UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 13D
 
Under the Securities Exchange Act of 1934
(Amendment No. __)*

 
PhaseRX, Inc.

(Name of Issuer)

Common Stock, $0.0001 par value 

(Title of Class of Securities)

71723F 103

(CUSIP Number)
 
Mark McDonnell
ARCH Venture Corporation
8725 W. Higgins Road Suite 290
Chicago, IL 60631

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

May 23, 2016

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o 

Note:   Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See §240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Persons who respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.

 

 
 
  CUSIP NO.   71723F 103
 	13D	Page 2 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  ARCH Venture Fund VII, L.P.	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  WC	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  Delaware	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  PN	

 
 
  CUSIP NO.   71723F 103
 	13D	Page 3 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  ARCH Venture Partners VII, L.P.	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  AF	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  Delaware	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  PN	

 
 
  CUSIP NO.   71723F 103
 	13D	Page 4 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  ARCH Venture Partners VII, LLC	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  AF	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  Delaware	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  OO	

 
 
  CUSIP NO.  71723F 103
 	13D	Page 5 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  Clinton Bybee	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  AF	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  United States	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  IN	

 
 
  CUSIP NO.   71723F 103
 	13D	Page 6 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  Keith Crandell	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  AF	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  United States	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  IN	

 
 
  CUSIP NO.   71723F 103
 	13D	Page 7 of 12 pages  	
 
1	  NAMES OF REPORTING PERSONS
  I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
 
  Robert Nelsen	
2	  CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a)   o
(b)   o
 	
3	  SEC USE ONLY

4	  SOURCE OF FUNDS (SEE INSTRUCTIONS)
 
  AF	
5	  CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)    o

6	  CITIZENSHIP OR PLACE OF ORGANIZATION
 
  United States	

NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH	7	  SOLE VOTING POWER
 
  0	
	8	  SHARED VOTING POWER
 
  2,854,222	
	9	  SOLE DISPOSITIVE POWER
 
  0	
	10	  SHARED DISPOSITIVE POWER
 
  2,854,222	
11	  AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
 
  2,854,222	
12	  CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)  o

13	  PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
 
  24.6%	
14	  TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
 
  IN	

 
 
  CUSIP NO.   71723F 103
 	13D	Page 8 of 12 pages  	

 
Item 1. 
 
Security and Issuer .

This statement relates to the Common Stock, $0.0001 par value per share (the "Common Stock"), of PhaseRx, Inc. (the "Issuer" or "PZRX") having its principal executive office at 410 West Harrison St., Suite 300, Seattle, WA  98119.

Item 2. 
 
Identity and Background .

	(a)	This statement is being filed by: (1) ARCH Venture Fund VII, L.P. ("ARCH Venture Fund VII"), (2) ARCH Venture Partners VII, L.P. ("AVP VII LP"), which is the sole general partner of ARCH Venture Fund VII, (3) ARCH Venture Partners VII, LLC ("AVP VII LLC"), which is the sole general partner of AVP VII LP, (4) Clinton Bybee ("Bybee"), (5) Keith Crandell ("Crandell"), and (6) Robert Nelsen ("Nelsen" and, together with Bybee and Crandell, collectively, the "Managing Directors" and each individually, a "Managing Director").  Each of the individuals and entities above shall be referred to herein individually as a "Reporting Person" and collectively as the "Reporting Persons".	

	(b)	The business address of each of the Reporting Persons is 8755 West Higgins Road, Suite 1025, Chicago, IL, 60631.	

	(c)	The principal business of ARCH Venture Fund VII is to invest and assist in developmental and emerging businesses located principally in the United States.  The principal business of AVP VII LP is to act as the general partner of ARCH Venture Fund VII.  The principal business of AVP VII LLC is to act as the general partner of AVP VII LP.  The principal business of each of the Managing Directors is to act as managing directors of AVP VII LLC and a number of affiliated partnerships with similar businesses.	

	(d)	During the five years prior to the date hereof, none of the Reporting Persons has been convicted in a criminal proceeding.	

	(e)	During the five years prior to the date hereof, none of the Reporting Persons has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction ending in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws.	

	(f)	Each of ARCH Venture Fund VII and AVP VII LP is a Delaware limited partnership.  AVP VII LLC is a Delaware limited liability company.  Each of the Managing Directors is a United States citizen.	

Item 3. 
 
Source and Amount of Funds or Other Consideration .

Immediately prior to the effective date of the initial public offering of the Issuer (the "Offering"), 6,629,931 shares of Series A Preferred Stock held by ARCH Venture Fund VII converted into 832,711 shares of PZRX Common Stock and 437,500 shares of common stock converted into 41,057 shares of PZRX Common Stock.  Additionally, all outstanding convertible debt securities issued by PhaseRx to ARCH Venture Fund VII in the principal and interest amount of $10,587,967 were converted into 1,456,852 shares of Common Stock of PZRX.   Finally, ARCH Venture Fund VII converted a series of warrants for a total of 203,661 shares of Common Stock of PZRX at cost of $0.08 per share.

 
  CUSIP NO.   71723F 103
 	13D	Page 9 of 12 pages  	

 
 
Concurrent with the consummation of the Offering, ARCH Venture Fund VII participated in the Offering of the Issuer by purchasing 1,000,000 shares of Common Stock at a purchase price of $5.00 per share.  In addition, ARCH Venture Fund VII sold 680,059 of its shares of PZRX for $4,955.23 to certain shareholders of the Issuer.   The number of shares reflects a 10.656096 to 1 reverse stock split effective immediately prior to the closing of the Offering.

The working capital of ARCH Venture Fund VII was the source of the funds for the purchase of its shares.  No part of the purchase price paid by this entity was represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the shares of Common Stock described above.  The total amount paid by ARCH Venture Fund VII for securities purchased in the above-listed transactions is as follows:

ARCH Venture Fund VII: 
 
$5,000,000.00

Item 4. 
 
Purpose of Transaction .

ARCH Venture Fund VII acquired the Common Stock for investment purposes.  Depending on market conditions, the continuing evaluation of the business and prospects of the Issuer and other factors, ARCH Venture Fund VII and other Reporting Persons may dispose of or acquire additional shares of Common Stock of the Issuer.  Except as set forth above, none of the Reporting Persons has any present plans which relate to or would result in:

(a)	The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer;	

(b)	An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries;	

(c)	A sale or transfer of a material amount of assets of the Issuer or  any of its subsidiaries;	

(d)	Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board;	

(e)	Any material change in the present capitalization or dividend policy of the Issuer;	

(f)	Any other material change in the Issuer's business or corporate structure;	

(g)	Changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person;	

(h)	Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;	

(i)	A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or	

(j)	Any action similar to any of those enumerated above.	

 

 
  CUSIP NO.   71723F 103
 	13D	Page 10 of 12 pages  	

 
 
Item 5. 
 
Interest in Securities of the Issuer .

(a)	ARCH Venture Fund VII is the record owner of 2,854,222 shares of Common Stock (the "Record Shares").

(b)	AVP VII LP, as the sole general partner of ARCH Venture Fund VII, may be deemed to beneficially own the Record Shares.   AVP VII LLC, as the sole general partner of the AVP VII LP, may be deemed to beneficially own the Record Shares.	

In addition, each of the Managing Directors may be deemed to share the power to direct the disposition and vote of the Record Shares. Each Reporting Person disclaims beneficial ownership of all securities except for the shares, if any, held of record by such Reporting Person.

The percentage of outstanding Common Stock of the Issuer which may be deemed to be beneficially owned by each Reporting Person is set forth on Line 13 of such Reporting Person's cover sheet.  Such percentage was calculated based on the 11,583,234 shares of Common Stock outstanding as of May 23, 2016 upon the closing of the Offering as reported in the Issuer's prospectus dated May 17, 2016 (the "Final Prospectus") filed with the Securities and Exchange Commission on May 18, 2016 pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended.  The number of shares of Common Stock outstanding does not give effect to the underwriters' option to purchase up to an additional 555,000 shares of Common Stock within 30 days from the date of the Final Prospectus.

	(b)	Regarding the number of shares as to which such person has:	

	(i)	sole power to vote or to direct the vote:  See line 7 of cover sheets.	

	(ii)	shared power to vote or to direct the vote:  See line 8 of cover sheets.	

	(iii)	sole power to dispose or to direct the disposition:  See line 9 of cover sheets.	

	(iv)	shared power to dispose or to direct the disposition:  See line 10 of cover sheets.	
 
	(c)	Except as set forth above, none of the Reporting Persons has effected any transaction in the Common Stock during the last 60 days.	

	(d)	No other person is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, shares beneficially owned by any of the Reporting Persons.	

	(e)	Not applicable	

Item 6.                    Contracts, Arrangements, Undertakings or Relationships with Respect to Securities of the Issuer .

Except for the transactions described in this Schedule, none of the Reporting Persons have any contract, arrangement, understanding or relationship (legal or otherwise) with any other person with respect to any securities of the Issuer, including but not limited to transfer or voting of any such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss or the giving or withholding of proxies.

ARCH Venture Fund VII and certain other stockholders are parties to a second amended and restated investors' rights agreement with the Issuer, dated as of November 17, 2014 (the " Investors' Rights Agreement "), which is attached as Exhibit 4.2 to the Issuer's Form S-1 filed on April 18, 2016.  The Investors' Rights Agreement provides, among other things, that ARCH Venture Fund VII and the other signatory stockholders have the right to demand that the Issuer file a registration statement or request that their shares of the Issuer's Common Stock be included on a registration statement that the Issuer is otherwise filing.

Item 7.                    Material to be Filed as Exhibits .

Exhibit 1 – Power of Attorney.
 
Exhibit 2 – Agreement regarding filing of joint Schedule 13D.

 
 
  CUSIP NO.   71723F 103
 	13D	Page 11 of 12 pages  	

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Date:               June 6, 2016

ARCH VENTURE FUND VII, L.P.

By:    ARCH Venture Partners VII, L.P.
its General Partner

By:        ARCH Venture Partners VII, LLC
its General Partner

By:                     *                             
         Managing Director

ARCH VENTURE PARTNERS VII, L.P.

By:  ARCH Venture Partners VII, LLC
        its General Partner

By:                       *                             
       Managing Director

ARCH VENTURE PARTNERS VII, LLC

By:                     *                             
          Managing Director

                      *                                
 Clinton Bybee

                      *                                
 Keith Crandell

                      *                                
 Robert Nelsen

 

 
* By:  _________________________
           Mark McDonnell as Attorney-in-Fact

* 
 
This  Schedule 13D was executed by Mark McDonnell pursuant to a Power of Attorney filed as Exhibit 1 to the Form 3 relating to the beneficial ownership of shares of Receptos, Inc. (file no. 001-35900) by the Reporting Persons filed with the Securities Exchange Commission on May 8, 2013 and incorporated herein in its entirety by reference .

 
  CUSIP NO.   71723F 103
 	13D	Page 12 of 12 pages  	
 
Exhibit 1
 
AGREEMENT OF JOINT FILING
 
Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, the undersigned hereby agree that only one statement containing the information required by Schedule 13D need be filed with respect to the ownership by each of the undersigned of shares of Common Stock of PhaseRx, Inc.

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.

Date:       June 6, 2016

ARCH VENTURE FUND VII, L.P.

By:    ARCH Venture Partners VII, L.P.
its General Partner

By:        ARCH Venture Partners VII, LLC
its General Partner

By:                     *                             
         Managing Director

ARCH VENTURE PARTNERS VII, L.P.

By:  ARCH Venture Partners VII, LLC
        its General Partner

By:                       *                             
       Managing Director

ARCH VENTURE PARTNERS VII, LLC

By:                     *                             
          Managing Director

                      *                                
 Clinton Bybee

                      *                                
 Keith Crandell

                      *                                
 Robert Nelsen

 

 
* By:   /s/ Mark McDonnell                                
           Mark McDonnell as Attorney-in-Fact
 
This  Schedule 13D was executed by Mark McDonnell pursuant to a Power of Attorney filed as Exhibit 1 to the Form 3 relating to the beneficial ownership of shares of Receptos, Inc. (file no. 001-35900) by the Reporting Persons filed with the Securities Exchange Commission on May 8, 2013 and incorporated herein in its entirety by reference .