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RXi Gets Spun Out of Galena, Names New CEO as it Loses Its CSO

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Galena Biopharma late last month completed its spinout of RNAi drugs subsidiary RXi Pharmaceuticals, ending a year-long saga that included an acquisition, litigation, and a management shakeup that included the loss of RXi's CSO.

RXi also disclosed last week that it has appointed Geert Cauwenbergh, who formerly served as CEO of China's Rhei Pharmaceuticals, as its new president and CEO, marking the fourth change in leadership for the firm in three years.

RXi was founded in 2007 as pure-play RNAi drugs shop following its spinout from CytRx. Under its first CEO and co-founder Tod Woolf, the company set lofty goals including the filing of its first investigational new drug application and consummation of at least two industry partnerships in 2009.

Those objectives were not met, and by late 2009, Woolf had stepped down to be replaced by Noah Beerman, who set his sights on pinning down a lead drug candidate and inking at least one industry alliance over the course of the coming year (GSN 11/12/2009 & 4/1/2010).

By mid-2010, RXi had winnowed down its once burgeoning pipeline to two key programs, dermal anti-scarring and retinal diseases. In late December, it said that it had found a lead molecule for the dermatology program in RXI-109, which uses a proprietary technology that allows siRNAs to reach target tissues without the need for a delivery vehicle and would initially be developed to reduce surgical scarring (GSN 12/23/2010).

The firm would not, however, meet its partnership goal and predicted that an IND for RXI-109 would not be filed until sometime in 2011. Under Beerman, RXi would also miss its objective of selecting a retinal disease candidate in 2010.

In early 2011, Beerman's time at RXi's helm would come to an end when the company announced that it was acquiring privately held peptide-based immunotherapy firm Apthera (GSN 3/31/2011). As part of that transaction, Apthera CEO Mark Ahn, who was also an RXi board member, assumed leadership of the combined company, which retained the RXi name.

Shortly after the deal was finalized, Ahn told Gene Silencing News that while the new RXi would advance Apthera's phase II breast cancer drug, it remained “completely committed” to RNAi.

“We're sending every signal we possibly can that we're in the RNAi business,” he said at the time, adding that resource limitations required the company to focus on RXI-109 as its sole RNAi drug candidate for the near term.

Over the next few month that commitment began to waver, however, and in September, RXi underwent a reorganization that renamed the firm Galena, narrowed its focus entirely on immunotherapies, and shifted its RNAi assets to a subsidiary with the RXi name (GSN 9/29/2011).

Notably, Galena held onto RXi's Nasdaq listing, while the RXi subsidiary was to be spun off into an independent company trading on the over-the-counter markets as a penny stock (GSN 12/15/2011).

Galena soon ran into opposition to its plan by a number of investment groups that filed lawsuits claiming that the firm failed to meet its obligation to buy back a number of stock-purchase warrants after the securities were devalued by RXi's merger with Apthera.

Earlier this year, however, Galena said that it gave the investment groups a total of $355,000 “as payment in full of the repurchase price” for the warrants at issue, making the majority of the legal claims “moot” (GSN 3/29/2012).

Although those lawsuits remain active, Galena pressed forward and successfully completed the RXi spinout last month, according to filings with the US Securities and Exchange Commission.

In an SEC filing this week, the newly independent RXi disclosed that it remains on track to meet its previously announced goal of beginning phase I testing of RXI-109 this year. However, an overhaul of its management, which included the loss of its CSO, and the status of its securities raise questions about this plan.

“Our business prospects are dependent on our management team,” RXi warned in the SEC filing. “The loss of any of our key employees, or our inability to identify, attract, retain and integrate additional qualified key personnel, could make it difficult for us to manage our business successfully and achieve our business objectives.”

Aside from the change-up with its CEO, RXi disclosed that CSO Anastasia Khvorova, who played a key role in the development of the self-delivering RNAi technology at the heart of RXI-109, had left the company at the time of the spinout.

At the same time, its shares have yet to begin trading, and once they do, they will be subject to SEC-mandated penny stock trading restrictions that RXi said could “adversely” affect the liquidity of its common stock.

RXi also noted that shares of its common stock that were distributed to Galena shareholders at the time of the spinout are eligible for immediate sale, which could impact its share price.

Still, the company said in the regulatory filing that it has sufficient working capital to fund its operations for at least the next 12 months, giving it a measure of breathing room before it is required to seek additional financing.

RXi officials were not available for comment.

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