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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2010-OR-o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File No. 001-33958
 RXi PHARMACEUTICALS
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
 Delaware(State or other jurisdiction
    of
    incorporation or organization)

20-8099512(I.R.S. Employer
    Identification Number)60 Prescott Street
    Worcester, Massachusetts(Address of principal
    executive offices)

01605(Zip
    Code)   Registrants telephone number, including area code:
 (508) 767-3861
  SECURITIES
    REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.0001 Par Value Per Share

NASDAQ Capital Market   SECURITIES
    REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K.  Yes o þ
  Regulation S-T o o
  Rule 12b-2
 Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:
  Form 10-K.




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##### 





RXi
    PHARMACEUTICALS CORPORATION
  FORM 10-K 
    FISCAL YEAR ENDED DECEMBER 31, 2010
  Table of
    Contents
   
 PageItem No.

Description

NumberPART IItem 1.


Business


1Item 1A.


Risk Factors


23Item 1B.


Unresolved Staff Comments


38Item 2.


Properties


38Item 3.


Legal Proceedings


38Item 4.


Reserved


38PART IIItem 5.


Market for Registrants Common Equity and
    Related Stockholder Matters


39Item 6.


Selected Financial Data


40Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


40Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


48Item 8.


Financial Statements and Supplementary Data


49Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures


81Item 9A.


Controls and Procedures


81Item 9B.


Other Information


81PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


82Item 11.


Executive Compensation


82Item 12.


Security Ownership of Certain Beneficial
    Owners


82Item 13.


Certain Relationships and Related Transactions


82Item 14.


Principal Accountant Fees and Services


82PART IVItem 15.


Exhibits, Financial Statement Schedules


82Signatures


83EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1    Form 10-K
 i




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ITEM 1.
    BUSINESS  Overview
  (508) 767-3861.
  tm
  
    Immunotherapy Products.  Our main product
    candidate is NeuVax, which is a peptide-based immunotherapy to
    reduce the recurrence of breast cancer in
    low-to-intermediate
    HER2-positive breast cancer patients not eligible for
    Herceptin®.

    We expect NeuVax to enter Phase III clinical trials in this
    breast cancer patient population during the first half of 2012
    if we are able to satisfy certain United States Food and Drug
    Administration (FDA) information requirements to be
    released from a clinical hold to commence the trial. In
    addition, based on our clinical trials, we believe that NeuVax
    has the potential to treat other cancers, including prostate,
    bladder and ovarian cancers.
    RNAi Products.  We believe that certain human
    diseases can potentially be treated by silencing targeted genes
    that lead to disease. While no therapeutic RNAi products have
    been approved by the FDA to date, there has been significant
    interest and growth in the field of RNAi therapeutic
    development. This growth is driven by the potential ability to
    use RNAi to rapidly develop lead compounds that specifically and
    selectively inhibit a target gene, many of which are thought to
    be undruggable by other modalities. RXI-109, our first RNAi
    product candidate, is a dermal anti-scarring therapy that
    targets CTGF (connective tissue growth factor). We are currently
    working towards filing an investigational new drug application
    (IND) for RXI-109 in the second half of 2011 and
    commencing a Phase I clinical trial in the first half of 2012.
    We intend to maintain our core RNAi discovery and development
    capability to advance current collaborations, as well as enable
    alliances. We believe that RXI-109 may be able to treat other
    indications, including pulmonary fibrosis, liver fibrosis, acute
    spinal injury, ocular scarring and restinosis. 1




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Our
    Therapeutic Programs
  Immunotherapy
    Program
  e.g.,
  neu neu 9-amino
  low-to-intermediate neu
  i.e., proof-of-principle
 2




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RNAi
    Program
    
    Novel RNAi Compounds,referred to as
    rxRNAtm

    compounds, that are distinct from, and we believe convey
    significant advantages over, classic siRNA
    (conventionally-designed small interfering RNA
    compounds), and offer many of the properties that we believe are
    important to the clinical development of RNAi-based drugs. We
    have developed a number of unique forms of rxRNA compounds, all
    of which have been shown to be highly potent both
    in vitroand in pre-clinical in vivomodels.
    These RNAi compounds include
    rxRNAoritm,

    rxRNAsolotm

    and
    sd-rxRNAtm,

    or self delivering RNA. Based on our research, we
    believe that these different, novel siRNA configurations have
    various potential advantages for therapeutic use. These
    potential advantages include high potency, increased resistance
    to nucleases and off-target effects, and, in the case of the
    sd-rxRNA compounds, access to cells and tissues with no
    additional formulation required.
    Advanced Delivery Technologiesthat enable the delivery
    of our rxRNA compounds to potentially treat a variety of acute
    and chronic diseases using both local and systemic approaches,
    potentially providing a competitive advantage in the development
    of many RNAi therapeutic compounds. RXis suite of delivery
    technologies is comprised of delivery vehicles, which can be
    combined with various rxRNA compounds, as well as sd-rxRNA
    compounds, which are chemically modified and have the unique
    property of entering cells and tissues to effect silencing
    without the need for any additional delivery vehicle. This suite
    of delivery technologies has broad applications for multiple
    therapeutic areas targeting both local and systemic applications.    RXI-109
  Recent
    Developments
     3




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ex vivo
  in vitro
  Form 8-Ks,
    Background
    on the Company and Recent Change in Strategic Focus
     4




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Management
    and Scientific Team
      
    Mark J. Ahn, Ph.D., President and Chief Executive
    Officer.  Dr. Ahn served as a director on
    RXis board from 2007 until his appointment as President
    and Chief Executive Officer in 2011. He brings more than
    20 years of experience in the biopharmaceutical industry,
    including as founder, President and Chief Executive Officer for
    Hana Biosciences, Inc. Prior to joining Hana, he served as Vice
    President, Hematology and corporate officer at Genentech, Inc.,
    and held positions of increasing responsibility in strategy,
    general management, sales and marketing, business development,
    and finance with Amgen Inc. and Bristol-Myers Squibb Company.
    Mark W. Schwartz, Ph.D., Executive Vice President and
    Chief Operating Officer.  Dr. Schwartz joins
    RXi as part of our acquisition of Apthera, where he had been the
    President and Chief Executive Officer. Prior to joining Apthera,
    Dr. Schwartz served for five years as President and Chief
    Executive Officer of Bayhill Therapeutics Inc., a company
    developing an innovative DNA vaccine platform for the treatment
    of autoimmune diseases, where he completed a successful
    partnership with Genentech for the development of the
    companys type 1 diabetes vaccine. He had also served as
    President and Chief Executive Officer of Calyx Therapeutics,
    Inc., which doubled its size, nurtured a successful working
    relationship with the FDA, and completed key phase I and
    phase II international clinical trials of novel
    anti-inflammatory compounds during his tenure.
    Robert E. Kennedy, Treasurer and Chief Financial
    Officer.  Robert E. Kennedy co-founded Apthera in
    2005, where he served as Director, Secretary, Treasurer and
    Chief Financial Officer. Previously, Mr. Kennedy served as
    Director and Chief Financial Officer for Blue Dot Services,
    Inc., a nationwide heating, ventilation, air-conditioning and
    plumbing construction and services company. Prior to his work at
    Blue Dot Services, he was the managing director for Koch
    Ventures, Inc., the venture capital arm of Koch Industries,
    Inc., the second largest privately-held company in the United
    States. Mr. Kennedy has held finance and accounting
    management roles at Sterling House Corporation, Thorn Americas,
    Inc., Raytheon Aircraft Corporation, and F.B. Kubik &
    Company, CPAs; he serves on the board of directors of
    Immunologix, Inc. and Arizona BioIndustry Association, and is a
    member of the American Institute of Certified Public Accountants
    and the Arizona Society of CPAs.
    Anastasia Khvorova, Ph.D., Chief Scientific
    Officer.  Dr. Khvorova has been our Chief
    Scientific Officer since October 2008. Dr. Khvorova has
    contributed significantly to the RNAi field. While at Dharmacon
    (ThermoFisher Scientific, Inc.), she made major technology
    advances in RNAi and microRNA. Dr. Khvorova was also
    responsible for establishing and managing several drug
    discovery/development collaborations with major pharmaceutical
    companies, including Abbott Laboratories and 5




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Alcon Inc. Her groundbreaking work has allowed her to author
    more than 150 abstracts, 30 patents and patent applications,
    several book chapters and over 40 peer reviewed publications.
    Dr. Khvorova received her Ph.D. in Biochemistry from the
    Russian Academia of Sciences in Moscow in 1994 and after
    10 years of working in academia and industry she joined
    Dharmacon in 2002, where she served as the Chief Scientific
    Officer for 6 years.  
    Pamela Pavco, Ph.D., Vice President Pharmaceutical
    Development.  Dr. Pavco has been our Vice
    President of Pharmaceutical Development since March 2007.
    Dr. Pavco brings over 20 years of research and
    development experience in oligonucleotides to us. From 2002 to
    2006, Dr. Pavco was Senior Director, R&D Project
    Management at Sirna Therapeutics, Inc., previously known as
    Ribozyme Pharmaceuticals, Inc., where she was responsible for
    the discovery research and development of Sirna-027, the first
    chemically modified siRNA to enter into clinical trials.
    Dr. Pavco also managed the alliance with Allergan, Inc.
    that was initiated to continue discovery research in the area of
    ophthalmology and take Sirna-027 forward into Phase 2 clinical
    studies. Dr. Pavco received a Ph.D. in Biochemistry from
    Virginia Commonwealth University in 1983 and did her
    post-doctoral work at Duke University prior to joining Sirna
    Therapeutics. She is a member of the American Association of
    Cancer Research and the Association for Research and Vision in
    Ophthalmology.  Scientific
    Advisory Board
  and/or
  Financial
    Condition
       6




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Recent
    Financing Activities
      Our
    Competitive Strengths
    
    The Apthera acquisition provides RXi with a late stage product
    candidate, NeuVax, a peptide-based immunotherapy for
    low-to-intermediate
    HER2+ breast cancer, not eligible for Herceptin, which is
    expected to enter Phase III clinical trials in the first
    half of 2012;
    Novel, proprietary technology platform with the potential to
    generate multiple RNAi therapeutic product opportunities,
    comprised of:  
    Our rxRNA compound platform that includes multiple distinct
    approaches all of which offer novelty and potential high
    potency, and
    Multiple delivery technologies, including self-delivering RNAi
    approaches, which do not require a delivery vehicle and can be
    administered for various local and systemic applications;  
    Accomplished scientific and business team with significant
    experience in building and managing emerging life sciences
    companies;
    Scientific advisors who are recognized leaders in research,
    including Dr. Craig Mello, recipient of the 2006 Nobel
    Prize in Medicine for co-discovering RNAi; Dr. George
    Peoples, Chief of Surgical Oncology at Brooke Army Medical
    Center in Houston, Texas and the Director and Principal
    Investigator of the Cancer Vaccine Development Program at
    Uniformed Services University of the Health Sciences in
    Bethesda, Maryland; and Dr. Victor Ambros, who was awarded
    the 2008 Albert Lasker Award for Basic Medical Research for his
    work leading to the groundbreaking discovery of the first
    microRNA (miRNA);
    Strong intellectual property position for our RNAi program
    covering:  
    novel approaches to RNAi chemistry and configuration,
    proprietary, formulation and delivery of active RNAi
    compounds, and
    key therapeutic target genes; and  
    A focus on unmet medical needs and significant market
    opportunity. 7




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Summary
    of NeuVax
  General
  neu 185-Kd GM-CSF neu neu
  9-amino 369-377 neu 24-month follow-up sub-optimally i.e. 24-month follow-up
  Figure
    1  Kaplan-Meier Disease-Free Survival for All Patients
  
 8




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Figure
    2  Kaplan-Meier Disease-Free Survival for
    Node-Positive Low-Expressor Optimally-Dosed Patients
  
  e.g. T-cell
     9




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Potential
    Advantages of NeuVax Versus Cancer Vaccines
  Parameter

Neuvax

Antigen-Specific Vaccines

Polyvalent/Whole-Cell VaccinesTumor Specificity

Highest

Less specific than peptide vaccines

LowestPresence of Self and/or Tolerogenic Antigens

None  E75 peptide contains a single,
    immunodominant epitope

Potential for multiple self epitopes that may be immunodominant
    over E75

Mostly self antigens that may be immunodominant over E75Cost/Ease of Manufacturing

Relatively easy and inexpensive automated peptide
    synthesis

More complex; requires recombinant or DNA plasmid; often
    requires autologous dendritic cells for presentation

Very complex, multi-step and expensive process for culturing
    cells; fraught with batch-to-batch inconsistencyClinical Development Path

Early-stage patientswith low tumor burden and
    robust immune systems

Advanced/metastatic patients with high tumor burden and poorly
    functioning immune systems

Advanced/metastatic patients with high tumor burden and poorly
    functioning immune systemsTrial Endpoints

Disease recurrence

Survival and disease recurrence

Survival and disease recurrence   Phase I/II End-of-Phase-II
    Market
    Opportunity for NeuVax
    U.S.
    Market Opportunities for NeuVax
  Est. Annual U.S.Newly Diagnosed

Number of NeuVax

MarketIndication

Cases/Year

Eligible Patients

Opportunity($ millions)1Breast cancer


182,500



18,400


$
1,060     (1)
    
    U.S. insurance reimbursement assumed at $35,000 for initial
    course of therapy.  Introduction
    to the Field of RNAi Therapeutics
   10




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Science
  Drug Discovery
    Today
  The RNAi
    Mechanism
    double-strands
 11




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Figure
    1  Mechanism of RNA interference within a
    cell
  
    
    High specificity for targeted genes;
    High potency (low doses);
    Ability to interfere with the expression of potentially any gene;
    Accelerated generation of lead compounds; and
    Low toxicity, natural mechanism of action.  RXis
    RNAi Therapeutic Platform
  RNAi
    Compound Design
   12




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Figure
    2  Types of RNAi Compounds
  
    Figure
    3  First generation of RNAi pursued for human
    therapeutics: classic siRNA
  
       13




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tm ® tm
    
    Up to 100 times more active than classic siRNA;
    More resistant to nuclease degradation;
    Readily manufactured;
    Potentially more specific for the target gene;
    More reliable at blocking immune side effects than classic
    siRNA; and
    In the case of sd-rxRNA, the unique ability to be
    self delivering, without the need for any additional
    delivery vehicle.  ori ori
  solo 19-27
  sd
 14




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Figure
    4  Classic and Novel RNAi Compound
    Configurations
  
  Delivery
  Figure
    5  Principles and Challenges of RNAi in vivo
    Delivery
  
   15




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e.g.
  e.g.
  sd
    Local
    Delivery
  sd sd e.g. sd sd sd sd sd
  Systemic
    Delivery
  sd in vivo
 16




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Figure 6:
    Data demonstrating in vivo gene silencing with sd-rxRNA in local
    and systemic settings
  
  Oral
    Delivery
    Alliance
    Partners in Therapeutic Areas
    Intellectual
    Property
   17




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Patents
    and Patent Applications
    License
    Agreements
  Immunotherapy-related
    Licenses
    The Board
    of Regents, University of Texas and Henry Jackson
    Foundation
     18




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RNAi-related
    Licenses
    University
    of Massachusetts Medical School
    sub-license,
   19




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Other
    License Agreements
  Fire-Mello.
  TriLink Biotechnologies.
  Dharmacon.
  Life Technologies. and/or and/or
  Advirna.
  Competition
     20




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Government
    Regulation
           21




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direct-to-consumer
    Environmental
    Compliance
   22




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Human
    Resources
    Insurance
    ITEM 1A.
    RISK
    FACTORS  Our business is subject to numerous risks. We caution you
    that the following important factors, among others, could cause
    our actual results to differ materially from those expressed in
    forward-looking statements made by us or on our behalf in
    filings with the SEC, press releases, communications with
    investors and oral statements. Any or all of our forward-looking
    statements in this annual report on
    Form 10-K
    and in any other public statements we make may turn out to be
    wrong. They can be affected by inaccurate assumptions or by
    known or unknown risks and uncertainties. Many factors mentioned
    in the discussion below will be important in determining future
    results. Consequently, no forward-looking statement can be
    guaranteed. Actual future results may vary materially from those
    anticipated in forward-looking statements. When used in this
    Form 10-K,
    the words believe, anticipate,
    expect, estimate, intend,
    plan, project, will be,
    will continue, will result,
    seek, could, may,
    might and similar expressions are intended to
    identify forward-looking statements. We explicitly disclaim any
    obligation to update any forward-looking statements to reflect
    events or circumstances that arise after the date hereof. You
    are advised, however, to consult any further disclosure we make
    in our reports filed with the SEC.
  Risks
    Relating to RXis Business and Industry
  The
    anticipated benefits of our Apthera acquisition may not be
    realized.
     23




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We are
    largely dependent on the success of our two leading drug
    candidates neither of which may receive regulatory approval or
    be successfully commercialized.
      A
    number of different factors could prevent us from obtaining
    regulatory approval or commercializing our product candidates on
    a timely basis, or at all.
       24




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
    delays in filing the initial drug application for RXI-109 or
    other product candidates,
    delays in providing the FDA with the CMC information required
    before the FDA approves the commencement of Phase III
    clinical tests for NeuVax as described under The FDA has
    placed the IND for NeuVax on a partial clinical hold which
    precludes us from entering into a Phase III clinical trial
    of NeuVax below,
    difficulty in securing centers to conduct trials,
    conditions imposed on us by the FDA or comparable foreign
    authorities regarding the scope or design of our clinical trials,
    problems in engaging IRBs to oversee trials or problems in
    obtaining or maintaining IRB approval of studies,
    difficulty in enrolling patients in conformity with required
    protocols or projected timelines,
    third party contractors failing to comply with regulatory
    requirements or meet their contractual obligations to us in a
    timely manner,
    our drug candidates having very different chemical and
    pharmacological properties in humans than in laboratory testing
    and interacting with human biological systems in unforeseen,
    ineffective or harmful ways,
    the need to suspend or terminate our clinical trials if the
    participants are being exposed to unacceptable health risks,
    insufficient or inadequate supply or quality of our drug
    candidates or other necessary materials necessary to conduct our
    clinical trials,
    effects of our drug candidates not being the desired effects or
    including undesirable side effects or the drug candidates having
    other unexpected characteristics,
    the cost of our clinical trials may be greater than we
    anticipate,
    negative or inconclusive results from our clinical trials or the
    clinical trials of others for drug candidates similar to our own
    or inability to generate statistically significant data
    confirming the efficacy of the product being tested,
    changes in the FDAs requirements for our testing during
    the course of that testing,
    modification of the drug during testing,
    reallocation of our limited financial and other resources to
    other clinical programs, and
    adverse results obtained by other companies developing similar
    drugs.   25




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The
    FDA has placed the IND for NeuVax on a partial clinical hold
    which precludes us from entering into a Phase III clinical
    trial of NeuVax.
    The
    approach we are taking to discover and develop novel
    therapeutics using RNAi is unproven and may never lead to
    marketable products.
    The
    FDA could impose a unique regulatory regime for RNAi
    therapeutics.
    The
    FDA approval process may be delayed for any drugs we develop
    that require the use of specialized drug delivery devices or
    vehicles.
   26




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We
    will rely upon third parties for the manufacture of our clinical
    product candidates.
    scale-up.
    We may
    not be able to establish or maintain the third party
    relationships that are necessary to develop or potentially
    commercialize some or all of our product
    candidates.
   27




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Even
    if we obtain regulatory approvals, our marketed drugs will be
    subject to ongoing regulatory review. If we fail to comply with
    continuing U.S. and foreign regulations, we could lose our
    approvals to market drugs and our business would be materially
    adversely affected.
    Even
    if we receive regulatory approval to market our product
    candidates, our product candidates may not be accepted
    commercially, which may prevent us from becoming
    profitable.
        
    the timing of our receipt of any marketing approvals, the terms
    of any approvals and the countries in which approvals are
    obtained,
    the safety, efficacy and ease of administration of our product
    candidates,
    the advantages of our product candidates over those of our
    competitors,
    the willingness of patients to accept relatively new therapies, 28




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##### Table of Contents




    the success of our physician education programs,
    the availability of government and third-party payor
    reimbursement,
    the pricing of our products, particularly as compared to
    alternative treatments, and
    the availability of effective alternative treatments and the
    relative risks
    and/or
    benefits of the treatments.  We
    will be subject to competition and may not be able to compete
    successfully.
    ®
       29




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We are
    dependent on technologies we license, and if we lose the right
    to license such technologies or we fail to license new
    technologies in the future, our ability to develop new products
    would be harmed.
    We may
    be unable to protect our intellectual property rights licensed
    from others parties, our intellectual property rights may be
    inadequate to prevent third parties from using our technologies
    or developing competing products, and we may need to license
    additional intellectual property from others.
       30




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Our
    success depends upon our ability to obtain and maintain
    intellectual property protection for our products and
    technologies.
     31




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If we
    are unable to obtain regulatory exclusivity for NeuVax, our
    business would be adversely affected and such exclusivity may
    not provide sufficient protection to prevent competitors from
    entering our markets.
    and/or
  We are
    subject to potential liabilities from clinical testing and
    future product liability claims.
   32




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Any
    drugs we develop may become subject to unfavorable pricing
    regulations, third-party reimbursement practices or healthcare
    reform initiatives, which could have a material adverse effect
    on our business.
      
    they are incidental to a physicians services,
    they are reasonable and necessary for the diagnosis
    or treatment of the illness or injury for which they are
    administered according to accepted standard of medical practice,
    they are not excluded as immunizations, and
    they have been approved by the FDA.     33




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If our
    new management team is not effective or if we fail to attract,
    hire and retain qualified personnel, we may not be able to
    design, develop, market or sell our products or successfully
    manage our business.
      We use
    biological and hazardous materials and if we do not comply with
    laws regulating the protection of the environment and health and
    human safety, our business could be adversely
    affected.
   34




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Risks
    Relating Our Financial Position and Capital
    Requirements
  We may
    not be able to obtain sufficient financing, and may not be able
    to develop our product candidates.
      
    to gather and submit the CMC information to the FDA before
    initiating a Phase III clinical trial for NeuVax,
    to conduct a Phase III clinical trial for NeuVax,
    to file the IND for RXI-109 and commence a Phase I clinical
    trial,
    to conduct research and development to successfully develop our
    RNAi technologies,
    to obtain regulatory approval for our product candidates,
    to file and prosecute patent applications and to defend and
    assess patents to protect our technologies,
    to retain qualified employees, particularly in light of intense
    competition for qualified scientists,
    to manufacture products ourselves or through third parties,
    to market our products, either through building our own sales
    and distribution capabilities or relying on third
    parties, and
    to acquire new technologies, licenses, products or companies.    We
    expect to continue to incur significant research and development
    expenses, which may make it difficult for us to attain
    profitability, and may lead to uncertainty about or as to our
    ability to continue as a going concern.
   35




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We
    have limited operating experience and may not be able to
    effectively operate.
     36




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Risks
    Related to Ownership of Our Common Stock
  The
    market price and trading volume of our common stock may be
    volatile.
    
    announcements of regulatory developments or technological
    innovations by us or our competitors,
    changes in our relationship with our licensors and other
    strategic partners,
    our quarterly operating results,
    developments in patent or other technology ownership rights,
    public concern regarding the safety of our products,
    additional funds may not be available on terms that are
    favorable to us and, in the case of equity financings, may
    result in dilution to our stock holders,
    government regulation of drug pricing, and
    general changes in the economy, the financial markets or the
    pharmaceutical or biotechnology industries.    Anti-takeover
    provisions of our certificate of incorporation and by-laws and
    provisions of Delaware law could delay or prevent a change of
    control that you may favor.
    
    divide our board of directors into three classes, with members
    of each class to be elected for staggered three-year terms,
    limit the right of stockholders to remove directors,
    regulate how stockholders may present proposals or nominate
    directors for election at annual meetings of
    stockholders, and
    authorize our board of directors to issue preferred stock in one
    or more series, without stockholder approval.   37




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We may
    acquire other businesses or form joint ventures that may be
    unsuccessful and could adversely dilute your ownership of our
    company.
      ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    RESERVED 38




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    Year Ended December 31, 2009

High


LowFirst Quarter

$
7.19


$
2.71Second Quarter

$
7.57


$
4.00Third Quarter

$
4.93


$
2.44Fourth Quarter

$
4.84


$
1.51   Year Ended December 31, 2010

High


LowFirst Quarter

$
8.11


$
3.72Second Quarter

$
4.71


$
2.56Third Quarter

$
2.85


$
1.75Fourth Quarter

$
3.85


$
2.41   Holders
    Dividends
    Securities
    authorized for issuance under equity compensation
    plans
    Performance
    Graph
    Recent
    Sales of Unregistered Securities
   39




---



##### Table of Contents



Preferred
    Stock
    Common
    Stock
    Common
    Stock Warrants
    ITEM 6.
    SELECTED
    FINANCIAL DATA    ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K
    Overview
  tm
  
    Immunotherapy Products.  Our main product
    candidate is NeuVax, which is a peptide-based immunotherapy to
    reduce the recurrence of breast cancer in
    low-to-intermediate
    HER2-positive breast cancer patients not eligible for
    Herceptin®.

    We expect NeuVax to enter Phase III clinical trials in this
    breast cancer patient population during the first half of 2012
    if we are able to satisfy certain United States Food and Drug
    Administration (FDA) information requirements to be
    released from a clinical hold to commence the trial. In
    addition, based on our clinical trials, we believe that NeuVax
    has the potential to treat other cancers, including prostate,
    bladder and ovarian cancers.
    RNAi Products.  We believe that certain human
    diseases can potentially be treated by silencing targeted genes
    that lead to disease. While no therapeutic RNAi products have
    been approved by the FDA to date, there has been significant
    interest and growth in the field of RNAi therapeutic
    development. This growth is driven by the potential ability to
    use RNAi to rapidly develop lead compounds that 40




---



##### Table of Contents



specifically and selectively inhibit a target gene, many of
    which are thought to be undruggable by other modalities.
    RXI-109, our first RNAi product candidate, is a dermal
    anti-scarring therapy that targets CTGF (connective tissue
    growth factor). We are currently working towards filing an
    investigational new drug application (IND) for
    RXI-109 in the second half of 2011 and commencing a Phase I
    clinical trial in the first half of 2012. We intend to maintain
    our core RNAi discovery and development capability to advance
    current collaborations, as well as enable alliances. We believe
    that RXI-109 may be able to treat other indications, including
    pulmonary fibrosis, liver fibrosis, acute spinal injury, ocular
    scarring and restinosis.  Background
    on the Company and Recent Change in Strategic Focus
        Research
    and Development
         41




---



##### Table of Contents




    Our ability to advance product candidates into pre-clinical
    research and clinical trials;
    The scope and rate of progress of our pre-clinical program and
    other research and development activities;
    The scope, rate of progress and cost of any clinical trials we
    commence;
    The cost of filing, prosecuting, defending and enforcing patent
    claims and other intellectual property rights;
    Clinical trial results;
    The terms and timing of any collaborative, licensing and other
    arrangements that we may establish;
    The cost and timing of regulatory approvals;
    The cost of establishing clinical and commercial supplies of our
    product candidates and any products that we may develop;
    The cost and timing of establishing sales, marketing and
    distribution capabilities;
    The effect of competing technological and market
    developments; and
    The effect of government regulation and insurance industry
    efforts to control healthcare costs through reimbursement policy
    and other cost management strategies.    License
    Agreements
      Critical
    Accounting Policies and Estimates
  Use of
    Estimates
   42




---



##### Table of Contents



Research
    and Development Expenses
    Stock-Based
    Compensation
  Compensation 
    Stock Compensation
  505-50 505-50), Equity Based Payments to Non- Employees.
    2010

2009Weighted average risk free interest rate

1.88% - 3.28%

1.55% - 3.91%Weighted average volatility

118.3% - 133.62%

116.72% - 122.93%Expected lives (years)

6 - 10

6 - 10Expected dividend yield

0%

0%      43




---



##### Table of Contents



Valuation
    of Common Stock
    Derivative
    Financial Instruments
    815-40, Derivatives and Hedging  Contracts in
    Entitys Own Stock 815-40),
  Results
    of Operations
    Revenue
    Research
    and Development Expense (in thousands)
  For the Years Ended December 31,2010


2009Research and development expense

$
6,046


$
6,728Research and development employee stock-based compensation
    expense


1,084



867Research and development non-employee stock-based compensation
    expense


743



1,297Total research and development expense

$
7,873


$
8,892      44




---



##### Table of Contents



Research
    and Development Non-Employee Stock-Based Compensation
    Expense
    General
    and Administrative Expense (in thousands)
  For the Years EndedDecember 31,2010


2009General and administrative expenses

$
5,493


$
5,483Common stock warrants issued for general and administrative
    expense


718



826Fair value of common stock issued in exchange for general and
    administrative expenses






281Common stock and stock options issued for general and
    administrative expense


2,541



2,038Total general and administrative expense

$
8,752


$
8,628         Interest
    Income (Expense)
   45




---



##### Table of Contents



Other
    Income (expense)
    For the Years Ended December 31,2010


2009Change in fair value of common stock warrants issued

$
3,049


$
(858
)Reduction of potential redemption liability


785



Other income


793



(4
)Other income (expense), net

$
4,627


$
(862
)     Income
    Taxes
    Liquidity
    and Capital Resources
         46




---



##### Table of Contents



Net
    Cash Flow from Operating Activities
    Net
    Cash Flow from Investing Activities
    Net
    Cash Flow from Financing Activities
    Recently
    Issued Accounting Standards
  Business
    Combinations and/or
  No. 2010-06, Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements 2010-06.
  No. 2009-17, Consolidations (Topic 810): Improvements to Financial
    Reporting by Enterprises Involved with Variable Interest
    Entities 2009-17.
 47




---



##### Table of Contents



No. 2010-09, Subsequent Events (Topic 855) Amendments to Certain
    Recognition and Disclosure Requirements (Update
    No. 2010-09).
  2010-29, Business Combinations (Topic 805) - Disclosure of
    Supplementary Pro Forma Information for Business
    Combinations No. 2010-29).
  Off-Balance
    Sheet Arrangements
  Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Other Form 10-K
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK    48




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    Page No.Index to Financial StatementsReport of Independent Registered Public
    Accounting Firm


50Balance Sheets as of December 31, 2010 and
    2009


51Statements of Expenses for the years ended
    December 31, 2010 and 2009 and the cumulative period from
    inception (January 1, 2003) through December 31,
    2010


52Statements of Stockholders Equity for the
    period from April 3, 2006 through December 31, 2010
    and Parent Companys Net Deficit for the period from
    December 31 2003 through December 31, 2006


53Statements of Cash Flows for the years ended
    December 31, 2010 and 2009 and the cumulative period from
    inception (January 1, 2003) through December 31,
    2010


56Notes to Financial Statements


58   49




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            
    50




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
    (A Development Stage Company)BALANCE SHEETS
  December 31,2010


2009(Amounts in thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
6,891


$
5,684Prepaid expenses


150



120Total current assets


7,041



5,804Equipment and furnishings, net of accumulated depreciation and
    amortization of $491 and $320 in 2010 and 2009, respectively


419



432Deposits


16



16Total assets

$
7,476


$
6,252LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
724


$
625Accrued expense and other current liabilities


1,113



1,077Current maturities of capital lease obligations


51



52Warrants potentially settleable in cash


3,138



3,721Total current liabilities


5,026



5,475Capital lease obligations, net of current maturities


20



36Total liabilities


5,046



5,511Commitments and contingencies (Notes 6, 8, 14 & 15)Stockholders equity:Preferred stock, $0.0001 par value; 5,000,000 shares
    authorized; no shares issued and outstanding






Common stock, $0.0001 par value; 50,000,000 shares
    authorized; 19,047,759 shares issued and
    18,372,759 shares outstanding and 16,207,625 shares
    issued and outstanding at December 31, 2010 and 2009,
    respectively


2



2Additional paid-in capital


62,020



44,489Deficit accumulated during the developmental stage


(55,743
)


(43,750
)Less treasury shares at cost, 675,000 and 0 shares at
    December 31, 2010 and December 31, 2009, respectively


(3,849
)


Total stockholders equity


2,430



741Total liabilities and stockholders equity

$
7,476


$
6,252    51




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
    (A Development Stage Company)
  STATEMENTS OF EXPENSES
  Period fromJanuary 1,2003 (Date ofYear Ended


Year Ended


Inception) toDecember 31,


December 31,


December 31,2010


2009


2010(Amounts in thousands, except share and per share data)Expenses:Research and development expense

$
6,046


$
6,728


$
26,683Research and development employee stock-based compensation
    expense


1,084



867



2,407Research and development non-employee stock-based compensation
    expense


743



1,297



6,063Fair value of common stock issued in exchange for licensing
    rights










3,954Total research and development expense


7,873



8,892



39,107General and administrative expense


5,493



5,483



21,110Fair value of common stock warrants issued for general and
    administrative expense


718



826



2,294Fair value of common stock issued in exchange for general and
    administrative expenses






281



281General and administrative employee stock-based compensation
    expense


2,541



2,038



7,385Total general and administrative expense


8,752



8,628



31,070Total operating expenses


(16,625
)


(17,520
)


(70,177
)Interest income (expense)


5



(5
)


628Other income (expense)


4,627



(862
)


3,765Loss before provision for income taxes


(11,993
)


(18,387
)


(65,784
)Provision for income taxes










Net loss

$
(11,993
)

$
(18,387
)

$
(65,784
)Net loss per common share:Basic and diluted loss per share

$
(0.67
)

$
(1.24
)Weighted average common shares outstanding: basic and diluted


17,883,381



14,796,541    52




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
    (A Development Stage Company)STATEMENTS OF STOCKHOLDERS
    EQUITY FOR THE PERIOD FROM APRIL 3, 2006 TODECEMBER 31, 2010 AND PARENT
    COMPANYS NET DEFICIT FOR THE PERIOD
    FROM DECEMBER 31, 2003 TO DECEMBER 31, 2006
  DeficitAccumulatedAdditional


During





ParentCommon Stock


Paid-In


Development


Treasury


CompanysShares Issued


Amount


Capital


Stage


Stock


Net Deficit


Total(Amounts in thousands, except share and per share data)PredecessorBalance at December 31, 2003





$



$











$
(89
)

$
(89
)Net loss






















(3,272
)


(3,272
)Net transactions with Parent






















2,393



2,393Balance at December 31, 2004






















(968
)


(968
)Net loss






















(2,209
)


(2,209
)Net transactions with Parent






















2,727



2,727Balance at December 31, 2005






















(450
)


(450
)Net loss






















(2,405
)


(2,405
)Net transactions with Parent






















2,587



2,587Balance at December 31, 2006





$



$











$
(268
)

$
(268
)SuccessorBalance at April 3, 2006





$



$



$



$







$
Issuance of common stock


1,624,278







2















2Balance at December 31, 2006


1,624,278







2















2Common stock issued to CytRx for contribution of RXi and other
    assets


7,040,318



1



47















48Common stock issued for cash


3,273,292







15,348















15,348Common stock issued to CytRx for reimbursement of expenses


188,387







978















978Expenses incurred by CytRx for RXi










831















831Common stock issued to UMMS for additional intellectual
    properties


462,112







2,311















2,311Common stock issued to directors


30,000







150















150Common stock issued upon exercise of stock options


66,045







331















331Stock based compensation for directors and employees










1,048















1,048Stock based compensation expense for services










766















766Net loss














(10,990
)










(10,990
)Balance at December 31, 2007


12,684,432



1



21,812



(10,990
)










10,823 53




---



##### Table of Contents



DeficitAccumulatedAdditional


During





ParentCommon Stock


Paid-In


Development


Treasury


CompanysShares Issued


Amount


Capital


Stage


Stock


Net Deficit


Total(Amounts in thousands, except share and per share data)Issuance of common stock, net of offering costs of $796


1,073,299







7,918















7,918Common stock issued upon exercise of stock options


5,500







26















26Stock based compensation for directors and employees










2,211















2,211Stock based compensation expense for services










1,613















1,613Common stock warrant expense in exchange for services










750















750Net loss














(14,373
)










(14,373
)Balance at December 31, 2008


13,763,231



1



34,330



(25,363
)










8,968Issuance of common stock, net of offering costs of $636


2,385,715



1



7,713















7,714Common stock warrants issued in connection with the 2009 Offering










(2,863
)














(2,863
)Common stock issued upon exercise of stock options


281























Common stock issued as commitment fee in connection with SEDA


58,398







281















281Stock based compensation expense for directors and employees










2,906















2,906Stock based compensation expense for services










1,296















1,296Common stock warrant expense in exchange for services










826















826Net loss














(18,387
)










(18,387
)Balance at December 31, 2009


16,207,625



2



44,489



(43,750
)










741Issuance of common stock, net of offering costs of $965


2,700,000







15,235















15,235Purchase of 675,000 shares of treasury stock


















(3,849
)






(3,849
)Common stock warrants issued in connection with 2010 offering










(2,466
)














(2,466
)Fair value of shares mandatorily redeemable for cash upon
    exercise of warrants










(785
)














(785
)Common stock issued upon exercise of stock options


53,500







254















254 54




---



##### Table of Contents



DeficitAccumulatedAdditional


During





ParentCommon Stock


Paid-In


Development


Treasury


CompanysShares Issued


Amount


Capital


Stage


Stock


Net Deficit


Total(Amounts in thousands, except share and per share data)Issuance of restricted stock units


86,634







207















207Stock based compensation expense for directors and employees










3,625















3,625Stock based compensation expense for services










743















743Value of common stock warrants issued in exchange for services










718















718Net loss














(11,993
)










(11,993
)Balance at December 31, 2010


19,047,759


$
2


$
62,020


$
(55,743
)

$
(3,849
)





$
2,430    55




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
    (A Development Stage Company)STATEMENTS OF CASH FLOWS
  Period fromJanuary 1,2003 (Date ofInception)Year Ended


Year Ended


throughDecember 31,


December 31,


December 31,2010


2009


2010(Amounts in thousands)Cash flows from operating activities:Net loss

$
(11,993
)

$
(18,387
)

$
(65,784
)Adjustment to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization expense


172



162



501Loss on disposal of equipment






4



12Non-cash rent expense










29Accretion and receipt of bond discount










35Non-cash share based compensation


4,368



4,202



15,857Fair value of shares mandatorily redeemable for cash upon
    exercise of warrants


(785
)






(785
)Fair value of common stock warrants issued in exchange for
    services


718



826



2,294Fair value of common stock issued in exchange for services






281



281Change in fair value of common stock warrants issued


(3,049
)


858



(2,191
)Fair value of common stock issued in exchange for licensing
    rights










3,954Changes in operating assets and liabilities:Prepaid expenses


(30
)


(47
)


(150
)Accounts payable


99



231



724Due to former parent










(207
)Accrued expenses and other current liabilities


243



101



1,320Net cash used in operating activities


(10,257
)


(11,769
)


(44,110
)Cash flows from investing activities:Purchase of short-term investments


(5,990
)






(37,532
)Maturities of short-term investments


5,990







37,497Cash paid for purchase of equipment and furnishings


(106
)


(82
)


(686
)Disposal of equipment and furnishings






(1
)


(1
)Cash refunded (paid) for lease deposit










(45
)Net cash used in investing activities


(106
)


(83
)


(767
)Cash flows from financing activities:Net proceeds from 2010 registered direct offering


15,235



7,714



46,367Repurchase of treasury stock


(3,849
)






(3,849
)Net proceeds from exercise of common stock options


254







610Repayments of capital lease obligations


(70
)


(34
)


(126
)Cash advances from Parent, net










8,766Net cash provided by financing activities


11,570



7,680



51,768Net increase in cash and cash equivalents


1,207



(4,172
)


6,891Cash and cash equivalents at the beginning of period


5,684



9,856



Cash and cash equivalents at end of period

$
6,891


$
5,684


$
6,891Supplemental disclosure of cash flow information:Cash received during the periods for interest

$



$
1


$
724Cash paid during the periods for interest

$



$



$
7 56




---



##### Table of Contents



Period fromJanuary 1,2003 (Date ofInception)Year Ended


Year Ended


throughDecember 31,


December 31,


December 31,2010


2009


2010(Amounts in thousands)Supplemental disclosure of non-cash investing and financing
    activities:Settlement of corporate formation expenses in exchange for
    common stock

$



$



$
978Fair value of warrants issued in connection with common stock
    recorded as cost of equity

$
2,466


$
2,863


$
5,329Fair value of shares mandatorily redeemable for cash upon
    exercise of warrants

$
785


$



$
785Allocation of management expenses

$



$



$
551Equipment and furnishings exchanged for common stock

$



$



$
48Equipment and furnishings acquired through capital lease

$
53


$
101


$
197Non-cash lease deposit

$



$



$
50Value of restricted stock units issued in lieu of cash bonuses

$
207


$



$
207    57




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
    (A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
  1.
    Nature of
    Business                 58




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
           59




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      2.
    Summary
    of Significant Accounting Policies  Uses of estimates in preparation of financial
    statements
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
  Equipment and Furnishings
    Impairment of Long-Lived Assets
  Patents and Patent Application Costs
  Share-based Compensation Compensation 
    Stock Compensation
 60




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  505-50 505-50), Equity Based Payments to Non- Employees
    Derivative Financial Instruments
  815-40, Derivatives and Hedging  Contracts in
    Entitys Own Stock,
  Obligations to Repurchase Shares of the Companys Equity
    Securities 480-10, Distinguishing Liabilities from Equity,
  Research and Development Expenses
  Income Taxes ASC 740-10, Accounting for Income Taxes (ASC
    740-10). ASC
    740-10
 61




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Concentrations of Credit Risk
  Comprehensive Loss
  Parent Companys Net Deficit
  3.
    Recent
    Accounting Pronouncements  Business Combinations and/or
  No. 2010-06, Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements 2010-06.
  No. 2009-17, Consolidations (Topic 810): Improvements to Financial
    Reporting by Enterprises Involved with Variable Interest
    Entities 2009-17.
 62




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    No. 2010-09, Subsequent Events (Topic 855) Amendments to Certain
    Recognition and Disclosure Requirements (Update
    No. 2010-09).
  2010-29, Business Combinations (Topic 805) - Disclosure of
    Supplementary Pro Forma Information for Business
    Combinations No. 2010-29).
  4.
    Fair
    Value Measurements  2010-06, Improving Disclosures about Fair Value
    Measurements 2010-06). Fair Value
    Measurements and Disclosures 2010-06
           63




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Quoted Prices in


Significant OtherDecember 31,


Active Markets


Observable Inputs


Unobservable InputsDescription

2010


(Level 1)


(Level 2)


(Level 3)Assets:Cash equivalents

$
6,891


$
6,891


$



$
Total assets

$
6,891


$
6,891


$



$
Liabilities:Warrants potentially settleable in cash

$
3,138


$



$
3,138


$
Total liabilities

$
3,138


$



$
3,138


$
   Quoted Prices in


Significant OtherDecember 31,


Active Markets


Observable Inputs


Unobservable InputsDescription

2019


(Level 1)


(Level 2)


(Level 3)Assets:Cash equivalents

$
5,684


$
5,684


$



$
Total assets

$
5,684


$
5,684


$



$
Liabilities:Warrants potentially settleable in cash


3,721







3,721



Total liabilities

$
3,721


$



$
3,721


$
   5.
    Deposits    6.
    Capital
    Lease Obligations   64




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  7.
    Accrued
    Expenses and Other Current Liabilities    For the YearsEndedDecember 31,2010


2009Professional fees

$
313


$
390Research and development costs


60



28Payroll related costs


740



659Total accrued expenses and other current liabilities

$
1,113


$
1,077   8.
    Commitments
    and Contingencies      Non-Cancelable





CancelableOperating


Employment





LicenseLeases(1)


Agreements(2)


Subtotal


Agreements(3)


Total(In thousands)2011

$
219


$
1,289


$
1,508


$
535


$
2,0432012


19



333



352



2,068



2,4202013


0



0







875



8752014


0



0







930



9302015


0



0







1,400



1,4002016 and Thereafter


0



0







14,215



14,215Total

$
238


$
1,622


$
1,860


$
20,023


$
21,883   (1)
    
    Operating leases are primarily facility and equipment related
    obligations with third party vendors. Operating lease expenses
    during the years ended December 31, 2010 and 2009 were
    approximately $274,000 and $260,000, respectively.(2)
    
    Employment agreement obligations include management contracts,
    as well as scientific advisory board member compensation
    agreements. Certain agreements, which have been revised from
    time to time, provide for minimum salary levels, adjusted
    annually at the discretion of the Compensation Committee, as
    well as for minimum bonuses that are payable.(3)
    
    License agreements generally relate to the Companys
    obligations with UMMS associated with RNAi and, for future
    periods, represent minimum annual royalty and milestone payment
    obligations, of the total 65




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  amount due $2,250,000 can be paid in equity, provided that the
    securities are registered for resale at the time of such
    payment. The Company continually assesses the progress of its
    licensed technology and the progress of its research and
    development efforts as it relates to its licensed technology and
    may terminate with notice to the licensor at any time. In the
    event these licenses are terminated, no amounts will be due.  Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Other
  9.
    Stockholders
    Equity  Preferred Stock
  Common Stock Warrants ASC 505-50.
     66




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  505-50.
      Private Investment in Public Equity
  2009 Registered Direct Offering
    815-40,
 67




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    2010 Registered Direct Offering
       68




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        10.
    Development
    Stage Supplemental Equity Disclosure    Price perShare orDollar


ExerciseShares of


Amount of


Price per


Counter

Nature ofCommon


Consideration


Share


Party to

Non-Cash

Basis ofType of Security

Date of Issuance

Stock


($)


($)


Transaction

Consideration

Assigning CostCommon Stock

April 3, 2006


1,624,278



2



0.002


Founders

NA

CashCommon Stock

January 8, 2007


7.040,318



48
(A)


0.007


CytRx

Contributed
    Assets

Predecessor
    CostCommon Stock

April 30, 2007


3,273,292



15,348
(B)


5.19


CytRx

NA

CashCommon Stock

April 30, 2007


462,112



2,311



5.00


UMMS

Intellectual
    Properties

Independent
    Third Party
    ValuationCommon Stock

August 18, 2007


30,000



150



5.00


Directors



CashCommon Stock

September 28, 2007


188,387



978



5.19


CytRx

NA

Independent
    Third Party
    ValuationCommon Stock

November 21, 2007


66,045



331



5.00


Exercise of
    Stock Options

NA

CashCommon Stock

June 26, 2008


1,073,299



7,918



8.12


PIPE

NA

Net CashCommon Stock

October 6, 2008 and
    November 16, 2008


5,500



26



5.00


Exercise of
    Stock Options

NA

CashCommon Stock

January 30, 2009


58,398



NA



NA




NA

Market ValueCommon Stock

May 1, 2009


281



NA



4.19


Exercise of
    Stock Options

NA

CashCommon Stock

August 3, 2009 and
    August 4, 2009


2,385,715



7,714



3.50


Registered Direct

NA

Net CashCommon Stock

March 22, 2010


2,700,000



15,235



6.00


Registered Direct

NA

Net CashCommon Stock

Various  2010


53,500



254



4.75


Exercise of
    Stock Options

NA

CashCommon Stock

January 2, 2010 and
    February 9, 2010


86,634



207



NA


Restricted Stock Units

NA

Market Value  69




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  (A)
    
    Transactions between related parties are accounted for at the
    historical cost of CytRx, with the intellectual property which
    was previously expensed on CytRxs books being recorded at
    zero cost and equipment and furnishings being recorded at
    $48,000.(B)
    
    RXi received gross proceeds of $17.0 million for the
    issuance of the 3,273,292 shares of common stock which
    equals $5.19 per share. The gross proceeds were reduced by a
    reimbursement to CytRx of (1) $1.3 million for
    RXis pro rata share of offering costs related to the
    April 17, 2007 private placement conducted by CytRx to fund
    its capital contribution to the Company and (2) $363,000 of
    expenses incurred on behalf of RXi for the year ended
    December 31, 2006. Net proceeds to RXi after these charges
    were $15.3 million or $4.69 a share.  11.
    Stock
    Based Compensation  Options to Purchase Shares of Common Stock
  505-50
    2010

2009Weighted average risk free interest rate

1.88% -  3.28%

1.55% - 3.91%Weighted average volatility

118.3% - 133.62%

116.72% - 122.93%Expected lives (years)

6 - 10

6 - 10Expected dividend yield

0%

0%      70




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          WeightedStock


AverageOptions


Exercise PriceOutstanding  January 1, 2009


2,223,452


$
6.11Granted


1,622,546



3.84Exercised


(281
)


4.19Forfeited


(263,378
)


5.05Outstanding  December 31, 2009


3,582,339



5.16Granted


926,768



4.81Exercised


(53,500
)


4.75Forfeited


(122,471
)


4.85Outstanding  December 31, 2010


4,333,136



5.10Exercisable  December 31, 2009


2,131,298



5.42Exercisable  December 31, 2010


3,155,900



5.22  71




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Weighted AverageStock


Grant Date FairOptions


Value per ShareNon-vested at January 1, 2009


987,265


$
5.15Granted


1,622,546



3.44Vested


(895,111
)


4.27Exercised


(281
)


3.71Pre-vested forfeitures


(263,378
)


4.07Non-vested at December 31, 2009


1,451,041



3.94Granted


926,768



4.31Vested


(1,024,602
)


4.06Exercised


(53,500
)


3.31Pre-vested forfeitures


(122,471
)


4.54Non-vested at December 31, 2010


1,177,236


$
4.01         Restricted Stock Units
    12.
    Net Loss
    Per Share  Earnings per
    Share.
 72




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    December 31,2010


2009Options to purchase common stock


4,333,136



3,582,339Restricted stock units






48,500Warrants to purchase common stock


2,100,642



1,310,642Total


6,433,778



4,941,481   13.
    Income
    Taxes    As of December 31,2010


2009CurrentFederal

$



$
State






DeferredFederal


4,853



(5,533
)State


1,283



(2,257
)Total deferred


6,136



(7,790
)Valuation allowance


6,136



7,790Total income tax expense

$



$
     As of December 31,2010


2009Net operating loss carryforwards

$
13,328


$
10,348Tax credit carryforwards


1,061



753Stock based compensation


5,864



4,222Other


104



74Licensing deduction deferral


3,264



2,089Gross deferred tax assets


23,621



17,486Valuation allowance


(23,621
)


(17,486
)Net deferred tax asset

$



$
  73




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    As of December 31,2010


2009Expected federal income tax benefit

$
(4,078
)

$
(6,252
)Non-qualified stock compensation


(1,236
)


621Effect of change in valuation allowance


6,136



6,103Income tax credits


(231
)


821State income taxes after credits


(994
)


(324
)Other


403



(969
)$



$
         ASC 740, ASC
    740-10
    14.
    License
    Agreements   74




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          and/or and/or
   75




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    paid-up
  15.
    Related
    Party Transactions       76




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      16.
    Employee
    Benefit Plan    17.
    Subsequent
    Events       77




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
                 78




---



##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Form S-3
      (in 000s)Calculation of allocable purchase price(i):Fair value of shares issued at closing including escrowed shares
    expected to be released

$
6,317
(ii)Estimated value of earn-out


3,194Total allocable purchase price

$
9,511Estimated allocation of purchase price(i):Cash

$
20Prepaid expenses and other current assets


7Equipment and furnishings


13Goodwill


2,214In-process research and development


9,637Accounts payable


(1,299
)Accrued expenses and other current liabilities


(720
)Notes payable


(361
)$
9,511     (i)
    
    The purchase price has not been finalized and is subject to
    change upon completion of the valuation of intangible assets(ii)
    
    The value of the Companys common stock was based upon a
    per share value of $1.27, the closing price of the
    Companys common stock as of the close of business on
    April 13, 2011. 79




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##### Table of Contents



RXi
    PHARMACEUTICALS CORPORATION
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
     Year Ended December 31,(unaudited)2010


2009Net loss


(14,244
)


(20,275
)Net loss per common share


$(0.62
)


$(1.03
)Weighted average shares outstanding


22,287,471



19,770,631        80




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURES.    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Rules 13a-15(e) 15d-15(e)
    Evaluation
    of Disclosure Controls and Procedure Managements report on
    Internal Control over Financial Reporting
  Rule 13a-15(f).
      ITEM 9B.
    OTHER
    INFORMATION   81




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##### Table of Contents



PART III  ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.    ITEM 13.
    CERTAIN
    RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
  Form 10-K,
  Financial Statement Schedules
    Exhibits
  Form 10-K.
 82




---



##### Table of Contents



SIGNATURES      By:
    /s/  Mark
    J. Ahn          Signatures

Title

Date/s/  Mark
    J. AhnMark
    J. Ahn, Ph.D.

President, Chief Executive Officer and Director (Principal
    Executive Officer)

April 15, 2011/s/  Caitlin
    KontulisCaitlin
    Kontulis

Principal Accounting Officer 
    (Principal Financial Officer and 
    Accounting Officer)

April 15, 2011/s/  Sanford
    J. HillsbergSanford
    J. Hillsberg

Director

April 15, 2011/s/  Richard
    ChinRichard
    Chin

Director

April 15, 2011/s/  Stephen
    S. GallikerStephen
    S. Galliker

Director

April 15, 2011/s/  Steven
    A. KriegsmanSteven
    A. Kriegsman

Director

April 15, 2011/s/  Rudolph
    NisiRudolph
    Nisi

Director

April 15, 2011  83




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description2
.1

Contribution Agreement between CytRx Corporation and RXi
    Pharmaceuticals Corporation, dated January 8, 2007(1)2
.2

Contribution Agreement between CytRx Corporation and RXi
    Pharmaceuticals Corporation, dated April 30, 2007(1)3
.1

Form of Amended and Restated Certificate of Incorporation of RXi
    Pharmaceuticals Corporation(1)3
.2

Form of Amended and Restated By-laws of RXi Pharmaceuticals
    Corporation(1)4
.1

Specimen common stock certificate(3)4
.2

Stockholders Agreement between CytRx Corporation, RXi
    Pharmaceuticals Corporation, the other Stockholders and the
    Scientific Advisory Board Members, dated February 23,
    2007(1)4
.3

Annex I to form of Subscription Agreement 
    Registration Rights Terms between RXi Pharmaceuticals
    Corporation and Stephen Galliker, Mark Ahn and Sanford
    Hillsberg(1)4
.4

Form of Securities Purchase Agreement between RXi
    Pharmaceuticals Corporation and various investors, dated
    June 24, 2008(5)4
.5

Amendment to Stockholders Agreement between CytRx Corporation,
    RXi Pharmaceuticals Corporation, the Stockholders and the
    Scientific Advisory Board Members, dated July 28, 2008(6)4
.6

Warrant
    No. A-1
    in favor of J.P. Turner Partners, dated August 7, 2008(8)4
.7

Form of Common Stock Purchase Warrant dated July 31,
    2009(11)4
.8

Form of Warrant issued in August 2009(11)4
.9

Form of Common Stock Purchase Warrant issued in March 2010(13)4
.10

Form of
    13-Month
    Common Stock Purchase Warrant issued in March 2011(15)4
.11

Form of
    Five-Year
    Common Stock Purchase Warrant issued in March 2011(15)4
.12

Form of Common Stock Purchase Warrant issued in April 2011(17)10
.1

Voting Agreement between CytRx Corporation and the University of
    Massachusetts Medical School, dated January 10, 2007(1)10
.2

Form of Securities Purchase Agreement between RXi
    Pharmaceuticals Corporation and various investors, dated
    July 31, 2009(11)10
.3

Form of Contingent Value Rights Agreement among RXi
    Pharmaceuticals Corporation, Computershare Trust Company, N.A.,
    Computershare Inc., and Robert E Kennedy, dated April 13,
    2011(16)10
.4

Exclusive License Agreement (No.: UMMC
    06-21-01)
    between the University of Massachusetts and RXi Pharmaceuticals
    Corporation, dated January 10, 2007+(2)10
.5

Exclusive License Agreement (No.: UMMC
    03-75-01)
    between the University of Massachusetts and RXi Pharmaceuticals
    Corporation, dated January 10, 2007+(2)10
.6

Non-Exclusive License Agreement (No.: UMMC
    06-08-03)
    between the University of Massachusetts and RXi Pharmaceuticals
    Corporation, dated January 10, 2007+(2)10
.7

Non-Exclusive License Agreement, between CytRx Corporation and
    the University of Massachusetts Medical School related to UMMS
    disclosure number
    01-36, dated
    April 15, 2003, as amended February 1, 2004+(2)10
.8

Exclusive License Agreement between CytRx Corporation and the
    University of Massachusetts Medical School related to UMMS
    disclosure number
    02-01, dated
    April 15, 2003, as amended September 10, 2004+(2)10
.9

Amended and Restated Exclusive License Agreement between CytRx
    Corporation and the University of Massachusetts Medical School
    related to UMMS disclosure number
    03-05,
    00-37,
    01-31,
    03-134,
    93-09 and
    02-38, dated
    September 15, 2003, as amended September 17, 2003 and
    February 1, 2004+(2)10
.10

Exclusive License Agreement between CytRx Corporation and the
    University of Massachusetts Medical School related to UMMS
    disclosure number
    03-17, dated
    April 15, 2003, as amended January 7, 2004 and
    February 1, 2004+(2)10
.11

Employment Agreement between RXi Pharmaceuticals Corporation and
    Pamela Pavco, dated March 7, 2007*(1)10
.12

Employment Agreement between RXi Pharmaceuticals Corporation and
    Anastasia Khvorova, dated October 17, 2008*(9)10
.13

Employment Agreement between RXi Pharmaceuticals and Mark Ahn,
    dated March 31, 2011*(16) 84




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##### Table of Contents



ExhibitNumber

Description10
.14

RXI Pharmaceuticals Corporations Amended and Restated 2007
    Incentive Plan*(14)10
.15

Form of Incentive Stock Option*(1)10
.16

Form of Non-qualified Stock Option*(2)10
.17

Lease between RXi Pharmaceuticals Corporation and Newgate
    Properties, LLC for One Gateway Place, Worcester, Massachusetts
    01605, dated September 25, 2007(3)10
.18

Amendment to Lease between RXi Pharmaceuticals Corporation and
    Newgate Properties, LLC for One Gateway Place, Worcester,
    Massachusetts 01605, dated January 23, 2009(8)10
.19

Amendment to Lease between RXi Pharmaceuticals Corporation and
    Newgate Properties, LLC for One Gateway Place, Worcester,
    Massachusetts 01605, dated March 5, 2009(10)10
.20

Form of Subscription Agreement between RXi Pharmaceuticals
    Corporation and each of Mark K. Ahn, Ph.D., Stephen S.
    Galliker and Sanford J. Hillsberg(3)10
.21

Scientific Advisory Board Agreement between RXi Pharmaceuticals
    Corporation and Tariq Rana, Ph.D., dated February 26,
    2007 and corresponding Letter Agreement, dated April 30,
    2007(3)10
.22

Scientific Advisory Board Agreement between RXi Pharmaceuticals
    Corporation and Gregory Hannon, Ph.D., dated
    February 26, 2007 and corresponding Letter Agreement dated
    April 30, 2007(3)10
.23

Scientific Advisory Board Agreement between RXi Pharmaceuticals
    Corporation and Michael Czech, Ph.D., dated
    February 26, 2007 and corresponding Letter Agreement dated
    April 30, 2007(3)10
.24

Scientific Advisory Board Agreement between RXi Pharmaceuticals
    Corporation and Craig C. Mello, Ph.D., dated
    February 26, 2007 and corresponding Letter Agreement dated
    April 30, 2007(3)10
.25

Letter Agreement between CytRx Corporation and RXi
    Pharmaceuticals Corporation, dated December 27, 2007(3)10
.26

Patent License Agreement between RXi Pharmaceuticals Corporation
    and Invitrogen IP Holdings, Inc. dated November 1, 2007(4)10
.27

Patent and Technology Assignment Agreement between RXi
    Pharmaceuticals Corporation and Advirna, LLC dated
    September 21, 2009+(12)14
.1

Code of Conduct(5)21
.1

Subsidiaries of the Registrant23
.1

Consent of BDO USA, LLP, Independent Registered Public
    Accounting Firm31
.1

Sarbanes-Oxley Act Section 302 Certification of Mark J. Ahn31
.2

Sarbanes-Oxley Act Section 302 Certification of Caitlin
    Kontulis32
.1

Sarbanes-Oxley Act Section 906 Certification of Mark J. Ahn
    and Caitlin Kontulis     (1)
    
    Previously filed as an Exhibit to the Companys
    Registration Statement on
    Form S-1
    filed on October 30, 2007 (File
    No. 333-147009)
    and incorporated by reference herein(2)
    
    Previously filed as an Exhibit to Amendment No. 1 to the
    Companys Registration Statement on
    Form S-1
    filed on November 19, 2007(File
    No. 333-147009)
    and incorporated by reference herein.(3)
    
    Previously filed as an Exhibit to Amendment No. 2 to the
    Companys Registration Statement on
    Form S-1
    filed on January 20, 2008 (File
    No. 333-147009)
    and incorporated by reference herein.(4)
    
    Previously filed as an Exhibit to Amendment No. 3 to the
    Companys Registration Statement on
    Form S-1
    filed on February 1, 2008 (File
    No. 333-147009)
    and incorporated by reference herein.(5)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K
    filed on June 26, 2008 (File No.
    001-33958)
    and incorporated by reference herein.(6)
    
    Previously filed as an Exhibit to Amendment No. 1 to the
    Companys Registration Statement on
    Form S-1
    filed on August 4, 2008 (File
    No. 333-152555)
    and incorporated by reference herein.(7)
    
    Previously filed as an Exhibit to the Companys
    Form 10-Q
    filed on November 14, 2008
    (File No. 001-33958)
    and incorporated by reference herein.(8)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K
    filed on January 23, 2009
    (File No. 001-33958)
    and incorporated by reference herein.(9)
    
    Previously filed as an Exhibit to the Companys
    Form 10-K
    filed on March 18, 2009
    (File No. 001-33958)
    and incorporated by reference herein. 85




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##### Table of Contents



(10)
    
    Previously filed as an Exhibit to the Companys
    Form 10-Q
    filed on May 15, 2009
    (File No. 001-33958)
    and incorporated by reference herein.(11)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K
    filed on July 31, 2009 (File No.
    001-33958)
    and incorporated by reference herein.(12)
    
    Previously filed as an Exhibit to the Companys
    Form 10-Q
    filed on November 16, 2009
    (File No. 001-33958)
    and incorporated by reference herein.(13)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K filed on March 23, 2010 (File
    No. 001-33958)
    and incorporated by reference herein.(14)
    
    Previously filed as Annex A to the Companys Proxy
    Statement on Schedule 14A filed on April 23, 2010
    (File No. 001-33958) and incorporated by reference herein.(15)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K filed on March 1, 2011 (File
    No. 001-33958) and incorporated by reference herein.(16)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K filed on April 5, 2011 (File
    No. 001-33958) and incorporated by reference herein.(17)
    
    Previously filed as an Exhibit to the Companys
    Form 8-K filed on April 14, 2011 (File
    No. 001-33958) and incorporated by reference herein.*
    
    Indicates a management contract or compensatory plan or
    arrangement.+
    
    This exhibit was filed separately with the Commission pursuant
    to an application for confidential treatment. The confidential
    portions of the exhibit have been omitted and have been marked
    by an asterisk. 86