Tamara McGrillen – Head-Investor Relations Geert Cauwenbergh – President and Chief Executive Officer Caitlin Kontulis – Principal Accounting Officer Pamela Pavco – Chief Development Officer.

Analysts:.

Good day, ladies and gentlemen, and welcome to the RXi Pharmaceuticals’ First Quarter 2016 Earnings Conference Call. Today’s call is being recorded. At this time, I’d like to turn the call over to Ms. Tamara McGrillen, Head of Investor Relations for RXi. Ma’am, the floor is yours..

Thank you, operator. Good afternoon ladies and gentlemen. Thank you for participating on our call today. We are joined today by our President and CEO, Dr. Geert Cauwenbergh; our Chief Development Officer, Dr. Pamela Pavco; and Principal Accounting Officer, Ms. Caitlin Kontulis.

I would like to remind listeners that this call will contain certain statements concerning RXi’s future expectations, plans, and processes which constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements and as a result of various important factors including those discussed in our most recent Form 10-Q filed today with the SEC.

In addition, any forward-looking statements represent our views only as of the date of this recording and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. Now, I would like to turn the call over to our President and CEO, Dr. Cauwenbergh..

collagenase and tyrosinase. Then the fourth section I want to briefly address is business development.

As mentioned during previous quarterly update calls with our planned clinical studies ongoing for RXI-109 and Samcyprone and our pre-clinical and research activities underway to achieve topical delivery in eye and skin for our sd-rxRNA platform, we have been focusing a lot more this year on the business development and corporate development activities of RXI with the intention to be able to grow our company through those activities and to access new sources of cash.

A little over a week ago, we announced the licensing deal with a small, privately owned CNS, Thera Neuropharma, abbreviated Thera, that has a deep knowledge and experience in ALS or Lou Gehrig's disease.

The interaction and negotiation between the two companies has started several months ago and during that process intellectual property has been jointly filed by RXI and Thera that covers a totally new treatment approach for ALS in which in addition of the misfolded of SOD1 protein using our sd-rxRNA compounds, is combined with a Thera small molecule regenerative therapy.

If successful, this combination could become the first to show disease modifying effect and possibly in the long-term curative effect for ALS.

In exchange for the license to our sd-rxRNA compounds that target SOD1, RXI received an equity position in Thera, part of which has anti-dilution protection for a number of years and in addition RXI has the potential to receive modest financial milestone payments, as well as royalties upon commercialization.

In case this first ALS project is successful, the possibility exists to enter into a second phase of the agreement, during which our neurodegenerative disease will be targeted and for which RXI will receive additional milestones and royalties, as well as an additional equity stake with partial anti-dilution protection.

As such, Thera joins MedImmune, a cell therapy company in oncology, as our second portfolio company. As RXI uses selective licensing of its technology platform to enable a network of small biotech companies to grow and in which RXI becomes a partial owner.

Finally, a few days ago, we announced that we are active on the corporate development front pursuing possible M&A and business development opportunities designed to enhance value to our shareholders.

As mentioned in our press release, we are in active discussions regarding a potential merger transaction that is successful – would be expected to bring substantial synergies to the combined business and advance our clinical pipeline.

For the lead project in this effort, we have engaged Griffin Securities as an advisory firm to spirit and facility that process. Updates on this effort will only be made whenever appropriate and necessary. And now, I would like to hand over the call to Caitlin for the financial details..

Thank you, Geert, and good afternoon everyone. The company filed its Form 10-Q for the first quarter of 2016 today with the SEC. The filing includes detailed information on the company’s financial performance. I will present an overview of the select financial highlights from the filing.

The company had net revenues of $10,000 for the three months ended March 31, 2016. The revenues during the quarter were due to the company’s out-licensed technology agreement with MirImmune. Net revenues for the three months ended March 31, 2015, totaled $34,000 and were due to the Company’s government grants with the NIH.

All the work under this grant was completed during the first quarter of 2015. Research and development expense was $1.3 million for the quarter ended March 31, 2016, as compared with $2.1 million for the quarter ended March 31, 2015.

The decrease in research and development expense was primarily due to the cash and equity fees payable to Hapten Pharmaceuticals, upon the close of the exclusive license agreement from Samcyprone, as well as for toxicology studies performed in connection with the company’s IND for our retinal scarring clinical trial.

Both of which were completed in the first quarter of 2015. General and administrative expense for the quarter ended March 31, 2016 was $1 million, as compared with $0.9 million for the quarter ended March 31, 2015.

The increase in general and administrative expense was primarily due to an increase in the use of professional service providers as the company has increased its focus on business development activities in line with our key corporate initiatives during the first of this year as compared with the same period in the prior year.

The company’s net loss for the quarter ended March 31, 2016 was $2.2 million, compared with $2.9 million for the quarter ended March 2015. Net loss decreased from the prior year quarter, primarily due to the decreases in research and development expense as just discussed.

The company’s net cash used in operating expenses for the three months ended March 31, 2016 was $2.9 million, compared with $2 million for the three months ended March 31, 2015.

The increase in net cash used in operating expenses was primarily due to changes in our working capital driven by payments during the quarter for our recent drug manufacturing batches of RXI-109 and Samcyprone.

As a result of these large payments, we did see an increase in our quarterly cash burn rate to about $3 million for the first quarter of 2016. The company has a strong fiscal track record and has been very diligent and consistent with our spending year-in and year-out.

We expect going forward that our quarterly cash burn will be in line with our historical burn rate of about $2 million per quarter. Cash flows from the company’s investing and financing activities were minimal during the first quarter of the year.

At March 31, 2016, the company had available cash of $7.7 million, compared with $10.6 million at December 31, 2016. As Geert mentioned, we have assessed our current budget plan and have adjusted our spending according to our project priorities as a function of time to data.

As a result, we believe that our existing cash should be sufficient to fund operations for at least one year. We are mindful of our future cash needs and are looking into strategic options to extend our financial position that would create value for both the company and our shareholders.

As we had discussed the prior quarter calls, the non-compliance notice from the NASDAQ stock market, that we were not in compliance with a $1 bid price listing requirements. On April 18, the company completed a reverse stock split of our common stock at a ratio of one-for-ten.

This reduced the company’s issued and outstanding common stock from 65.3 million shares to 6.5 million shares. There were no changes to the company’s authorized shares as a result of the split. Further, all share and per share amounts disclosed in the company’s Form 10-Q filed today have an adjusted to reflect the reverse stock split.

On May 2 following the implementation of the reverse stock split, the company received written notice from NASDAQ that we had regained compliance with the minimum bid price requirements for continued listing on the NASDAQ capital market. And with that I will turn the call over to Pam, who will discuss the company’s R&D activities..

first, the gel itself stayed more or less in place on the eye, unlike the gel – the eye drops that can quickly disperse and be blinked away. The thermo-reversible gel is applied as a drop and at the warm temperature at the surface of the eye it thickens and forms a gel, which remains in place.

Thus the gel formulation provides a longer duration of contact with the surface of the eye with a simple drop formulation. Secondly, more pronounced and deeper delivery across the cellular layers of the cornea was noted with the gel compared to the simple eye drop formulation.

sd-rxRNA compound was delivered to practically all cells in the wounded area throughout the thickness of the cornea. We are very encouraged by these results and are continuing to work with gel formulations to optimize a topical therapeutic for front of the eye indications.

While not all cornea injuries or infections lead to corneal scarring and vision loss, a significant number of them do. In the most severe cases required corneal transplants, 30,000 to 40,000 of which are performed in the U.S. alone.

A drug, which could present or lessen the corneal scarring that may accompany corneal injury and inflammation, can dramatically reduce this need. Moreover, access to the eye by topical administration may lead to research and development of sd-rxRNAs against additional gene targets for additional indications for front of the eye.

In parallel, our first clinical trial with RXI-109 in the eye is continuing to progress as planned. As you know, this is a Phase I/II trial in patients with late-stage or wet age-related macular degeneration, who have already begun to develop subretinal scars.

The first of three cohorts in this trial has fully enrolled and all patients have received at least two doses of drug. No safety issues have to risen with up to four monthly doses. The drug and the intravitreal injection are well tolerated to date, which allowed us to decide to move forward into next cohort of this dose escalation study.

After evaluating the early safety data for the first cohort, we recently opened the second cohort, which will be dosed at the next higher dose level. This progress is on track with our original timing projection and our 2016 goal of enrolling at least half of the patients into this trial by the end of the year.

We have also been working on topical delivery of our sd-rxRNA compounds for the skin. As in the cornea, it is very difficult to deliver to the underlying layers of the skin. The upper skin layer, called the stratum corneum, is a protective layer consisting of multiple layers of dead cells resulting from the natural process of skin cell turnover.

To screen a variety of formulations and mechanical delivery methods, in order to study delivery pass the stratum corneum into the dermis, one model that we use is a full thickness pig skin from a pig ear.

This is a nice ex vivo model, because the pig skin closely matches the structure and thickness of the human skin and is available on a routine basis. One of the most promising methods we have developed to date was recently presented at the Society for Investigative Dermatology, or SID.

For these studies, fluorescently labeled sd-rxRNA compounds are applied to the surface of the pig skin in this case and then a Dermapen fractional micro needle device was passed over the surface of the skin to create micro channels through which the compounds can enter the skin.

The needle length of Dermapen used was 1 millimeter, which is not quite the thickness of the dime. And this is a good length to use because it minimally penetrates the skin through the cap stratum corneum and the epidermis and into the dermis.

The piece of skin is then put into culture setup that keeps the tissue viable for 24 hours after which it is then analyzed to determine dermal penetration using a fluorescence microscopy. The results for this type of delivery demonstrated penetration into the pig skin to a depth of 400 microns with good cellular uptake observed.

This step means that the sd-rxRNA compound and in this case it was our anti-tyrosinase compound, RXI-231, can be delivered to the dermal-epidermal junction just where it needs to be in order to be taken up by melanocytes to disrupt the process of producing melanin.

In human skin, the melanocytes make up 5% to 10% of the cells in this basal layer of the epidermis. Efficient delivery to this depth of skin is essential for the activity of this compound as a cosmetic ingredient to set the appearance of hyperpigmented areas in the skin.

Data will also be presented at the SID meeting for the anti-collagenase sd-rxRNA we are developing to prevent or lessen photo-aging, or the aging effects of the skin caused by exposure to sunlight. Here the experimental system we are using is the 3-D epidermal skin cultural model called EpiDerm-FT, commercial available from MatTek Corporation.

And this is essentially a reconstructed human epidermis that can be used in vitro testing. Like normal skin, this tissue is metabolically active and the outermost layer is a protective barrier.

For example, when irradiated with ultraviolet light as we do in the lab, collagenase, which is also known as MMP1, is upregulate in the EpiDerm-FT tissue as it would be expected to be upregulated in normal skin by exposure to sunlight. It is in part this elevation with MMP1 that leads to photo aging.

MMP1 breakdown the collagen in your skin and this contributes to skin laxity and wrinkles. If however, the epiderm FT 3-D skin culture is treated with anti-collagenase sd-rxRNA RXI-185 more normal levels of collagenase MRNA and protein are maintained even after the UV radiation.

Development of RXI-185 to lessen the effects of photo-aging is in progress at RXI. This compound in combination with the delivery such as I described above for the tyrosinase compound, could potentially be used to maintain skin appearance.

Both of these compounds, RXI-185 and RXI-231, have been selected for development of consumer health products rather than as therapeutic candidates at first. This is the most direct path toward the market.

For these no animal testing will be done, instead all testing is to be conducted in vitro in cultured cells, ex vivo in the tissue I described or in one of several 3-D skin culture models. Preliminary in vitro safety test with both compounds as indicated [indiscernible] and cell culture assays, the first step in the safety evaluation.

Further testing of RXI-185 shows that it is not classified as R38 skin irritating compound, when we tested it in the MatTek’s in vitro EpiDerm skin irritation test.

Work is ongoing to finalize a delivery formulation to be used with these compounds and our goal is still to initiate consumer testing that is safety testing on volunteers before the end of the year. In addition, separate sd-rxRNA is targeting tyrosinase and collagenase can also be taken forward as therapeutic compound.

We can build on the data generated to support the consumer health programs and one of both of these compounds into other additional indications. For example, blocking collagenase could be therapeutic and other dermatological indication such as for chronic ulcers and maybe wound healing potentially in the eye for corneal ulceration.

It can also be useful to reduce the ability of cancers to invade and spread into surrounding tissue. One main potential therapeutic area for an anti-tyrosinase compound is melanoma, the most serious of the skin cancers.

Moving into these additional therapeutic areas will require in vivo type testing in appropriate animal models and extensive toxicity testing programs, which we will put in place at a later day. Lastly, a brief update on our ongoing Phase II trials.

With respect to our small molecule drug, Samcyprone, recruitment into Study 1502 for the treatment of warts is ongoing. We have one side open in Florida and are working on in additional site – clinical site in New York. Enrollment is progressing and we expect to fully enroll by the end of the year as planned.

Our ongoing hypertrophic scar study, Study 1402 is progressing on track. As you know, the first two cohorts have been completely enrolled and as of last November, we initiated a third and fourth cohorts to Study 1402 with the purpose of adding additional doses and extending the dose in period.

We’ve already enrolled about half of our subjects in these additional cohorts and are on track to meet our goal of completing enrollment by the end of the year. The last subjects and cohorts one and two will have their nine months visit and complete their trial in the third quarter of 2016.

After cleaning that part of the database and analyzing the photographs, we will report at on the results from these first two cohorts before the end of the year.

As perviously mentioned, we are on track to complete enrollments in cohorts three and four in Study 1402 by the end of the year and anticipate providing preliminary data in the second half of 2016. It is expected that a full interim analysis for cohorts three and four for Study 1402 is expected mid-2017.

With that I’ll turn the microphone back over to Ms. McGrillen..

Thank you, Pam. This now concludes the formal presentation for today. Operator, we would like to now go for questions please..

Operator:.

Well, once again, ladies and gentlemen, thank you for participating in our call today. That will be it. This concludes our call..

Thank you. Good evening all..

This does conclude today’s webinar. We thank you for your participation. You may disconnect your lines at this time and have a great day..

Thank you..