RXi Pharmaceuticals Reports Full Year 2012 Financial Results

  RXi Pharmaceuticals Reports Full Year 2012 Financial Results

  *Cash burn of approximately $4.6 million for fiscal 2012 and $5.1 million
    in remaining cash at year-end
  *Spin-off completed and filed IND for RXI-109; started two Phase 1 studies
    and completed dosing in those studies
  *Acquired substantially all of OPKO Health, Inc.’s siRNA assets in early
    2013
  *Completed a private placement in Q1 2013 with gross proceeds of $16.4
    million, led by OPKO Health, Inc. and Frost Gamma Investments Trust,
    resulting in a cash position of approximately $20.0 million at the end of
    March 2013

Business Wire

WESTBOROUGH, Mass. -- March 29, 2013

RXi Pharmaceuticals Corporation (OTC: RXII), a biotechnology company focused
on discovering, developing and commercializing innovative therapies addressing
major unmet medical needs using RNA-targeted technologies, today reported its
financial results for the full year 2012, and provided a business update.

“Our progress since being spun off in April of 2012 has been quite remarkable,
with near flawless execution of our plan by the whole RXi team,” said Dr.
Geert Cauwenbergh, President and CEO of the company. He added that “being able
to execute within budget and in line with the projected timing is not always
the norm in biotech. I am proud of the hard work done by our employees, and am
convinced that their work ethic has been instrumental in enabling us, in the
1^st quarter of 2013, to acquire substantially all of the siRNA assets of OPKO
while also having OPKO, Frost Gamma Investments Trust and other premier
investment funds become shareholders of RXi through a private placement. This
financing will provide us with the necessary cash to comfortably move RXI-109
into Phase 2 clinical trials.”

Full Year 2012 Financial Overview

Cash and Cash Equivalents

At December 31, 2012, RXi had cash and cash equivalents of approximately
$5.1million, compared with $0.5million at December 31, 2011.

Net Loss and Net Loss Applicable to Common Stockholders

The net loss for the year ended December 31, 2012 was $12.9, million including
$1.0 million in non-cash share based compensation expense, compared with a net
loss of $10.2 million, including $2.1 million in non-cash share based
compensation expense, for the year ended December 31, 2011. The increase in
the net loss of $2.7 million was primarily attributable to a one-time charge
of $6.2 million related to the fair value of common shares issued for patent
rights, partially offset by a decrease in general and administrative expenses
of $3.5 million compared to 2011.

Net loss applicable to common stockholders for the year ended December 31,
2012 was $25.7 million compared with a net loss applicable to common
stockholders of $10.2 million for the comparable period in 2011. The increase
in net loss applicable to common stockholders of $15.5 million was primarily
attributable to the aforementioned increase in the net loss as compared to
prior year, in addition to a one-time charge of $9.5 million related to the
accretion of the beneficial conversion feature as a result of the Company’s
issuance of preferred shares and $3.3 million of dividends paid in the form of
preferred stock to the Company preferred shareholders.

Revenues

Total revenues for the year ended December 31, 2012 was $0.1 million as
compared with no revenue for the comparable period in 2011. The increase in
total revenues for the year ended December 31, 2012 was due to the recognition
of work completed on the Company’s government grants.

Research and Development Expense

Research and development expenses for the full year 2012 were $10.5 million,
compared with $6.6 million for the full year 2011. The increase of $3.9
million is largely due to the one-time charge of $6.2 million related to the
fair value of common shares issued for patent rights offset by a decrease in
research and development expenses of $2.5 million primarily due to a decrease
in personnel and lab supply costs as compared to the same period in the prior
year.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2012 were
$2.6 million, compared with $6.1 million for the year ended December 31, 2011.
The decrease in general administrative expenses of $3.5 million was due to
lower personnel related costs, including non-cash share based compensation
expense, a decrease in legal expenses, and a decrease in the use of outside
professional services and consultants.

Preferred Stock Accretion and Dividends

Accretion of Series A convertible preferred stock and dividends was $12.8
million for the year ended December 31, 2012, compared with no Series A
convertible preferred stock accretion and dividends for the year ended
December 31, 2011. Upon the Company’s completion of the spin-off from our
former parent company, Galena Biopharma, Inc., the Company issued shares of
Series A convertible preferred stock to certain investors. The preferred stock
accretion and dividends of $12.8 million are attributable to a one-time charge
of $9.5 million related to the beneficial conversion feature as a result of
the Series A convertible preferred stock issuance and $3.3 million related to
the fair value of dividends paid to the preferred shareholders during 2012.

Fourth Quarter 2012 and Recent Corporate Highlights

  *Initiation and Completion of Enrollment in Second Phase 1 Clinical Trial
    for RXI-109 Program: The Company initiated and fully enrolled a second
    Phase 1 clinical trial with its anti-scarring drug candidate, RXI-109, for
    the management of surgical and hypertrophic scars and keloids. Nine
    subjects (3 cohorts of 3) were enrolled in this multi-dose escalation
    study, during which subjects were administered intradermal injections of
    RXI-109 on multiple occasions over multiple weeks. Dose levels range from
    2.5 to 7.5 mg per injection, and subjects received injections of RXI-109
    in four separate areas of the abdomen and placebo injections in four other
    areas of the abdomen. This study not only evaluates safety/tolerance
    parameters and systemic exposure to RXI-109, but also measures mRNA levels
    of CTGF and various other biomarkers considered relevant for wound healing
    and scarring.
  *Completion of Acquisition of RNAi-related Assets from OPKO: On March 1,
    2013, RXi entered into an asset purchase agreement with OPKO, in which RXi
    acquired substantially all of OPKO’s RNAi-related assets, which included
    patents, licenses, clinical and preclinical data and other assets. As
    consideration for these assets, RXi issued to OPKO 50 million shares of
    its common stock and will make milestone payments to OPKO up to an
    aggregate of $50 million per product tied to the successful development
    and commercialization of products utilizing the acquired OPKO intellectual
    property. In addition, upon commercialization of these products, if
    approved, RXi would make royalty payments to OPKO.
  *Completion of $16.4 million Placement of Common Stock: On March 6, 2013,
    RXi entered into definitive agreements related to the private placement of
    approximately 113 million shares of common stock at a price of $0.145 per
    share. The gross proceeds to the Company from the offering, which closed
    on March 12, 2013, were approximately $16.4 million and net proceeds to
    RXi, after payment of commissions, were approximately $16.0 million. The
    financing was lead by OPKO and Frost Gamma Investments Trust, a trust
    controlled by Phillip Frost, M.D. Other participants included existing
    investors Tang Capital Partners, LP and RTW Investments, LLC as well as
    new institutional and accredited investors.

About RXI-109

RXi Pharmaceutical’s first clinical program centers on RXI-109, a
self-delivering RNAi compound (sd-rxRNA®) developed by RXi for the reduction
of dermal scarring in planned surgeries. RXI-109 is designed to reduce the
expression of CTGF (connective tissue growth factor), a critical regulator of
several biological pathways involved in fibrosis, including scar formation in
the skin. The first clinical trial of RXI-109, initiated in June 2012, was
designed to evaluate the safety and tolerability of several dose levels of
RXI-109 in humans and may provide preliminary evidence of surgical scar
reduction. A second Phase 1 trial also initiated in 2012 evaluates the safety
of multiple (3) administrations of RXI-109 over 2 weeks and will allow the
evaluation of RXI-109’s effect on scarring-related biomarkers. As there are
currently no FDA-approved drugs to prevent scar formation, a therapeutic of
this type could have great benefit for trauma and surgical patients, as a
treatment during the surgical revision of existing unsatisfactory scars, and
in the treatment, removal and inhibition of keloids (scars which extend beyond
the original skin injury).

About RXi Pharmaceuticals Corporation

RXi Pharmaceuticals Corporation (OTC: RXII) is a biotechnology company focused
on discovering, developing and commercializing innovative therapies based on
its proprietary, next-generation RNAi platform. Therapeutics that use RNA
interference, or “RNAi,” have great promise because of their ability to
“silence,” or down-regulate, the expression of a specific gene that may be
overexpressed in a disease condition. Building on the pioneering work of
scientific founder and Nobel Laureate Dr. Craig Mello, RXi’s first RNAi
product candidate, RXI-109, which targets CTGF (connective tissue growth
factor), entered into a human clinical trial in June 2012 to evaluate its
safety, tolerability and potential efficacy for scar prevention. For more
information, please visit www.rxipharma.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: “intend,” “believe,” “expect,”
“may,” “should,” “designed to,” “will” and similar references. Such statements
include, but are not limited to, statements about: our ability to successfully
develop RXI-109 and our other product candidates; the future success of our
clinical trials with RXI-109; our expectation that Phase 2 studies with
RXI-109 will start before the end of 2013; and our ability to implement
cost-saving measures. Forward-looking statements are neither historical facts
nor assurances of future performance. Instead they are based only on our
current beliefs, expectations and assumptions regarding the future of our
business, future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial condition
may differ materially from those indicated in the forward-looking statements.
Therefore, you should not rely on any of these forward-looking statements.
Important factors that could cause our actual results and financial condition
to differ materially from those indicated in the forward-looking statements
include, among others: the risk that our clinical trial with RXI-109 may not
be successful in evaluating the safety and tolerability of RXI-109 or
providing preliminary evidence of surgical scar reduction; the successful and
timely completion of clinical studies; uncertainties regarding the regulatory
process; the availability of funds and resources to pursue our research and
development projects, including our clinical trials with RXI-109; general
economic conditions; and those identified under “Risk Factors” in the
Company’s most recently filed Annual Report on Form 10-K, Quarterly Report on
Form 10-Q and in other filings the Company periodically makes with the SEC.
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 press release.

                                                           
RXi PHARMACEUTICALS CORPORATION (REGISTRANT) AND PREDECESSOR (RNAi)
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)
                                                                
                                                                Predecessor
                                           RXi (Registrant)     (RNAi) and RXi
                                                                (Registrant)
                                           Year Ended           Year Ended
                                           December 31,         December 31,
                                           2012                 2011
                                                                
Total grant revenues                       $  97               $ -          
                                                                
Research and development expense              10,451              6,624
General and administrative expense           2,621             6,146      
Operating loss                                (12,975     )       (12,770    )
Interest income (expense)                     (30         )       -
Other income, net                            125               2,551      
Net loss                                      (12,880     )       (10,219    )
Accretion of Series A convertible
preferred stock and                          (12,815     )      -          

dividends
Net loss applicable to common              $  (25,695     )     $ (10,219    )
stockholders
Net loss per common share applicable
to common

stockholders:
Basic and diluted loss per share           $  (0.19       )     $ (0.28      )
Weighted average common shares
outstanding:
Basic and diluted                            137,213,630       36,334,413 

                                                             
RXi PHARMACEUTICALS CORPORATION (REGISTRANT)
(A Development Stage Company)
CONDENSED BALANCE SHEETS (REGISTRANT)
                                                                  
                                                 December 31,     December 31,
                                                 2012             2011
ASSETS
Current assets:
Cash and cash equivalents                        $  5,127         $  503
Restricted cash                                     53               53
Due from Parent                                     -                597
Prepaid expenses and other current assets          212            186    
Total current assets                                5,392            1,339
                                                                  
Equipment and furnishings, net                      198              355
Other assets                                       2              -      
                                                                  
Total assets                                     $  5,592        $  1,694  
                                                                  
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities         $  1,183         $  931
Short-term deferred revenue                         491              816
Current maturities of capital lease                5              29     
obligations
Total current liabilities                           1,679            1,776
Convertible notes payable                           -                500
Long-term deferred revenue                          27               -
Capital lease obligations, net of current          -              5      
maturities current portion
Total liabilities                                   1,706            2,281
Total convertible preferred stock                   9,726            -
Total stockholders' deficit                        (5,840  )       (587   )
Total liabilities, convertible preferred         $  5,592        $  1,694  
stock and stockholders' deficit

Contact:

RXi Pharmaceuticals Corporation
Tamara McGrillen, 508-929-3646
tmcgrillen@rxipharma.com