. Five patients with cSCC achieved a pathologic complete response (100% tumor clearance), one had a near complete response (90% clearance), and another had a partial response (50% clearance). A Merkel cell patient also showed a partial response (50% clearance). Importantly, no dose-limiting toxicities or clinically relevant treatment-emergent adverse effects have been observed, indicating a supportive safety profile.

In terms of manufacturing, Phio successfully produced its first cGMP batch of RXI-762 in mid-2018 and, in July 2025, announced an agreement with a U.S. manufacturer for drug substance development services for PH-762. While a prior clinical co-development collaboration with AgonOx, Inc. for PH-762 treated double positive tumor infiltrating lymphocytes (DP TIL) showed promising preclinical data and early clinical tumor reductions in a melanoma patient, this agreement was terminated in May 2024, with all final obligations settled by March 2025.

Operationally, Phio implemented a cost rationalization program in 2023-2024. This involved a significant headcount reduction (over 50% of discovery research personnel) and a transition to a remote business model, with its Marlborough, Massachusetts office and laboratory lease expiring in March 2024, and a new laboratory facility in Worcester. These expense reductions were strategically redirected to fund the ongoing Phase 1b clinical trial of PH-762. Historically, the company also pursued the monetization of its legacy dermatology and ophthalmology assets, reporting positive top-line data for these programs in 2018, aiming to generate non-dilutive funding for its immuno-oncology pipeline.

Financial Performance and Liquidity: The Road Ahead

Phio Pharmaceuticals, as a clinical-stage biotechnology company, has reported recurring losses from operations since its inception and has not yet generated product revenues. This trend is expected to continue for the foreseeable future as the company invests heavily in research and development. For the second quarter of 2025, the company reported a net loss of $2.17 million, an increase from $1.85 million in the same period of 2024. For the six months ended June 30, 2025, the net loss was $3.94 million, a slight decrease from $4.00 million in the prior year.

Operating expenses reflect the company's focused development. In Q2 2025, Research and Development (R&D) expenses increased by 24%, primarily due to an $81,000 rise in pass-through costs from higher patient enrollment, a $53,000 increase in consultant fees, and a $70,000 increase in salary-related costs. General and Administrative (G&A) expenses also increased by 18%, largely driven by a $185,000 increase in salary-related costs for new hires. Over the six-month period, R&D expenses saw an immaterial 3% decrease, while G&A expenses increased by an immaterial 5%.

As of June 30, 2025, Phio held $10.78 million in cash and cash equivalents, a significant increase from $5.38 million at December 31, 2024. This improvement in liquidity was largely driven by financing activities. For the six months ended June 30, 2025, net cash provided by financing activities totaled $9.21 million, primarily from the issuance of common stock and warrants ($6.49 million) and the exercise of warrants ($2.72 million). A subsequent financing event in July 2025 further bolstered the cash position, generating approximately $2.20 million in net proceeds from warrant exercises and the issuance of new warrants.

Despite these capital raises, the company explicitly states a "going concern" risk due to its limited cash resources, recurring losses, and negative operating cash flows. Phio's continuation is dependent on its ability to raise additional capital through equity offerings, debt offerings, or strategic opportunities. The company projects its current cash and cash equivalents will fund operations into the second quarter of 2026. Historically, management guided for a quarterly cash burn of approximately $2.5 million in 2017, which was reduced to $2 million in 2018 following the strategic pivot, but was expected to increase again to $2.5 million by mid-2019 as clinical trials advanced.

Phio also faces ongoing challenges in maintaining compliance with Nasdaq Capital Market listing requirements, specifically regarding minimum stockholders' equity and bid price. As of June 30, 2025, its stockholders' equity of $10.10 million was above the $2.5 million threshold. However, historical concerns from shareholders about stock price volatility and manipulation underscore the importance of achieving significant clinical and commercial milestones to attract long-term institutional investment.

Outlook and Key Risks

Phio Pharmaceuticals anticipates incurring substantial additional operating losses for at least the next several years as it continues to develop its product candidates and pursue marketing approval. The immediate outlook includes the expected completion of PH-762 clinical trial enrollment in the third quarter of 2025. However, the IND submission for PH-894 has been deferred, reflecting a strategic reprioritization to advance the lead PH-762 program.

The investment thesis for Phio is underpinned by several key risks:

• Early Stage Development: PHIO's product candidates are in early stages of development, and there is no guarantee of successful clinical advancement, regulatory approval, or eventual commercialization.
• Funding Uncertainty: The company's ability to continue as a going concern relies heavily on securing additional capital, which may not be available on favorable terms or at all.
• Nasdaq Listing Compliance: Failure to maintain Nasdaq listing requirements could adversely affect market liquidity and investor confidence.
• Reliance on Third Parties: The company depends on third parties for manufacturing and clinical trial execution, introducing external dependencies.
• Competitive Landscape: Despite its technological differentiation, Phio faces intense competition from large, well-funded pharmaceutical companies with established market presence and diversified pipelines.

Conclusion

Phio Pharmaceuticals Corp. is a compelling, yet high-risk, investment proposition centered on its innovative INTASYL sd-rxRNA technology and a focused strategy in immuno-oncology. The company's pivot from broader therapeutic areas to a laser-sharp focus on cancer immunotherapy, underscored by its name change, reflects a clear vision to address significant unmet needs, particularly in expanding adoptive cell therapies to solid tumors.

The early clinical data for PH-762, demonstrating promising tumor responses and a favorable safety profile in its Phase 1b trial, provides critical validation for the INTASYL platform. This technology's ability to precisely target genes, enhance immune cell function without complex delivery, and tackle "undruggable" targets positions Phio as a niche innovator against the scale of large pharmaceutical competitors. While the company faces the inherent financial challenges of a clinical-stage biotech, including recurring losses and a stated "going concern" risk, recent capital raises have provided a crucial runway into the second quarter of 2026. The success of Phio's strategic collaborations and the continued advancement of its pipeline, particularly PH-762, will be paramount in translating its technological leadership into sustained value creation and overcoming the competitive pressures of the dynamic immuno-oncology market.