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Money splice infuses RXi; Cancer vaccine business spinoff.

Byline: Lisa Eckelbecker

WORCESTER - RXi Pharmaceuticals Corp. is splitting into two companies infused with a combined $12 million in new financing.

The move peels off cancer vaccine technology recently acquired by RXi and packages it into a business - Galena Biopharma Inc. - which will be based in Portland, Ore., with about 12 employees.

RXi's gene-silencing technology, known as RNA interference, would be spun out by the end of this year under the RXi name as a publicly traded company staying in Worcester with about 12 employees, according to Mark J. Ahn, who became RXi's chief executive about five months ago and now becomes chief executive of Galena.

The split results because company officials felt they needed to make a "strategic commitment" to RXi's cancer therapies, Mr. Ahn said.

"People were not wanting you to have assets that didn't necessarily go together," Mr. Ahn said.

Tang Capital Partners LP, an investment fund based in San Diego, and New York-based hedge fund RTW Investments LLC will invest $2.5 million in Galena and $9.5 million in RXi, according to a filing yesterday with Securities and Exchange Commission.

After the spin-off of RXi, that would give the funds about 83 percent of the equity in RXi.

Mr. Ahn is expected to serve on the board of the new RXi. A new chief executive will be named for RXi, Mr. Ahn said.

RXi's stock fell 34 cents yesterday to 65 cents a share in trading on the Nasdaq Capital Market.

RXi's roots go back to 2003, when CytRx Corp. of California sponsored research at the University of Massachusetts Medical School in Worcester.

In 2006, CytRx formed RXi. The company publicized ties to Craig C. Mello, a UMass researcher who was co-recipient of the 2006 Nobel Prize in Medicine for his work on RNA interference, or RNAi, and it licensed technology from UMass.

More recently, the Massachusetts Life Sciences Center, the agency overseeing the state's $1 billion in life sciences grants and loans, awarded $500,000 to RXi and UMass in April for a two-year project to develop a treatment for amyotrophic lateral sclerosis, or Lou Gehrig's disease. UMass declined to comment yesterday on RXi's news.

With no products on the market, RXi has lost $71 million since 2003, according to a filing with the Securities and Exchange Commission for the period up to June 30.

RXi shifted course earlier this year when it acquired Apthera Inc. of Arizona, which controlled an experimental vaccine to treat breast cancer.

Last week, RXi also acquired an experimental gynecological cancer vaccine technology from the University of Texas MD Anderson Cancer Center and the Henry M. Jackson Foundation for the Advancement of Military Medicine.

RXi expects the breast cancer vaccine to begin the final phase of human studies next year.

The second cancer vaccine could start initial human studies this year, according to RXi.

The RNAi technology is less advanced. RXi expects the first product, a scarring treatment, could start initial human studies next year.

The journal Nature Biotechnology reported earlier this year that efforts to develop new drugs based on RNAi have gone

more slowly than initially expected.

One challenge is getting the drugs to their targets in the body.

Mr. Ahn said RXi considered keeping the cancer and RNAi technologies together in one business, turning the RNAi technology over to a venture capital group and selling the RNAi business for cash or stock.

The solution RXi reached gives the RNAi business enough money for two years, Mr. Ahn said.

Finding financing and a way for all Worcester employees to keep their jobs, he said, is "a pretty awesome place to be, relative to where we could be."
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Title Annotation:MONEY
Publication:Telegram & Gazette (Worcester, MA)
Date:Sep 27, 2011
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