RXi third quarter net loss increases to $4.1 million

Nov 15 2010

RXi Pharmaceuticals Corporation (Nasdaq: RXII), a recognized leader in RNAi-based therapeutic discovery and development, today reported its financial results for the third quarter ended September 30, 2010.

"We have made substantial progress transitioning RXi from a research-focused company to one that is leveraging our strategy, platform and collaborations to advance our therapeutic pipeline," said Noah D. Beerman, President and Chief Executive Officer of RXi. "We are focused on achieving our two remaining corporate goals for 2010, which include selecting a product candidate to advance into development and completing a corporate partnership. With a clear therapeutic strategy in place, our plans for 2011 include filing our first IND in the second half of the year, advancing additional candidates into preclinical development and securing additional collaborations and partnerships. I am very pleased with how the company has progressed over the last year and look forward to our continued success."

Quarterly and Other Recent Highlights

• Awarded Over $1.5 Million in Grants to Advance RNAi Therapeutics. RXi was awarded four Therapeutic Discovery Project grants, totaling $977,917, by the United States Internal Revenue Service as part of the Patient Protection and Affordable Care Act of 2010. RXi also received approximately $600,000 for the first two years of a highly competitive NIH grant awarded in July of this year. This non-dilutive funding provides additional resources for the preclinical development of RNAi therapeutics using RXi's novel, proprietary platform and for the advancement of the Company's therapeutic pipeline.
• Progressed Toward Selecting an Anti-Scarring Development Candidate. RXi has made great progress in evaluating drug candidates to bring into development for its dermal anti-scarring program and plans to select a development candidate by the end of 2010. Anti-scarring is an attractive first indication for RXi with clear development precedent, limited competition for effective therapies, and substantial market potential. RXi is planning to file an IND for this program in the second half 2011.
• Presented Additional In Vivo Uptake and Silencing Data in Mouse Retinal Cells. Retinal disorders, which affect approximately 18 million people in the US, are a promising therapeutic area where RXi may have the potential to develop novel, next generation treatments. Anastasia Khvorova, Ph.D., RXi's Chief Scientific Officer, presented new preclinical data at the October Oligonucleotide Therapeutics Conference demonstrating statistically significant silencing of sd-rxRNA™ compounds in mouse retinal cells in vivo with a duration of greater than two weeks. This encouraging data along with additional preclinical results on the in vivo uptake and silencing in mouse retinal cells may enable the rapid discovery and validation of a wide range of therapeutic targets for the treatment of serious retinal disorders.
• Announced Collaboration with EyeGate Pharma Focused on Non-Invasive Ocular Delivery of RNAi Therapeutics. The combination of RXi's RNAi technology with EyeGate's unique, non-invasive ocular delivery system (EyeGate® II), provides RXi with the potential opportunity to develop novel treatments for many ocular diseases and to improve treatment options. The collaboration will use preclinical models to explore the use of EyeGate's iontophoresis technology to deliver RXi's sd-rxRNA compounds to the eye. Iontophoresis is a method of drug delivery that uses a low-level electrical current to deliver a drug across a biological barrier, such as the ocular surface into the eye. Once inside the eye, RXi believes that RXi's sd-rxRNA compounds will have access to retinal cells, and by virtue of their self-delivering properties, enter these cells and silence disease causing genes.
• Continued to Accelerate rxRNA™ Development with Collaborators. As RXi aggressively moves its own internal technology and therapeutic programs forward, the company continually evaluates relationships with leading industry partners and academic institutions to further advance and develop RNAi based therapeutics. Collaborations provide additional sources of research expertise and capabilities and may offer unique opportunities to support or complement future therapeutic development. RXi is combining its cutting edge RNAi technology with a number of collaborators to:

• Engaged in Numerous Investor Activities. Management of the company presented at investor-focused conferences where they provided an update on RXi's therapeutic platform, key goals for 2010, and outlook for 2011. The company also launched a new redesigned website to provide more information on the company's therapeutic strategy, RNAi platform, and business development activities.

Quarterly Financial Highlights:

Cash, Cash Equivalents and Short Term Investments

As of September 30, 2010, cash, cash equivalents and short-term investments totaled $8.8 million, compared with cash and cash equivalents of $5.7 million at December 31, 2009. This increase is primarily due to proceeds from the Company's registered direct offering in March 2010 whereby the Company received approximately $15.2 million in net proceeds, after deducting placement agent fees and other offering costs, partially offset by the $3.8 million associated with a redemption of our common stock in connection with the offering as well as cash used in operations of $8.4 million for the nine months ended September 30, 2010.

Net Loss

For the third quarter of 2010, the Company reported a net loss of approximately $4.1 million compared with a net loss of $3.0 million for the same period in 2009. The increase in net loss of $1.1 million, or 37% results from the decrease in the loss from operations of $0.3 million offset by an increase of $1.4 million in non-cash expense related to the change in fair value of warrants issued with various financing activities. The decrease in the loss from operations of $0.3 million is due primarily to $0.2 million, or 10%, decrease in research and development expenses and a decrease of $0.1 million, or 5%, in general and administrative expenses as discussed below. The result is a net loss of $0.23 per share for the third quarter of 2010 on both a basic and diluted basis, based on 18.4 million weighted average shares outstanding, compared with a net loss of $0.19 per share on both a basic and diluted basis, based on 15.3 million weighted average shares outstanding, for the third quarter of 2009.

Research and Development Expenses

Research and development expenses for the third quarter of 2010 were $1.9 million, including approximately $0.3 million in non-cash stock-based compensation, compared with $2.1 million, including $0.1 million in non-cash stock-based compensation, for the third quarter of 2009. The decrease of $0.2 million, or 10%, was primarily due to a decrease in license maintenance fees and patent costs.

General and Administrative Expenses

General and administrative expenses for the third quarter of 2010 were $1.8 million including $0.7 million in non-cash stock-based compensation from common stock options issued to employees and common stock warrants issued for investment advisory services, compared with $1.9 million including $0.5 million in non-cash stock-based compensation from common stock options issued to employees and common stock warrants issued for investment advisory services. The decrease of $0.1 million, or 5%, was primarily due to a reduction in professional service fees.