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Under New Management, RXi Takes Aim at the Clinic, Wall Street

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Following RXi Pharmaceuticals' successful spinout of Galena Biopharma, RXi's newly appointed CEO sees advancing the anti-scarring drug candidate RXI-109 into human testing as the keystone to his efforts to revitalize the RNAi drug firm.

CEO Geert Cauwenbergh also said he is preparing to reach out to the investment community in earnest in order to ensure RXi will be able to raise the additional capital needed to extend its cash runway beyond its current one year, and is weighing the value in pushing to get the company's stock off the Over-the-Counter Bulletin Board and back on the Nasdaq.

The RXi saga began in 2007 when the company was spun out of CytRx as a pure-play RNAi drug developer under the leadership of co-founder Tod Woolf.

In 2009, after a series of pipeline change-ups and missed guidance, Noah Beerman assumed the CEO role and winnowed down the company's pipeline to two indications: anti-scarring and retinal diseases. Under Beerman, RXi tapped RXI-109 as its lead drug candidate, but missed its goal of submitting an investigational new drug application for the compound in 2010.

In early 2011, RXi announced that it would acquire privately held Apthera, which was developing non-RNAi drugs, in a bid to diversify. Just months later, RXi's new CEO Mark Ahn, who had been Apthera CEO's, shifted all of the firm's RNAi assets into a new subsidiary called RXi and announced plans to spin it out once again as an independent firm focused on the gene-silencing technology. The parent company was named Galena.

Notably, Galena would hold on to RXi's Nasdaq listing following the spinout, which closed in late April (GSN 5/10/2012).

Throughout the Apthera/Galena shakeup, RXi remained committed to its goal of starting phase I testing of RXI-109 before the end of 2012, and this week Cauwenbergh told Gene Silencing News that the firm remains on track to do so.

The drug comprises RXi's so-called self-delivering siRNAs, which have been shown to reach cells without a delivery vehicle (GSN 1/21/2010). RXI-109 is designed to inhibit connective tissue growth factor, a protein linked to wound healing and other fibrotic processes.

To Cauwenbergh, the drug's successful completion of proof-of-concept studies in humans would set the stage for RXi to not only attract a bigger partner, a long-standing objective for the company, but also woo investors.

“RNAi [molecules] have created excitement and disappointment with investors,” he said. “We have the tool with RXI-109 to make it clear, once and for all … that this is a valid therapeutic tool for a validated target.”

If this can be achieved, “we will … be able to access additional sources of money, either dilutive or non-dilutive, through partnerships, through licensing, or through equity offerings,” he added. “What we really have to do [is] create credibility by getting human proof of concept. If that works out, everything else will be pretty straightforward.”

Providing that proof of concept will first require showing that RXI-109 is safe and well tolerated in the planned phase I trial. Cauwenbergh declined to provide specific details on the study, but confirmed that it will examine RXI-109 as an anti-scarring agent in surgical patients and is scheduled to begin sometime this year.

Should that trial yield positive data, “we will as quickly as possible … design a phase IIa study in patients with a focus on proving efficacy” in a more tightly defined patient population, he noted, adding that efficacy data from that trial could come “within six to 12 months” after obtaining phase I data.

Such data, Cauwenbergh said, “will be a real driver for partnerships, [and] will be a real driver for additional financing.”

RXi has a certain measure of financial breathing room, with an estimated 12 months of cash on hand, but this won't be sufficient to carry the company all the way through to the planned phase IIa trial, and so Cauwenbergh said he is taking steps to gauge the firm's fund-raising options.

“I will be reaching out in the next weeks … very intensely to put the company back on the radar screen for current investors, former investors, [and] potential investors, and I will feel the temperature in terms of availability of additional financing,” he said. “It is difficult to comment on at this point, but … in talking to some of the players there, I do think it will not be all that much of an issue to access financing.”

One matter that could potentially limit investment opportunities are RXi's shares themselves, which trade as a penny stock and are therefore subject to more stringent regulatory oversight, which the company said in a recent US Securities and Exchange Commission filing could “adversely” affect the liquidity of the securities.

Cauwenbergh said that regaining a place on the Nasdaq for RXi's stock is “not the top of my priorities,” but noted that he may at some point propose to the firm's board that RXi undertake a reverse stock split, which would prop up its price to meet the Nasdaq's trading requirements.

RXi shares were trading around $0.16 this week. In early 2009, the stock had been selling for as much $6.

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