Assistant Managing Editor

As it moves ahead with its early stage RNAi programs, which include a recently licensed oral delivery platform, RXi Pharmaceuticals Corp. fortified its financial position with a $25 million committed standby equity agreement to Yorkville Advisors fund YA Global Investments.

Under the terms, the Worcester, Mass.-based firm isn't obligated to draw down any of those funds, but can, as needed, opt to sell to Yorkville new common shares in increments of up $500,000 over a two-year period. Shares would be priced based on the lowest daily volume weighted average share price for five consecutive trading days, with a 5 percent discount.

"The terms are quite good," said Tod Woolf, president and CEO of RXi, adding that there are no banking fees associated with the deal. The company can access funds "at appropriate times," when it needs money and when the firm's stock price is relatively good.

RXi is not the only firm to seek a committed equity facility, an option that has become increasingly popular as the industry braces for tough economic times to come. In recent months, for example, Warrington, Pa.-based Discovery Laboratories Inc. and Lincolnshire, Ill.-based BioSante Pharmaceuticals Inc. each entered $25 million deals with Kingsbridge Capital Ltd. to supplement their balance sheets if needed.

RXi's Chief Financial Officer Stephen DiPalma called the move an "important element of our financing strategy," and added that it does not preclude the firm from raising money through other means, such as a public offering if the capital market improves.

Any money brought in from the deal with Yorkville would help support the company's ongoing discovery work in the area of RNAi, an area that has garnered considerable attention thanks to big-dollar deals involving firms such as Cambridge, Mass-based Alnylam Inc. and San Francisco-based Sirna Therapeutics Inc. (now part of Merck & Co. Inc.), though RXi's platform technology is approaching RNAi drug development a bit differently.

Founded in January 2007 by RNAi researchers - including 2006 Nobelist Craig Mello, who now serves as chairman of the company's scientific advisory board - RXi is working on rxRNA compounds, synthetic molecules that Woolf described as the "next generation of RNAi," and are believed to have several advantages over existing short interfering RNAs currently in development.

For one, rxRNA compounds have been chemically modified to make them stable against nuclease so they can be delivered intact to the disease target. One of the challenges in RNAi drug development has been trying to overcome RNA's susceptibility to nuclease degradation.

RXi's compounds also are designed with "stealth technology," which blocks interferon induction, Woolf told BioWorld Today. And rxRNA compounds are believed to be "100 times more potent" than siRNAs.

The company also has added to its arsenal a delivery technology for oral delivery of RNAi therapeutics. In October, RXi licensed exclusive, worldwide rights from the University of Massachusetts to an oral delivery platform targeting macrophages for developing drugs against inflammatory diseases, such as rheumatoid arthritis (RA).

That technology involves packaging the RNAi molecule inside a "special coat, a beta-glucan shell, which latches onto the natural pathways in the gut," Woolf said. It then is transported across the tissue membrane, where it meets up with macrophages.

It's an approach that might work especially well for targeting tumor necrosis factor-alpha for treating RA. Existing TNF-alpha inhibiters like Centocor Inc.'s Remicade (infliximab) and Abbott's Humira (adalimumab) in RA, must be administered by injection, but RXi's work could offer "an oral alternative to monoclonal antibodies," Woolf said.

Last month, the company reported that its work in inflammatory disease could be funded in part by a grant from the Massachusetts Life Sciences Center. The MLCS selected RXi's proposed collaboration with the University of Massachusetts Medical School as one of the recipients of Cooperative Research grant funding, intended to support development of orally delivered RNAi therapeutics.

That grant is expected to provide $250,000 per year for three years.

Other programs in RXi's discovery pipeline also target multibillion-dollar markets, including a program aimed at cholesterol.

The company has not provided a timeline for reaching the clinic, but Woolf said the goal is to get to "human efficacy as quickly as we can, and at that stage, we'll have more options" going forward, such as partnering.

RXi, which gained its independence from majority holder Los Angeles-based CytRx Corp. last year, operates with about 25 full-time people plus outsourcing. So "we've got about 50 people working on our programs," Woolf said.

The firm last raised money in an $8.7 million private placement in June. It reported a net loss of $3.4 million, or 25 cents per share, in the third quarter, and had a cash position of $12.7 million as of Sept. 30.

Shares of RXi (NASDAQ:RXII) gained 19 cents Thursday to close at $6.10.

In other financings news:

• DARA BioSciences Inc., of Raleigh, N.C., said it received total proceeds of $1 million from a stock purchase and loan agreement and related agreements. Those funds, combined with the firm's existing cash and anticipated sale proceeds for the company's shares of MiMedx Group Inc., of Destin, Fla., which become salable this month, will be used as working capital to continue operations. Earlier this week, the firm also reported filing an investigational new drug application for DB959, a dual PPAR delta/gamma agonist, in Type II diabetes mellitus. Subject to IND approval and additional financing, that product is set to move into the clinic. DARA also has KRN5500, its lead product, which is in Phase IIa testing in cancer patients with neuropathic pain. Shares of DARA (NASDAQ:DARA) gained 6 cents Thursday to close at 48 cents.

• EpiCept Corp., of Tarrytown, N.Y., said it expects net proceeds of about $15.6 million from a public offering of 7.55 percent convertible senior subordinated notes due February 2014 and five one-half year warrants to purchase about 11.1 million shares of common stock at an exercise price of $1.035 per share. The total offering is $25 million, but about $9.4 million will be deposited in escrow for 24 months to pay interest on the notes and to cover the make-whole payments upon conversion or redemption. EpiCept intends to use the net proceeds to repay outstanding debt, including its senior secured loan with Hercules Technology Growth Capital Inc., as well as for general corporate purposes. The company's shares (NASDAQ:EPCT) fell 17 cents, or 20 percent, to close Thursday at 68 cents.

• Oxford BioMedica plc, of Oxford, UK, said it received a planned further investment of $250,000 under a collaboration with the Foundation Fighting Blindness (FFB), through its translational research arm the National Neurovision Research Institute. That investment is intended to support the ongoing development of StarGen, the company's gene therapy product, which uses the LentiVector technology to deliver a corrected version of ABCA4, a gene that is mutated in patients with Stargardt disease. Under the original 2006 agreement, the FFB and a consortium of investors are committed to invest up to $3.9 million in the StarGen program, with subscriptions to be made in stages and priced at a 10 percent premium to the market price at the time of investment. Shares of Oxford BioMedica (LSE:OXB) closed Thursday at 7 pence (US10 cents).