Update: Addressing RXi Pharmaceuticals' Letter To Shareholders

| About: RXI Pharmaceuticals (RXII)
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Summary

RXi Pharmaceuticals’ President and Chief Executive Officer Geert Cauwenbergh has just issued an open letter to the suffering shareholders of the company.

After a confusing acquisition I predicted this could enhance shareholder value long-term but in no way saw this open letter coming.

Any time a management team has the back of shareholders and will defend the company publicly I generally am bullish, and this is no exception.

RXi Pharmaceuticals' (NASDAQ:RXII) President and Chief Executive Officer Geert Cauwenbergh has just issued an open letter to the suffering shareholders of the company. This letter demonstrates the dedicated leadership of the company and shows that the company recognizes shareholders are confused by the latest moves the company has made and even more concerned about their investment in the company. The primary motivation for the letter was to respond to critics posting misleading and inaccurate information about the company and its latest news releases on social media. I encourage my readers to carefully read this letter.

The letter is in response to issues I just covered earlier this week in an earlier post entitled "RXi Pharmaceuticals: Stock Appears On Sale Following 2 Big Announcements." In this article, I discussed that the company had entered into an assignment and exclusive global license agreement with Hapten Pharmaceuticals, LLC to acquire its product called Samcyprone. I was quick to clearly admit that this acquisition was tough to interpret. Like many other shareholders I was confused. That said I stated that the long-term story remains intact and thus compared to my coverage initiation the stock is at more attractive levels. However, I in no way saw this executive level response coming.

I think this letter is a bullish sign. In my opinion, it is always better to have a management team that speaks up when it believes its stock is undervalued, or that there is misinformation being spread by the company. In the letter, Dr. Cauwenbergh elaborated on the motivation for the acquisition. The target diseases of Samcyprone complement the therapeutic areas in which RXI-109 would become commercially available, if approved. Further, there may be a combined effect between RXi's sd-rxRNA drugs and Samcyprone. This is because the way Samcyprone works is linked to DPCP's ability to alter the expression of multiple genes and miRNAs involved in the immune response. These gene targets may be modulated by an RNAi approach, utilizing sd-rxRNAs, to further enhance Samcyprone's efficacy and response rates. Thus, in addition to being a future revenue source, Samcyprone could also become a research tool to enhance the value of the sd-rxRNA platform through identification of new protein targets for the company's RNAi compounds. Perhaps even more important was Dr. Cauwenbergh's comments regarding those who claim RXi Pharmaceuticals is stagnating. He reminded us of upcoming catalysts including an ophthalmology Investigational New Drug application to be submitted for RXI-109 planned for Q2 2015. There is also the evidence based sd-rxRNA compounds that act against vascular endothelial growth factor. There are also recent patent submissions on newly synthesized sd-rxRNA compounds against collagenase and tyrosinase. Add to this the new acquisitions and the extremely positive data we have had to date in the scar reduction trials. All things considered, this was a well-timed letter. The only thing that I fear is the cash position as I outlined in my first in-depth article on the company. Right now that is the most prevalent risk, but it is a common issue for developmental stage companies. It would be nice if this was addressed further, but all in all, I remain very bullish on this stock and the company.

Disclosure: The author is long RXII.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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