Tamara McGrillen - Investor Relations Dr. Geert Cauwenbergh - Chief Development Officer Dr. Pamela Pavco - President & Chief Executive Officer Caitlin Kontulis - Principal Accounting Officer.

Analysts:.

Good afternoon ladies and gentlemen, and welcome to the RXi Pharmaceuticals’ Third Quarter 2016 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the floor 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 and thank you for participating on our call today. We are joined by our President and CEO, Dr. Geert Cauwenbergh; our Chief Development Officer, Dr. Pamela Pavco; and our 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..

Thank you very much, Tammie. I want to thank you all for being on the call this afternoon. As you've been able to read from our press release and in our 10-Q for the third quarter of 2016, our company has been able to maintain a significant level of austerity while progressing our projects according to plan.

Our Chief Development Officer, Pam Pavco will give an overview of what we've achieved in the third quarter and in the first weeks of the fourth quarter.

But first, I'd like to spend the first part of our Q3 company review on the topic that I consider potentially transformational for our company and for the management of hematological malignancies as well as solid tumors.

We've negotiated an exclusive option to acquire MirImmune Inc., a biotech company from the Boston area with the focus on the use of our sd-rxRNA technology to harnessing themselves through transfection for cell therapy.

A little over 18 months ago, MirImmune obtained a license from RXi for the use of our proprietary sd-rxRNA technology for using cell-based immunotherapy in cancer. With this license, they received seed funding from Tim Barberich, founder and former CEO of Sepracor.

Since that time, the MirImmune team has achieved many important milestones with this technology. First, they identified sd-rxRNA compounds against six different checkpoint targets, and demonstrated dose dependant markdown of these checkpoints with those lead compounds.

There were no noted toxic effects from the cultured tumor immune cells and approximately 100% viability was maintained. Those results compared very favorably with the cell viability data with other transfection methods that do not use our cell delivering technology.

MirImmune also demonstrated that transfection of immune cells with sd-rxRNA compounds occurred rapidly in more than 98% of the cells in cultures and that culture section of up to four different checkpoint inhibitors in the same cell batch in culture can be accomplished without affecting cell viability.

Third thing that they achieved in that short 18-month period, these four co-transfected checkpoint inhibitors targeted extracellular and intracellular checkpoints. That is important because you cannot target intracellular check targets with -- checkpoint targets with antibodies, only the extracellular ones.

The four sd-rxRNA compounds that they had culture and sectored the same batch of T-cells with, did not interfere with one another as shown by the fact that the combination of the compounds in the cells was equipotent in reducing each individual checkpoint as those inhibitors used singly in cell cultures.

The fourth achievement of the Company in those 18 months was that they demonstrated positive effect in a mice model for human ovarian carcinoma. In that study, an anti-PD-1 sd-rxRNA was used to transfect meso-CAR T-cells, which are CAR T-cells that are directed to bind mesothelin and that is expressed on cancer cells.

These trasfected meso-CAR T-cells were then injected into a human ovarian cancer tumor in mice and the growth of the tumor was followed overtime. The control groups of mice were injected with either meso-CAR T-cells alone, meso-CAR T-cells trasfected with a non-targeting or a non-related sd-rxRNA or a PBS buffer.

The tumor is injected with a self-delivering rxRNA PD-1 inhibitor, showed a significant reduction in the rate of growth compared to PBS whereas the CAR T-cells without PD-1 inhibition showed a non-significant reduction in the growth rate.

Importantly, at one month after the single administration which is fairly long time, PD-1 was still reduced by approximately 80% in the anti-PD-1 transfected CAR T-cells compared to the controls, indicating a lasting effect of at least one month.

The fifth thing that they achieved was, in a novel type of study tumor infiltrating lymphocytes or TILs or the patient with melanoma were collected and were subjected to a rapid expansion program after which they were transfected with that same anti-PD-1 sd-rxRNA.

These transfected TILs were added to melanocyte cultures or painful melanoma lesion of that patient. So, it was all homologous from the same patient.

Compared to the non-transfected TILs, the tumor killing capacity of the transfected TILs in the melanoma-filled cultures was dramatically increased in a dose-dependent manner as compared to control and even to an anti-PD-1 antibody control group.

Last but not least, the MirImmune team filed broad IP for the use of RNAi compounds in the fields of cell therapy and immune-oncology, which if granted will provide our company with patent protection well into the 2030s.

When in our due diligence, we asked experts in the field of immunotherapy and cell therapy, how they felt about these findings? There was a unanimous positive and enthusiastic response with the several experts commenting that this could significantly enhance the potential of the developments currently taking place in cell therapy and immune-oncology.

Based on these data and the feedback that we received from these independent experts, MirImmune and RXi started discussing the possibility of an acquisition/merger of the two companies. Both management teams and Boards are aligned and an exclusive option agreement had been signed for the acquisition of MirImmune by RXi.

We're currently taking necessary next steps to assure a rapid integration of the two companies and to further accelerate the development of this exciting and possibly lifesaving potential of our sd-rxRNA technology to stay with a core mission of our company's existence to develop innovative therapies for a better life.

And now, I want to hand the call over Caitlin for the review of our Q3 financials of our company.

Caitlin?.

Thank you, Geert, and good afternoon everyone. The Company ended September 30, 2016, with approximately $4.4 million in cash in cash in short term investments as compared with $5.8 million and $10.6 million in cash, cash equivalents and short-term investments at June 30, 2016 and December 31, 2015 respectively.

The Company's net cash used in operating expenses during the third quarter of 2016 was $1.6 million, as compared with $1.9 million during the third quarter of 201. The Company has continued to maintain an average quarterly cash balance burn of $2 million in line with our projections and expectations.

Additionally, during the nine months ended September 30, 2016 the Company had received growth proceeds of $152,000 due to the sale of its common stock to Lincoln Park Capital under the Company's outstanding equity line with the fund.

The Company plans to continue to conservatively modernize its cash out flows and to use the available equity line to help fund operations. Turning next to the Company's income statement, research and development expenses were $1.5 million for the quarter ended September 30, 2016, compared with $1.7 million for the quarter ended September 30, 2015.

The decrease in research and development expenses was primarily due to drug manufacturing expenses for the RXI-109 drug product that was completed in the second half of 2015, offset by an increase in manufacturing and clinical trial-related expenses for Samcyprone incurred during the current quarter.

Research and development expenses further decreased from the prior year quarter due to a decrease in non-cash stock-based compensation expense related to the full vesting of stock options that were granted in 2012.

General and administrative expenses were $750,000 for the quarter ended September 30, 2016, were compared with $770,000 for the quarter ended September 30, 2015.

The decrease in general and administrative expenses was primarily due to a decrease in non-cash stock-based compensation expense related to the full vesting of stock options that were granted in 2012, offset by an increase in G&A expenses primarily related to the use of outside professional services due to the Company's continued focus on business development activities.

The Company's net loss for the quarter ended September 30, 2016, was $2.2 million, as compared with $2.5 million for the same period in the prior year. The decrease in net loss from the prior year's quarter was primarily due to a decrease in research and development expenses, as previously discussed.

The Company plans to hold its 2016 Annual Meeting of Stockholders at the offices of Gibson, Dunn & Crutcher in New York on December 15th at 10:00 AM Eastern. The related proxy statement has been filed with the SEC and the Annual Meeting materials have been made available via the Internet and have also been mailed to our shareholders.

If you wish to attend the 2016 Annual Meeting in person, please RSCP by either marking appropriate box on the proxy card or by contacting the Company. In order to be admitted into the meeting, your name mush to appear on the attendance list and a government issued photo ID must be presented.

We appreciate your vote and look forward to meeting you on December 15th. Detailed information on the Company’s financial performance for the third quarter of 2016 can be found in the Company’s Form 10-Q filed with the SEC today. With that, I’ll turn the call over to Pam, who will provide an update on the Company’s R&D activities..

Thank you, Caitlin, and hello everyone. As Geert said, I will be providing a brief update on our ongoing clinical trials and on our ongoing research activity. Our first clinical sd-rxRNA, RXI-109 is currently being evaluated in two different clinical studies.

Our Phase 2 trial Study 1402 for the management of hypertrophic scars after scar revision is fully enrolled.

Based on a preliminary evaluation of the three month data, we have added an additional two cohorts to evaluate an extended dosing regimen to better cover the length of time that scar can continue to form on a person that has permanent hypertrophic scar.

For these two new cohorts, additional doses are given at four, five and six months followed by a three month observation period up to nine months. The subjects in one and two and cohorts one and two received only three months of treatment and were followed up to nine months as well.

The subjects in the first two cohorts have completed the nine month study and we plan to provide a summary overview of these two cohorts by the end of the year. We also expect to provide an interim review of the safety data and preliminary clinical activity for the subjects in cohorts three and four will reach seven month before the end of this year.

As before, our evaluation will be a blinded comparison of the photograph of the treated versus untreated in incisions and scars. The last enrolled subject in Study 1402 is projected to complete the nine month study in mid-2017, so our final complete readout and formal reporting of this study will happen in Q3 2017.

The second ongoing study with RXI-109 Study 1501 is evaluating the safety and tolerability of intraocular injections of RXI-109 in patients with advanced wet AMD and associated retinal scaring. This study is more than two thirds enrolled well ahead of our anticipated schedule.

We're currently enrolling the third cohort at the highest dose to be tested in the study. The two previous dose levels were well accelerated and did not result in any safety issues on the eye and its function. In this trial, the study eye is given four injections on a monthly schedule and the patient is followed out for seven months.

As this is a primarily a safety study, numerous evaluations are being conducted to ensure that the continued health of the patient and the effect on the study eye using a variety of imaging parameters. As a preliminary evaluation of activity, we're following visual acuity as well as measuring the size of the original scar overtime.

If the untreated contralateral eye also includes a subretinal fibrosis, comprehensive exams and imaging and measurements of this eye and this scar will also be conducted. As it is known that approximately half of the patients with wet AMD who received anti-VEGF treatment develop retinal scars within two years of initiating their treatment.

It's very possible that we'll see changes in scar size over this seven month study. In those subjects with scars on both eyes, there's an opportunity even in the short duration safety study to observe that there's a slowing of the scar growth in the treated eye compared to the untreated eye.

As you know, we've also licensed in a small molecule immunomodulator, DPCP and we're evaluating our proprietary topical formulation Samcyprone in a study for the treatment of cutaneous warts. Study SCP-1502 is well underway and as in other trials we're learning from the initial preliminary results how to proceed.

So we have decided to initiate a second cohort in this study in which we will alter the sensitization and dosing regimen. We are seeing essentially all of the subjects become intensified, so we are taking this opportunity to reduce the sensitization dose and to alter the timing of it.

The first cohort is almost completely enrolled and many subjects to the second cohort already to be screened. Now, I mentioned at the last quarter call that our first two subjects in the trial were responding positively. In fact, more subjects in treatment phase of the study had exhibited at least a partial clearance of warts to-date.

But this trend could be confirmed with the remainder of the study, this could mean a significant advantage over existing topical treatment. In our function of skin care project, we have continued to evaluate formulations with and without the age of mechanical disruption of the epidermis skin.

Our initial compound have moved into human testing is RXI-231 for the management of hyperpigmentation. RXI-231 targets tyrosinase a key player in the production of melanin.

A formulation has been developed at RXi that allows the compound to penetrate beyond the stratum corneum barrier of the skin to the epidermal-dermal junction in studies that we've done on ex vivo on pig skin.

We are in the process of finalizing the first protocol for testing in volunteers and to support this initial testing in volunteers RXI-231 is being manufactured and procedures through largest skin formulation are being put in place.

Based on initial in vitro test, we previously reported that RXI-231 did not show any cytotoxicity and will not be considered as skin irritant based on this early in vitro testing. The first studies in volunteers will focus on standard safety testing of RXI-231 in a topical formulation of apply to skin.

These types of test involved repeatedly applying the product to the same location on the skin using attached and monitoring any irritation reaction that may develop overtime.

After this initial safety is confirmed by testing in the volunteers, RXI-231 can be evaluated in a streamlined consumer evaluation design to rapidly show proof-of-concept in human skin.

While the ultimate goal for the use of RXI-231 is to improve areas of existing hyperpigmentation, one way to more rapidly show proof-of-activity is to demonstrate the compound can prevent hyperpigmentation from occurring. Because UV exposure causes melanin content of your skin to increase, this is why we all get a sun tan.

We can expose small areas of skin to UV light and test with RXI-231 or placebo formulation to determine if the usage of 231 reduces this effect.

The difference in color of the UV exposed areas can easily be measured using a colorimeter and these differences between 231 and placebo tested areas following UV exposure can be used as a surrogate read out for presenting melanin deposition that leads to the hyperpigmentation.

A positive result would support continued consumer testing on hyperpigmented areas already present on an individual to evaluate the length of time until the hyperpigmentation is reduced and the color is more consistent with surrounding areas.

So in summary our three ongoing clinical trials are progressing on track and we are gearing up for consumer testing as compound to improve pigmentation.

We will be conducting a photo review and summarizing the available data for the dermal scar study, Study 1402 perhaps through the end of the year; and by the time of the next call we'll be able to tell you about our progress into consumer testing.

Also we're very excited about the prospect to work in a new area, that of immuno-oncology and pending the potential acquisition of MirImmune, we can began to share with you more about the research and development effort that we'll undertake in that exciting field.

As Geert said, this is chance to develop what might view a transformational therapy for even the most recalcitrant tumors. With that, I will hand the call back to Tamy..

Thank you, Pam. This now concludes the formal presentation for today and at this time operator we would like to poll for calls please..

Thank you. The floor is now open for questions. [Operator Instructions] And our first question comes from Keith Markey [ph]. Please state your question..

Couple of questions about the RXI-231 program, I was wondering with the manufacturing ongoing and such just when we might anticipate starting the study of that therapy and also I guess it's cosmetic I should say and how long -- how many individuals you might enroll in that type of study; not just the safety but also the effectiveness study?.

Pam, I think that's exactly something for you..

We are expecting to have the compound manufactured and released by early in the beginning of the quarter first quarter and we can formulate and go into the safety studies right away after that.

The studies, the first studies are a couple of well like we repeated irritation studies where you do, apply the patch to the same spot over a period of time, and we believe we're going to treat about 25 people into each of those studies but those can go rather quickly because they volunteer and you can have them pretty much come in all in a few days and start the series of patch testing and work through that in several weeks.

I forgot if there was more to that question?.

Well, actually a broader another question and that is -- is there two different formulations and that's the reasons you're having two studies? And then the part that I was asking before about was simply, how larger the trial or study would you do for the actual efficacy portion of assessing the therapy?.

So, for the safety studies, there's two studies because one is determined if there's irritation and one is a longer study where you do a repeated application of the compounded CFU sort of increased sensitivity and get more irritation or not.

For the actual study with the UV, we're going to be looking at whether we can alter the hyperpigmentation that occurs after UV exposure; we haven't determined our final protocol for that; so I can't say how many subjects we'll have in that.

But again you can do multiple spots on the same person so we may be able to keep it at to a very limited and short-term study to be able to get an answer..

Thank you. And our next question comes from Justin Foster [ph]. Please state your question..

Congratulations on the MirImmune deal that sounds fantastic. Can you give a little more color to the share offering that's you've announced.

Is there a possibility of a private placement or can you give us an idea of the status of that at this moment?.

Caitlin, I hand it over to you..

Sure.

Right now because we are in the period from our original filings as to be going effective will eliminate to what we can discuss in relation to the filing so at this time will just tell our investors and our shareholders to the EDGAR, website which has our original filing and for any future updates in filings will be posted on that website at that time and just due to the filing period that we are in where as SEC rules and regulations that limit us and to speaking towards this..

Can you mention anything regards to timing at all or you also not talk in that respect?.

Yes, we are limited here while we are in the filing period, so will refer everybody to the SEC website when there is update that's where that will get posted..

Understood.

Finally, are you still working with Griffin in terms of finding partnerships and transactional questions like that?.

We are still interacting with the Griffin on certain project, yes..

And were they instrumental in this arrangement with MirImmune or is that not a question you can answer?.

Please not to answer that..

Okay, thanks very much..

And there appears to be no more questions at this time..

Well, operator. Then I'd like to thanks everybody for participating on our call today. And we may end the call..

Great, thank you. We thank you for your participation. You may disconnect your lines at this time and have a great day..