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<SEC-DOCUMENT>0000950123-11-020615.txt : 20110301
<SEC-HEADER>0000950123-11-020615.hdr.sgml : 20110301
<ACCEPTANCE-DATETIME>20110301155420
ACCESSION NUMBER:		0000950123-11-020615
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20110301
DATE AS OF CHANGE:		20110301

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			RXI PHARMACEUTICALS CORP
		CENTRAL INDEX KEY:			0001390478
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				000000000

	FILING VALUES:
		FORM TYPE:		424B5
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-167025
		FILM NUMBER:		11651522

	BUSINESS ADDRESS:	
		STREET 1:		60 PRESCOTT  STREET
		CITY:			WORCESTER
		STATE:			MA
		ZIP:			01605
		BUSINESS PHONE:		508-767-3861

	MAIL ADDRESS:	
		STREET 1:		60 PRESCOTT  STREET
		CITY:			WORCESTER
		STATE:			MA
		ZIP:			01605
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>b85186pse424b5.htm
<DESCRIPTION>424B5
<TEXT>
<HTML>
<HEAD>
<TITLE>e424b5</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Filed pursuant to Rule&nbsp;424(b)(5)<BR>
Registration No.: 333-167025</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Prospectus Supplement</B><BR>
(To Prospectus dated May&nbsp;21, 2010)

</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 18pt"><B>RXI PHARMACEUTICALS CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><IMG src="b85186psb8518600.gif" alt="(RI LOGO)">
</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>6,000,000&nbsp;Shares of Common Stock<BR>
13-Month Warrants to Purchase 3,000,000&nbsp;Shares of
Common Stock<BR>
Five-Year Warrants to Purchase 3,000,000&nbsp;Shares of
Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are offering 6,000,000&nbsp;shares of our common stock and
warrants to purchase an aggregate of up to 6,000,000&nbsp;shares of our
common stock in this offering (and the shares of common stock issuable from time to time upon
exercise of these warrants). The common stock and warrants will be sold in units, with each unit
consisting of one share of common stock, a 13-month warrant to
purchase 0.50&nbsp;of a share of common stock at an
exercise price of $1.70&nbsp;per share of common stock and a five-year warrant to purchase
0.50&nbsp;of a share of common stock at an
exercise price of $1.87 per share of common
stock. Each unit will be sold at a public offering price of
$1.35&nbsp;per unit. The shares of common stock and warrants will be issued separately but can only be
purchased together in this offering. Units will not be issued or certificated.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Nasdaq Capital Market under the symbol &#147;RXII.&#148; On February
25, 2011, the closing price of our common stock was $1.79 per share.
There is no established public trading market for the warrants, and
we do not expect a market to develop. In addition, we do not intend
to apply for listing of the warrants on any national securities exchange.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our securities involves a high degree of risk. Before buying any securities, you
should read the discussion of material risks of investing in our common stock under the heading
&#147;Risk Factors&#148; beginning on page&nbsp;S-6 of this prospectus supplement and the risk factors described
in the other documents incorporated by reference herein.</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any representation to the contrary is a
criminal offense.</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Per Unit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public offering price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.35&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,100,000&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Underwriting discounts and commissions<SUP style="FONT-size: 85%; vertical-align: text-top">1 </SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.095&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">567,000&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds, before expenses, to us</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.256&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,533,000&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="FONT-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>In addition, we have agreed to reimburse the
underwriters for certain of their expenses as described under &#147;Underwriting&#148; on
page <font style="font-size: 8pt">S-24</font> of this prospectus supplement.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate the expenses of this offering, excluding underwriting discounts and commissions,
will be approximately $175,000.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delivery
of the securities is expected to be made on or about March&nbsp;4, 2011, subject to
the satisfaction of certain conditions.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B><I>Sole Book-Running Manager</I></B>
</DIV>


<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>Lazard Capital Markets</B>
</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B><I>Co-Manager</I></B>
</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>ROTH Capital Partners</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The date
of this prospectus supplement is March&nbsp;1, 2011.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="B85186tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Prospectus supplement</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="right" nowrap>&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186101">About this prospectus supplement</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right" nowrap>S-1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186102">Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186103">Risk factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186104">Note regarding forward-looking statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-20</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186105">Use of proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186106">Dilution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-21</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186107">Description of securities we are offering</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-22</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186108">Underwriting</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-24</TD>
</TR>

<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186108">Legal
matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-28</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186109">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-28</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186110">Where you can find more information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-28</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186111">Incorporation of certain documents by reference</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>S-28</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#B85186108">Annex
A: Form of warrant</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>A-1</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Prospectus</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">About this
prospectus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap align="right">1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk factors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Note regarding forward-looking statements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Use of proceeds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">6</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan of distribution</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">7</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description of preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">10</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Description of debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">11</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal matters</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Experts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">19</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Where you can find more information</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">19</TD>
</TR>




<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px">Incorporation of
certain documents by reference</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">19</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="B85186101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS SUPPLEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This document is part of the registration statement that we filed with the Securities and
Exchange Commission (the &#147;SEC&#148;) using a &#147;shelf&#148; registration process and consists of two parts. The
first part is this prospectus supplement, including the documents incorporated by reference, which
describes the specific terms of this offering. The second part, the accompanying prospectus,
including the documents incorporated by reference, gives more general information, some of which
may not apply to this offering. Generally, when we refer only to the &#147;prospectus,&#148; we are referring
to both parts combined. This prospectus supplement may add to, update or change information in the
accompanying prospectus and the documents incorporated by reference into this prospectus supplement
or the accompanying prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If information in this prospectus supplement is inconsistent with the accompanying prospectus
or with any document incorporated by reference that was filed with the SEC before the date of this
prospectus supplement, you should rely on this prospectus supplement. This prospectus supplement,
the accompanying prospectus and the documents incorporated into each by reference include important
information about us, the shares being offered and other information you should know before
investing in our common shares. You should also read and consider information in the documents we
have referred you to in the section of this prospectus supplement and the accompanying prospectus
entitled &#147;Where you can find more information.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on this prospectus supplement, the accompanying prospectus and the
information incorporated or deemed to be incorporated by reference in this prospectus supplement
and the accompanying prospectus. We have not authorized anyone to provide you with information that
is in addition to or different from that contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not offering to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should not assume that the information
contained or incorporated by reference in this prospectus supplement or the accompanying prospectus
is accurate as of any date other than as of the date of this prospectus supplement or the
accompanying prospectus, as the case may be, or in the case of the documents incorporated by
reference, the date of such documents regardless of the time of delivery of this prospectus
supplement and the accompanying prospectus or any sale of our common shares. Our business,
financial condition, liquidity, results of operations and prospects may have changed since those
dates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references in this prospectus supplement or the accompanying prospectus to &#147;RXi,&#148; the
&#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our&#148; mean RXi Pharmaceuticals Corporation, unless we state otherwise or
the context otherwise requires.
</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->S-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif">



<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">


<DIV align="left">
<A name="B85186102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This summary highlights selected information appearing elsewhere in this prospectus supplement
or in the accompanying prospectus or incorporated by reference in this prospectus supplement and
accompanying prospectus. This summary is not complete and may not contain all of the information that you should consider before investing in our
securities. This prospectus supplement and the accompanying prospectus include or incorporate by
reference information about the securities we are offering as well as information regarding our
business and detailed financial data. You should read this prospectus supplement and the
accompanying prospectus and the information incorporated by reference herein in their entirety,
including the risk factors beginning on page S-6 and the financial statements and related notes
and the form of warrant.</I>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated as Argonaut Pharmaceuticals, Inc. in Delaware on April&nbsp;3, 2006, changed
our name to RXi Pharmaceuticals Corporation on November&nbsp;28, 2006, and began operations in January
2007. Our principal executive offices are located at 60 Prescott Street, Worcester, MA 01605, and
our phone number is (508)&nbsp;767-3861. We are a discovery-stage biopharmaceutical company pursuing
proprietary therapeutics based on RNA interference, or &#147;RNAi&#148;, a naturally occurring cellular
mechanism that has the potential to effectively and selectively interfere with, or &#147;silence&#148;,
expression of targeted disease-associated genes. It is believed that this specific silencing can be
used to potentially treat human diseases by &#147;turning off&#148; 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Therapeutic Platform</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By utilizing our expertise in RNAi and the comprehensive RNAi therapeutic platform that we
have established, we believe we will be able to discover and develop lead compounds and progress
them into and through clinical development for potential commercialization. Our proprietary
therapeutic platform is comprised of two main components:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Novel RNAi Compounds, </I>referred to as rxRNA&#153; compounds, that are distinct from, and we
believe convey significant advantages over classic siRNA (conventionally-designed &#147;small
interfering RNA&#148; 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 <I>in vitro </I>and in pre-clinical <I>in
vivo</i> models. These RNAi compounds include rxRNAori&#153;, rxRNAsolo&#153;<SUP style="FONT-size: 85%; vertical-align: text-top"> </SUP>and sd<I>-</I>rxRNA&#153;, or &#147;self
delivering&#148; RNA. Based on our research we believe that these different, novel siRNA
configurations have various advantages for therapeutic use. These 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Advanced Delivery Technologies </I>that 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&#146;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.</TD>
</TR>

</TABLE>
</DIV>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->S-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Areas of Therapeutic Focus</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While our therapeutic platform has the potential to be broadly applicable to multiple
therapeutic areas, we intend to focus our internal therapeutic development efforts in two main core
areas: fibrosis &#151; dermal anti-scarring and ophthalmology &#151; retinal disorders. We are planning to
identify a product candidate in ophthalmology and advance product
candidates from both core areas into early development and through clinical
proof-of-concept.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD colspan="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Core Areas</I></B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD colspan="4" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently focusing our internal therapeutic development efforts in the following two
core areas:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Fibrosis &#151; Dermal Anti-Scarring. </I>Data with our sd-rxRNA compounds in preliminary
pre-clinical models using local administration to the skin have shown robust delivery and
effective target gene silencing. We have selected a dermal anti-scarring development
candidate, RXI-109, and have targeted filing an IND for the product candidate in the second
half of 2011. Our anticipated success with RNAi therapeutics in anti-scarring may provide additional
opportunities in other dermatology applications as well as in anti-fibrotic indications
including pulmonary fibrosis, liver fibrosis, acute spinal cord injury, ocular scarring and
restenosis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Ophthalmology&#151; Retinal Disorders. </I>We have produced data demonstrating
delivery and effective target gene silencing in animal models in the retina with sd-rxRNA
compounds. By applying our unique technology with existing and novel targets, and
potentially multiple targets, we believe we have the potential to develop next generation
treatments for retinal disorders. Further, we believe that there is opportunity to
potentially improve on existing therapies, extend the time required between doses and
utilize new modes of administration for delivery to the eye. We intend to select a retinal
disorder development candidate in 2011.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD colspan="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strategic Areas</I></B></TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
team has experience targeting genes in many therapeutic areas, and we
believe we will discover many more drug candidates than we can develop with our own resources. We will explore
additional indications and proceed through preclinical development ourselves and with potential
partners, in areas that are of strategic interest to us, including the areas of neurological
disorders and oncology as discussed below.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Neurology &#151; Spinal Cord. </I>We are exploring indications accessible by spinal cord
delivery of sd-rxRNA. Direct dosing to the spinal cord could be used for severe central
nervous system or spinal cord diseases in both orphan and non-orphan indications. We may
also be able to leverage early proof-of-concept studies and collaborations to advance
programs in this area. We intend to advance potential candidates through preclinical
studies and seek potential partners to help support further development.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Oncology &#151; Liver Metastases and Hepatocellular Carcinoma. </I>In the area of oncology, we
will be concentrating initially on liver metastases and hepatocellular carcinoma using
systemic delivery of sd-rxRNA or other rxRNA compounds in combination with delivery
vehicles. Given the emerging emphasis on multi-targeted therapies for cancer, we believe we
have the ability to develop RNAi compounds against multiple gene targets to generate
effective combination treatments. The unique features of sd-rxRNA may offer a new
alternative to treating cancers and could lead to attractive product candidates to further
advance in conjunction with partners.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Developments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fourth quarter of 2010 and the first quarter of 2011, the Company announced several
important developments which are outlined below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;2, 2010, we announced that the United States Internal Revenue Service (IRS)
awarded us four Therapeutic Discovery Project (TDP)&nbsp;grants totaling $977,917 as part of the Patient
Protection and Affordable
</DIV>

</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->S-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Care Act of 2010. The TDP grants were awarded in four equal amounts for
developing (1)&nbsp;self-delivering RNAi therapeutic for fibrotic disease, (2)&nbsp;self-delivering RNAi
therapeutic for Age-Related Macular Degeneration, (3)&nbsp;self-delivering RNAi for ALS (Lou Gehrig&#146;s
Disease), and (4)&nbsp;oral delivery of Glucose Encapsulated siRNAs for Rheumatoid Arthritis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;17, 2010, we announced the selection of our first RNAi therapeutic product
candidate to advance into development. The development candidate, RXI-109, is a self-delivering
RNAi compound (sd-rxRNA&#153;) that will initially be evaluated for the reduction of dermal scarring in
planned surgeries. The selected lead candidate, and several backups, are designed to reduce the
expression of CTGF (connective tissue growth factor), a gene target known to be a critical
regulator of several biological pathways involved in fibrosis and thus may be applicable in the
treatment of numerous indications with a fibrotic component, including scar formation. Our goal is
to submit an Investigational New Drug Application (IND)&nbsp;to the FDA in the second half of 2011. We
have begun manufacturing activities and we are preparing a pre-IND package to submit to the FDA.
Pending FDA review, we intend to employ a clinical trial design to study safety and tolerability as
well as initial efficacy in a first clinical trial targeted for 2012. In this clinical trial, we
plan to evaluate RXI-109 for the reduction of dermal scarring in planned surgeries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2011, we announced positive results from two successful collaborations with other
biotechnology companies using our proprietary sd-rxRNA&#153; (self delivering rxRNA) technology. On
January&nbsp;6, 2011, we announced a successful collaboration with Generex Biotechnology Corporation,
and its wholly-owned subsidiary Antigen Express, Inc., in developing proprietary vaccine
formulations for active immunotherapy. Initial results from the collaboration demonstrated success
in using sd-rxRNA compounds to silence genes up to 80% in hemopoietic cells. The ability to reduce
expression of certain genes in isolated hemopoietic-derived cancer cells (<I>ex vivo</I>) has the
potential to convert them into specific immune-stimulants and opens the possibility for development
of a new class of anticancer therapeutic vaccines.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;27, 2011, we announced positive initial results as part of our collaboration with
miRagen Therapeutics, Inc., in creating microRNA mimics, or artificial copies of microRNAs, using
our sd-rxRNA technology. In particular, the collaboration demonstrated efficacy in down-regulating
a reporter gene (<I>in vitro</I>) whose expression is controlled by the microRNA in cell culture model
systems develop by miRagen. Increasing the level of particular microRNAs by using therapeutic
mimics may treat certain diseases, including cardiovascular, cancer, inflammatory, fibrotic and
metabolic disorders.
</DIV>

</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->S-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Offering</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Issuer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">RXi Pharmaceuticals Corporation</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock we are offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">6,000,000&nbsp;shares</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock to be outstanding after this offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">24,373,166&nbsp;shares</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">13-month
warrants we are offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We are offering warrants to
purchase 3,000,000&nbsp;shares of common
stock, that will be
exercisable during the period
commencing on
the date of original issuance
and ending 13 months from such
date at an exercise
price of $1.70 per share of
common stock. This prospectus
supplement also relates to the
offering of the shares of
common stock issuable upon
exercise of these warrants.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Five-year
warrants we are offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We are offering warrants to
purchase 3,000,000&nbsp;shares of common
stock, that will be
exercisable during the period
commencing on
the date of original issuance
and ending five years from such
date at an exercise
price of $1.87 per share of
common stock. This prospectus
supplement also relates to the
offering of the shares of
common stock issuable upon
exercise of these warrants.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk Factors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">See &#147;Risk Factors&#148; beginning
on page S-6 of this
prospectus supplement and page
5 of the accompanying
prospectus for a discussion of
factors you should consider
carefully when making an
investment decision.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Use of proceeds
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We intend to use the net
proceeds of this offering for
general corporate purposes,
which may include working
capital, capital expenditures,
research and development
expenditures, pre-clinical and
clinical trial expenditures,
commercial expenditures,
acquisitions of new
technologies or businesses
that are complementary to our
current technologies or
business focus, and
investments. See &#147;Use of
Proceeds&#148; on page S-21 of
this prospectus supplement for
further information.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nasdaq Capital Market symbol
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">RXII</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares of common stock shown above to be outstanding after this offering is
based on 18,373,166&nbsp;shares outstanding as of December&nbsp;31, 2010 and excludes:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4,333,136&nbsp;shares of our common stock subject to options outstanding as of December
31, 2010 having a weighted average exercise price of $5.10 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2,199,497 shares of our common stock that have been reserved for issuance in
connection with future grants under our stock option plans as of December&nbsp;31, 2010;</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>250,000 shares of our common stock that have been reserved for
issuance under our employee stock purchase plan as of December 31,
2010;</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2,100,642&nbsp;shares of our common stock that have been reserved for issuance upon
exercise of outstanding warrants as of December&nbsp;31, 2010 having a weighted average exercise
price of $5.24 per share; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shares of our common stock issuable upon the exercise of warrants offered
hereby.</TD>
</TR>

</TABLE>
</DIV>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->S-5<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="B85186103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investing in our securities involves a high degree of risk. You should carefully consider the risks
described below and in the documents incorporated by reference into this prospectus supplement and
the accompanying prospectus before making a decision to invest in our securities. Some of these
factors relate principally to our business and the industry in which we operate. Other factors
relate principally to your investment in our securities. The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial may also materially and adversely affect our business and
operations.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>If any of the matters included in the following risks were to occur, our business, financial
condition, results of operation or prospects could be materially and adversely
affected. In such case, you may lose all or part of your original investment.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to RXi&#146;s Business and Industry</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The approach we are taking to discover and develop novel therapeutics using RNAi is unproven and
may never lead to marketable products.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The scientific discoveries that form the basis for our efforts to discover and develop new
drugs are relatively new. The RNAi technologies that we have licensed or have created internally
and that we intend to develop have not yet been clinically tested by us, nor are we aware of any
clinical trials for efficacy having been completed by third parties involving these technologies.
To date, neither we nor any other company has received regulatory approval to market therapeutics
utilizing RNAi and a number of clinical trials of third parties&#146; RNAi technology has been
unsuccessful. The scientific evidence to support the feasibility of developing drugs based on these
discoveries is both preliminary and limited. Successful development of RNAi-based products by us
will require solving a number of issues, including providing suitable methods of stabilizing the
RNAi material and delivering it into target cells in the human body. We may spend large amounts of
money trying to solve these issues and never succeed in doing so. In addition, any compounds that
we develop may not demonstrate in patients the chemical and pharmacological properties ascribed to
them in laboratory studies, and they may interact with human biological systems in unforeseen,
ineffective or even harmful ways.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further, our exclusive focus on RNAi technology for developing products as opposed to
multiple, more proven technologies for drug development increases the risk associated with our
business. If we are not successful in developing a product candidate using RNAi technology, we may
not be able to identify and successfully implement an alternative product development strategy.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We will be subject to competition and may not be able to compete successfully.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A number of medical institutions and pharmaceutical companies are seeking to develop
therapeutic products using RNAi technologies, including for at least some of the disease
indications we have been focusing our efforts on to date. Companies working in the RNAi area
include: Alnylam Pharmaceuticals, Marina Biotech, Tacere Therapeutics, Benitec, OPKO Health,
Silence Therapeutics, Quark Pharmaceuticals, Rosetta Genomics, Lorus Therapeutics, Tekmira
Pharmaceuticals Corporation, Calando Pharmaceuticals, Regulus Therapeutics, and Santaris
Pharmaceuticals, as well as a number of the large pharmaceutical companies. In addition, a number
of companies are developing therapeutics for the same diseases we are targeting using technologies
other than RNA interference, and, for some of these diseases, there are existing therapeutics being
marketed currently. Most of these competitors have substantially greater research and development
capabilities and financial, scientific, technical, manufacturing, marketing, distribution, and
other resources than us, and we may not be able to successfully compete with them. In addition,
even if we are successful in developing our product candidates, in order to compete successfully we
may need to be first to market or to demonstrate that our RNAi based products are superior to
therapies based on different technologies. A number of our competitors have already commenced
clinical testing of RNAi product
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">candidates and may be more advanced than are we in the process of developing products. If we
are not first to market or are unable to demonstrate such superiority, any products for which we
are able to obtain approval may not be successful.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to depend on collaborators, partners, licensees, clinical research organizations and
other third parties to support our discovery efforts, to formulate product candidates, to
manufacture our product candidates, and to conduct clinical trials for some or all of our product
candidates. We cannot guarantee that we will be able to successfully negotiate agreements for or
maintain relationships with collaborators, partners, licensees, clinical investigators and other
third parties on favorable terms, if at all. Our ability to successfully negotiate such agreements
will depend on, among other things, potential partners&#146; evaluation of the superiority of our
technology over competing technologies and the quality of the pre-clinical data that we have
generated, the perceived risks in developing RNAi therapeutics as a new form of therapeutic. In
addition, we and other companies operating in the RNAi field receive notices from third parties
from time to time that our or such other companies&#146; technology or product candidates infringe or
may infringe the intellectual property rights of those third parties. The assertion by third
parties that our activities or product candidates infringe upon their intellectual property rights
may adversely affect our ability to secure strategic partners or licensees for our technology or
product candidates or our ability to secure or maintain manufacturers for our compounds. If we are
unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate,
manufacture, obtain regulatory approvals for or commercialize our product candidates. Under certain
license agreements that we have already entered into, we have minimum dollar amounts per year that
we are obligated to spend on the development of the technology we have licensed from our contract
partners. If we fail to meet this requirement under any of our licenses that contain such
requirements or any other obligations under these licenses, we may be in breach of our obligations
under such agreement, which may result in the loss of the technology licensed. We cannot
necessarily control the amount or timing of resources that our contract partners will devote to our
research and development programs, product candidates or potential product candidates, and we
cannot guarantee that these parties will fulfill their obligations to us under these arrangements
in a timely fashion. We may not be able to readily terminate any such agreements with contract
partners even if such contract partners do not fulfill their obligations to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently are partially dependent on licenses from third parties for our key technologies
relating to fundamental RNAi technologies. Our current licenses impose, and any future licenses we
enter into are likely to impose, various development, funding, royalty, diligence, sublicensing,
insurance and other obligations on us. If our license with respect to any of these technologies is
terminated for any reason, the development of the products contemplated by the licenses would be
delayed, or suspended altogether, while we seek to license similar technology or develop new
non-infringing technology. The costs of obtaining new licenses are high, and many patents in the
RNAi field have already been exclusively licensed to third parties, including our competitors. If
any of our existing licenses are terminated, the development of the products contemplated by the
licenses could be delayed or terminated and we may not be able to negotiate additional licenses on
acceptable terms, if at all, which would have a material adverse effect on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We will rely upon third parties for the manufacture of our clinical product candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have the facilities or expertise to manufacture supplies of any of our potential
product candidates for clinical trials. Accordingly, we will be dependent upon contract
manufacturers for these supplies. We currently manufacture limited quantities of our product
candidates for our research activities at our facility. For product supply activities, we are
currently working with Agilent Technologies, a contract manufacturing organization with whom we
recently executed a mid scale GMP supply agreement. There can be no assurance that we will be able
to secure needed supply arrangements on attractive terms, or at all. Our failure to secure these
arrangements as needed could have a materially adverse effect on our ability to complete the
development of our product candidates or, if we obtain regulatory approval for our product
candidates, to commercialize them.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current plans call for the manufacture of our rxRNA compounds and, as necessary, any
delivery vehicles that may be used to deliver our rxRNA compounds by contract manufacturers
offering research grade, Good Laboratory grade and Good Manufacturing Practices grade materials for
preclinical studies (e.g. toxicology studies) and for clinical use. We anticipate the chemistry,
manufacturing and controls for each RNAi active pharmaceutical ingredient will be addressed by our
clinical development team in close collaboration with a contract manufacturer with extensive
experience in RNA drug synthesis. RNA is a complex molecule requiring many synthesis steps, which
may lead to challenges with purification and scale-up. These challenges could result in increased
costs and delays in manufacturing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Any drug candidates we develop may fail in development or be delayed or may not be commercially
viable.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before obtaining regulatory approval for the sale of any drug candidate, we must conduct, at
our own expense, extensive pre-clinical tests and clinical trials to demonstrate the safety and
efficacy in humans of our drug candidates. However, we are required to do extensive testing in
animal models with our product candidates before we can be approved by the FDA to initiate clinical
trials in humans. Furthermore, we cannot be sure that our product candidates will be safely
tolerated by humans or be efficacious. All of our products in development must be approved by the
FDA or similar foreign governmental agencies before they can be marketed. The process for obtaining
FDA approval is both time-consuming and costly, with no certainty of a successful outcome. This
process typically includes the conduct of extensive preclinical and clinical testing, which may
take longer or cost more than we anticipate, and may prove unsuccessful due to numerous factors. A
failure of one or more of our pre-clinical studies or clinical trials can occur at any stage of
testing. Product candidates that may appear to be promising at early stages of development may not
successfully reach the market for a number of reasons. The results of pre-clinical and initial
clinical testing of these products may not necessarily indicate the results that will be obtained
from later or more extensive testing. Companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials, even after obtaining promising
results in earlier trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, the FDA or other applicable regulatory authorities, or an institutional review board
(&#147;IRB&#148;), an independent committee under the oversight of the United States Department of Health and
Human Services (&#147;HHS&#148;), which has been formally registered with HHS and functions to approve,
monitor and review biomedical and behavioral research involving humans, may suspend clinical trials
of a drug candidate at any time for various reasons, including if we or they believe the subjects
or patients participating in such trials are being exposed to unacceptable health risks. Among
other reasons, adverse side effects of a drug candidate on subjects or patients in a clinical trial
could result in the FDA or other regulatory authorities suspending or terminating the trial and
refusing to approve a particular drug candidate for any or all indications of use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical trials of a new drug candidate require the enrollment of a sufficient number of
patients, including patients who are suffering from the disease the drug candidate is intended to
treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many
factors, and delays in patient enrollment can result in increased costs and longer development
times.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical trials also require the review and oversight of IRBs, which approve and continually
review clinical investigations and protect the rights and welfare of human subjects. An inability
or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical
trials, and the FDA may decide not to consider any data or information derived from a clinical
investigation not subject to initial and continuing IRB review and approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Numerous factors could affect the timing, cost or outcome of our drug development efforts,
including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Delays in filing initial drug applications,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Difficulty in securing centers to conduct trials,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Conditions imposed on us by the FDA or comparable foreign authorities
regarding the scope or design of our clinical trials,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->S-8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Problems in engaging IRBs to oversee trials or problems in obtaining or
maintaining IRB approval of studies,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Difficulty in enrolling patients in conformity with required protocols or
projected timelines,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Third party contractors failing to comply with regulatory requirements or meet
their contractual obligations to us in a timely manner,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The need to suspend or terminate our clinical trials if the participants are
being exposed to unacceptable health risks,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insufficient or inadequate supply or quality of our drug candidates or other
necessary materials necessary to conduct our clinical trials,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effects of our drug candidates not being the desired effects or including
undesirable side effects or the drug candidates having other unexpected characteristics,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The cost of our clinical trials may be greater than we anticipate,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in the FDA&#146;s requirements for our testing during the course of that
testing,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Modification of the drug during testing,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reallocation of our limited financial and other resources to other clinical
programs, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Adverse results obtained by other companies developing RNAi drugs.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The substances we are intending to develop may represent a new class of drug, and the FDA has
not yet established any definitive policies, practices or guidelines in relation to these drugs.
While we expect any product candidates that we develop will be regulated as a new drug under the
Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other products we
may develop as biologics under the Public Health Service Act. The lack of policies, practices or
guidelines may hinder or slow review by the FDA of any regulatory filings that we may submit.
Moreover, the FDA may respond to these submissions by defining requirements that we may not have
anticipated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is possible that none of the product candidates that we develop will obtain the appropriate
regulatory approvals necessary for us to begin selling them or that any regulatory approval to
market a product may be subject to limitations on the indicated uses for which we may market the
product. The time required to obtain FDA and other approvals is unpredictable but often can take
years following the commencement of clinical trials, depending upon the complexity of the drug
candidate. Any analysis we perform of data from clinical activities is subject to confirmation and
interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval.
Any delay or failure in obtaining required approvals could have a material adverse effect on our
ability to generate revenue from the particular drug candidate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to numerous foreign regulatory requirements governing the conduct of
clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement.
The foreign regulatory approval process includes all of the risks associated with the FDA approval
described above as well as risks attributable to the satisfaction of local regulations in foreign
jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of
the United States.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The FDA approval process may be delayed for any drugs we develop that require the use of
specialized drug delivery devices or vehicles.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some drug candidates that we develop may need to be administered using specialized vehicles
that deliver RNAi therapeutics directly to diseased parts of the body. For example, we may use an
implantable pump to deliver certain potential drug candidates to the nervous system. The drug
delivery vehicles that we expect to deliver our drug candidates have not been approved by the FDA
or other regulatory agencies. In addition, the FDA may regulate the product as a combination
product of a drug and a device or require additional approvals or clearances for the modified
delivery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Further, to the extent the specialized delivery vehicle is owned by another company, we would
need that company&#146;s cooperation to implement the necessary changes to the vehicle, or its labeling,
and to obtain any additional approvals or clearances. Any delays in finding suitable drug delivery
vehicles to administer RNAi therapeutics directly to diseased parts of the body could negatively
affect our ability to successfully develop our RNAi therapeutics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If we are not successful in developing pre-clinical product candidates, we will not be able to
commence clinical trials in humans or obtain approval for our product candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the new drug discovery phase and have identified early lead compounds against
several targets. We have selected a dermal anti-scarring development candidate and other lead
compounds that are in early stages of preclinical testing for therapeutic development. RNA
interference is a relatively new scientific field, and the technologies are still in the early
stage of development. We have no compounds in pre-clinical toxicology studies, and we may not be
able to advance any product candidate through the pre-clinical stage into clinical trials.
Additionally, our development efforts may never result in the identification of a pre-clinical
candidate which we are able to successfully develop into a drug. Even if we are able to designate a
lead candidate, we may not be able to identify or generate data that would support entering such a candidate
into clinical trials. Furthermore, even if we successfully enter into clinical studies, the results
from pre- clinical testing of a drug candidate may not predict the results that will be obtained on
human clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following regulatory approval of any drugs we may develop, we will also be subject
to continuing regulatory review, including the review of adverse drug experiences and clinical
results that are reported after our drug products are made available to patients. This would
include results from any post marketing tests or vigilance required as a condition of approval. The
manufacturer and manufacturing facilities we use to make any of our
drug products will also be
subject to periodic review and inspection by the FDA. The discovery of any new or previously
unknown problems with the product, manufacturer or facility may result in restrictions on the drug
or manufacturer or facility, including withdrawal of the drug from the market. Our product
promotion and advertising also will be subject to regulatory requirements and continuing regulatory
review. If we fail to comply with applicable continuing regulatory requirements, we may be subject
to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating
restrictions and other adverse consequences.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The product candidates that we are developing are based on new technologies and therapeutic
approaches. RNAi products may be more expensive to manufacture than traditional small molecule
drugs, which may make them more costly than competing small molecule drugs. Additionally, for
various applications, RNAi products are likely to require injection or implantation, and do not
readily cross the so-called blood brain barrier, which will make them less convenient to administer
than drugs administered orally. Key participants in the pharmaceutical marketplace, such as
physicians, medical professionals working in large reference laboratories, public health
laboratories and hospitals, third- party
payors and consumers, may not accept products intended to improve therapeutic results based
on RNAi technology. As a result, it may be more difficult for us to convince the medical
community and third-party
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">payors to accept and use our product, or to provide favorable
reimbursement. And if medical professionals working with large reference laboratories, public
health laboratories and hospitals choose not to adopt and use our RNAi technology, our products may
not achieve broader market acceptance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other factors that we believe will materially affect market acceptance of our product
candidates include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The timing of our receipt of any marketing approvals, the terms of any
approvals and the countries in which approvals are obtained,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The safety, efficacy and ease of administration of our product candidates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The advantages of our product candidates over those of our competitors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The willingness of patients to accept relatively new therapies,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The success of our physician education programs,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The availability of government and third-party payor reimbursement,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The pricing of our products, particularly as compared to alternative
treatments, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The availability of effective alternative treatments and the relative risks
and/or benefits of the treatments.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a non-exclusive license to the Fire-Mello patent owned by UMMS and the Carnegie
Institution of Washington, which claims various aspects of RNAi or genetic inhibition by double
stranded RNA. This license continues to be available to third parties, and as such it does not
provide us with the ability to exclude others from its use or protect us from competition.
Therapeutic applications of gene silencing technologies, delivery methods, and other technologies
that we license from third parties are claimed in a number of pending patent applications, but
there can be no assurance that these applications will result in any issued patents or that those
patents would withstand possible legal challenges or protect our technologies from competition.
The United States Patent and Trademark Office and patent granting authorities in other countries have
upheld stringent standards for the RNAi patents that have been prosecuted so far. Consequently,
pending patents that we have licensed and those that we own may continue to experience long and
difficult prosecution challenges and may ultimately issue with much narrower claims than those in
the pending applications. Third parties may hold
or seek to obtain additional patents that could make it more difficult or impossible for us to
develop products based on RNAi technology without obtaining a license to such patents, which
licenses may not be available on attractive terms or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, others may challenge the patents or patent applications that we currently license
or may license in the future or that we own and, as a result, these patents could be narrowed,
invalidated or rendered unenforceable, which would negatively affect our ability to exclude others
from using RNAi technologies described in these patents. There can be no assurance that these
patent or other pending applications or issued patents we license or that we own will withstand
possible legal challenges. Moreover, the laws of some foreign countries may not protect our
proprietary rights to the same extent as do the laws of the United States. Any patents issued to us
or our licensors may not provide us with any competitive advantages, and there can be no assurance
that the patents of others will not have an adverse effect on our ability to do business or to
continue to use our technologies freely. Our efforts to enforce and maintain our intellectual
property rights may not be successful and may result in substantial costs and diversion of
management time. Even if our rights are valid, enforceable and broad in scope, competitors may
develop products based on technology that is not covered by our licenses or patents or patent
application that we own.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have received a letter from a third party claiming that we require access to such third
party&#146;s patents and patent applications and demanding that we stop engaging in unspecified alleged
infringing activities unless we obtain a license from such third party. We understand that other
companies working in the RNAi area have received similar letters from this third party. Although
we do not believe, based on the advice of our patent counsel, that our current and planned
activities infringe any valid patent rights of such third party, there can be no assurance that we
will not need to alter our development candidates or products or obtain a license to such third
party rights to avoid any such infringement. There is no guarantee that future licenses will be
available from third parties on satisfactory terms, or at all. To the extent that we are required
and are able to obtain multiple licenses from third parties to develop or commercialize a product
candidate, the aggregate licensing fees and milestones and royalty payments made to these parties
may materially reduce our economic returns or even cause us to abandon development or
commercialization of a product candidate.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our licenses, we also rely on copyright and trademark protection, trade
secrets, know-how, continuing technological innovation and licensing opportunities. In an effort to
maintain the confidentiality and ownership of our trade secrets and proprietary information, we
require our employees, consultants, advisors and others to whom we disclose confidential
information to execute confidentiality and proprietary information agreements. However, it is
possible that these agreements may be breached, invalidated or rendered unenforceable, and if so,
there may not be an adequate corrective remedy available. Furthermore, like many companies in our
industry, we may from time to time hire scientific personnel formerly employed by other companies
involved in one or more areas similar to the activities we conduct. In some situations, our
confidentiality and proprietary information agreements may conflict with, or be subject to, the
rights of third parties with whom our employees, consultants or advisors have prior employment or
consulting relationships. Although we require our employees and consultants to maintain the
confidentiality of all confidential information of previous employers, we or these individuals may
be subject to allegations of trade secret misappropriation or other similar claims as a result of
their prior affiliations. Finally, others may independently develop substantially equivalent
proprietary information and techniques, or otherwise gain access to our trade secrets. Our failure
to protect our proprietary information and techniques may inhibit or limit our ability to exclude
certain competitors from the market and execute our business strategies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our success depends upon our ability to obtain and maintain intellectual property protection for
our products and technologies.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend on our ability to obtain and maintain adequate protection of our
intellectual property covering our product candidates and technologies. The ultimate degree of
patent protection that will be afforded to biotechnology products and processes, including ours, in
the United States and in other important markets remains uncertain and is dependent upon the scope
of protection decided upon by the patent offices, courts and lawmakers in these countries. There is
no certainty that our existing patents, or patent applications if obtained, will afford us
substantial protection or commercial benefit. Similarly, there is no assurance that our pending
patent applications or patent applications licensed from third parties will ultimately be granted
as patents or that those patents that have been issued or are issued in the future will stand if
they are challenged in court. These applications claim many different methods, compositions and
processes relating to the discovery, development, delivery and commercialization of RNAi
therapeutics. Because the field is so new, very few of these patent applications have been fully
processed by government patent offices around the world, and there is a great deal of uncertainty
about which patents will issue, when, to whom, and with what claims. It is likely that there will
be significant litigation and other proceedings, such as interference and opposition proceedings in
various patent offices, relating to patent rights in the RNAi field and that we may be a party to
such proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There may be patent or other intellectual property rights belonging to others that require us
to alter our products, pay licensing fees or cease certain activities. If our products infringe
patent or other intellectual property rights of others, the owners of those rights could bring
legal actions against us claiming damages and seeking to enjoin
manufacture, use, marketing and sales of the
affected products. If these legal actions are successful, in addition to any potential liability
for damages, we could be required to obtain a license in order to continue to manufacture or market
the affected products. We may not prevail in any action brought against us, and any license
required under any rights that we infringe may not be available on acceptable terms or at all.
Others may attempt to invalidate our intellectual property rights or those of our licensors. Even
if our rights, or those of our licensors, are not directly challenged, disputes among third parties
could lead to the weakening or invalidation of our intellectual property rights. Any attempt by
third parties to undermine or invalidate our intellectual property rights could be costly to
defend, require significant time and attention of our management and have a material adverse effect
on our business.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We are subject to potential liabilities from clinical testing and future product liability claims.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of our future products are alleged to be defective, they may expose us to claims for
personal injury by patients in clinical trials of our products or by patients using our
commercially marketed products. Even if the marketing of one or more of our products is approved by
the FDA, users may claim that such products caused unintended adverse effects. We will seek to
obtain clinical trial insurance for clinical trials that we conduct, as well as liability insurance
for any products that we market. There can be no assurance that we will be able to obtain insurance
in the amounts we seek, or at all. We anticipate that licensees who develop our products will carry
liability insurance covering the clinical testing and marketing of those products. There is no
assurance, however, that any insurance maintained by us or our licensees will prove adequate in the
event of a claim against us. Even if claims asserted against us are unsuccessful, they may divert
management&#146;s attention from our operations and we may have to incur substantial costs to defend
such claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to sell our products primarily to hospitals which receive reimbursement for the
health care services they provide to their patients from third-party payors, such as Medicare,
Medicaid and other domestic and international government programs, private insurance plans and
managed care programs. Most third-party payors may deny reimbursement if they determine that a
medical product was not used in accordance with cost-effective treatment methods, as determined by
the third-party payor, or was used for an unapproved indication. Third-party payors also may refuse
to reimburse for experimental procedures and devices. Furthermore, because our programs are in the
early stages of development, we are unable at this time to determine their cost-effectiveness and
the level or method of reimbursement for them. Increasingly, the third-party payors who reimburse
patients are requiring that drug companies provide them with predetermined discounts from list
prices, and are challenging the prices charged for medical products. If the price we are able to
charge for any products we develop is inadequate in light of our development and other costs, our
profitability could be adversely effected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently expect that any drugs we develop may need to be administered under the
supervision of a physician. Under currently applicable law, drugs that are not usually
self-administered may be eligible for coverage by the Medicare program if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>They are &#147;incidental&#148; to a physician&#146;s services,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>They are &#147;reasonable and necessary&#148; for the diagnosis or treatment of the
illness or injury for which they are administered according to accepted standard of medical
practice,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>They are not excluded as immunizations, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>They have been approved by the FDA.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There may be significant delays in obtaining insurance coverage for newly-approved drugs, and
insurance coverage may be more limited than the purpose for which the drug is approved by the FDA.
Moreover, eligibility for insurance coverage does not imply that any drug will be reimbursed in all
cases or at a rate that covers our costs, including research, development, manufacture, sale and
distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover
our costs and may not be made permanent. Reimbursement may be based on payments for other services
and may reflect budgetary constraints or imperfections in Medicare data. Net prices for drugs may
be reduced by mandatory discounts or rebates required by government health care programs or private
payors and by any future relaxation of laws that presently restrict imports of drugs from countries
where they may be sold at lower prices than in the United States. Third-party payors often rely
upon Medicare coverage policy and payment limitations in setting their own reimbursement rates. Our
inability to promptly obtain coverage and profitable reimbursement rates from both
government-funded and private payors for new drugs that we develop could have a material adverse
effect on our operating results, our ability to raise capital needed to develop products, and our
overall financial condition.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, third-party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for medical products and services. Levels of
reimbursement may decrease in the future, and future legislation, regulation or reimbursement
policies of third-party payors may adversely affect the demand for and price levels of our
products. If our customers are not reimbursed for our products, they may reduce or discontinue
purchases of our products, which could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive health care reform legislation, which was recently adopted by Congress and was
subsequently signed into law, could adversely affect our business and financial condition. Among
other provisions, the legislation provides that a &#147;biosimilar&#148; product may be approved by the FDA
on the basis of analytical tests and certain clinical studies demonstrating that such product is
highly similar to an existing, approved product and that switching between an existing product and
the biosimilar product will not result in diminished safety or efficacy. This abbreviated
regulatory approval process may result in increased competition if we are able to bring a product
to market. The legislation also includes more stringent compliance programs for companies in
various sectors of the life sciences industry with which we may need to comply and enhanced
penalties for non-compliance with the new health care regulations. Complying with new regulations
may divert management resources, and inadvertent failure to comply with new regulations may result
in penalties being imposed on us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some states and localities have established drug importation programs for their citizens, and
federal drug import legislation has been introduced in Congress. The Medicare Prescription Drug
Plan legislation, which became law in December&nbsp;2003, required the Secretary of Health and Human
Services to promulgate regulations for drug reimportation from Canada into the United States under
some circumstances, including when the drugs are sold at a lower price than in the United States.
The Secretary, however, retained the discretion not to implement a drug reimportation plan if he
finds that the benefits do not outweigh the costs, and has so far declined to approve a
reimportation plan. Proponents of drug reimportation may attempt to pass legislation that would
directly allow reimportation under certain circumstances. Legislation or regulations allowing the
reimportation of drugs, if enacted, could decrease the price we receive for any products that we
may develop and adversely affect our future revenues and prospects for profitability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are highly dependent on our named executive officers and Scientific Advisory Board (&#147;SAB&#148;)
members. The continued service of our named executive officers and SAB members is critical to our
success. We have entered into employment agreements with our named executive officers, all of which
can be terminated by such persons on short notice. The loss of any of our named executive officers
or SAB members, or our inability to identify, attract, retain and integrate additional qualified
key personnel, could make it difficult for us to manage our business successfully and achieve our
business objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition for skilled research, product development, regulatory and technical personnel also
is intense, and we may not be able to recruit and retain the personnel we need. The loss of the
services of any key research, product development, regulatory, and technical personnel, or our
inability to hire new personnel with the requisite skills, could restrict our ability to develop
our product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development activities involve the controlled use of potentially harmful
biological materials as well as hazardous materials, chemicals and various radioactive compounds.
We cannot completely eliminate the risk of accidental contamination or injury; we could be held
liable for any damages that result, and any liability could exceed our resources. We are subject to
federal, state and local laws and regulations governing the use, storage, handling and disposal of
these materials and specific waste products. We are also subject to numerous environmental, health
and workplace safety laws and regulations, including those governing laboratory procedures,
exposure to blood-borne pathogens and the handling of biohazardous materials. The cost of
compliance with these
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">laws and regulations could be significant and may adversely affect capital expenditures to the
extent we are required to procure expensive capital equipment to meet regulatory requirements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to numerous environmental, health and workplace safety laws and
regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and
the handling of biohazardous materials. We maintain workers&#146; compensation insurance to cover us for
costs and expenses we may incur due to injuries to our employees resulting from the use of these
materials. The limits of our workers&#146; compensation insurance are mandated by state law, and our
workers&#146; compensation liability is capped at these state-mandated limits. We do not maintain
insurance for environmental liability or toxic tort claims that may be asserted against us in
connection with our storage or disposal of biological, hazardous or radioactive materials.
Additional federal, state and local laws and regulations affecting our operations may be adopted in
the future. We may incur substantial costs to comply with, and substantial fines or penalties if we
violate any of these laws or regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating Our Financial Position and Capital Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may not be able to obtain sufficient financing, and may not be able to develop our product
candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our existing cash and
cash equivalents and the proceeds from this offering should be sufficient to fund our
operations through at least the first half of 2012. In the future, we will be dependent on
obtaining further financing from third parties in order to maintain our operations and to meet our
financial obligations. We cannot assure that additional debt or equity or other funding to maintain
our operations and to meet our obligations to our licensors will be available to us in the future
on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be
forced to scale back, or terminate, our operations, or to seek to merge with or to be acquired by
another company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that we will need to raise substantial amounts of money to fund a variety of
future activities integral to the development of our business, which may include but are not
limited to the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To conduct research and development to successfully develop our RNAi
technologies,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To obtain regulatory approval for our product candidates,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To file and prosecute patent applications and to defend and assess patents to
protect our technologies,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To retain qualified employees, particularly in light of intense competition
for qualified scientists,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To manufacture products ourselves or through third parties,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To market our products, either through building our own sales and distribution
capabilities or relying on third parties, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To acquire new technologies, licenses, products or companies.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure you that any financing needed for the development of our business will be
available to us on acceptable terms or at all. If we cannot obtain additional financing in the
future, our operations may be restricted and we may ultimately be unable to continue to develop and
potentially commercialize our product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantial funds were expended to develop our RNAi technologies, and additional substantial
funds will be required for further research and development, including pre-clinical testing and
clinical trials of any product candidates, and to manufacture and market any products that are
approved for commercial sale. Because the successful development of our products is uncertain, we
are unable to precisely estimate the actual funds we will require to develop and potentially
commercialize them. In addition, we may not be able to generate enough revenue, even if we are able
to commercialize any of our product candidates, to become profitable.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that we are unable to achieve or sustain profitability or to secure additional
financing, we may not be able to meet our obligations as they come due, raising substantial doubts
as to our ability to continue as a going concern. Any such inability to continue as a going concern
may result in our common stock holders losing their entire investment. There is no guaranty that we
will become profitable or secure additional financing. Our financial statements contemplate that we
will continue as a going concern and do not contain any adjustments that might result if we were
unable to continue as a going concern. Changes in our operating plans, our existing and anticipated
working capital needs, the acceleration or modification of our expansion plans, increased expenses,
potential acquisitions or other events will all affect our ability to continue as a going concern.
Future financing may be obtained through, and future development efforts may be paid for by, the
issuance of debt or equity, which may have an adverse effect on our stockholders or may otherwise
adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we raise funds through the issuance of debt or equity, any debt securities or preferred
stock issued will have rights, preferences and privileges senior to those of holders of our common
stock in the event of a liquidation. In such event, there is a possibility that once all senior
claims are settled, there may be no assets remaining to pay out to the holders of common stock. In
addition, if we raise funds through the issuance of additional equity, whether through private
placements or additional public offerings, such an issuance would dilute your ownership in us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of debt securities may also impose restrictions on our operations, which may include
limiting our ability to incur additional indebtedness, to pay dividends on or repurchase our
capital stock, or to make certain acquisitions or investments. In addition, we may be subject to
covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy
such covenants may be affected by events outside of our control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may have difficulty evaluating our business, because we have limited history and our
historical financial information may not be representative of our future results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The historical financial information included in our annual report on Form 10-K for the year
ended December&nbsp;31, 2009 and subsequent quarterly reports on Form 10-Q do not necessarily reflect
the financial condition, results of operations or cash flows that we would have achieved as a
separate company during the periods presented or those that we will achieve in the future. Prior to
the contribution of our RNAi assets from CytRx, our RNAi research and development activities were
conducted by CytRx as part of its broader operations, rather than as an independent division or
subsidiary, and were primarily conducted through sponsored research arrangements rather than
through internal activities. CytRx also performed various corporate functions relating to our
business. Our historical financial information reflects allocations of indirect expenses from CytRx
for these and similar functions. We believe that these allocations are comparable to the expenses
we would have incurred had we operated as a separate company, although we may incur higher expenses
as a separate company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We have limited operating experience and may not be able to effectively operate.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a discovery-stage company with limited operating history. We will focus solely on
developing and, if we obtain regulatory approval for our product candidates, commercializing
therapeutic products based upon RNAi technologies, and there is no assurance that we will be able
to successfully implement our business plan. While our management collectively possesses
substantial business experience, there is no assurance that we will be able to manage our business
effectively, or that we will be able to identify, hire and retain any needed additional management
or scientific personnel to develop and implement our product development plans, obtain third-party
contracts or any needed financing, or achieve the other components of our business plan. The
obligations associated with being an independent public company require significant resources and
management attention.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a publicly traded company, we are subject to the reporting requirements of the U.S.
Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;), and the Sarbanes-Oxley Act of
2002. In addition, the Exchange Act requires that we file annual, quarterly and current reports.
Our failure to prepare and disclose this information in a timely manner could subject us to
penalties under federal securities laws, expose us to lawsuits and restrict our ability to access
financing. The Sarbanes-Oxley Act requires that we, among other things, establish and maintain
effective internal controls and procedures for financial reporting. From time to time we evaluate
our existing internal controls in light of the standards adopted by the Public Company Accounting
Oversight Board. It is possible that we or our independent registered public accounting firm may
identify significant deficiencies or material weaknesses in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our internal control over financial reporting in the future. Any failure or difficulties in
implementing and maintaining these controls could cause us to fail to meet the periodic reporting
obligations or result in material misstatements in our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;404 of the Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal control over financial reporting. Our failure to satisfy the
requirements of Section&nbsp;404 on a timely basis could result in the loss of investor confidence in
the reliability of our financial statements, which in turn could have a material adverse effect on
our business and our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Ownership of Our Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The market price and trading volume of our common stock may be volatile</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock could fluctuate significantly for many reasons, including
the following factors:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Announcements of regulatory developments or technological innovations by us or
our competitors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in our relationship with our licensors and other strategic partners,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our quarterly operating results,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Developments in patent or other technology ownership rights,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Public concern regarding the safety of our products,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Government regulation of drug pricing, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>General changes in the economy, the financial markets or the pharmaceutical or
biotechnology industries.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, factors beyond our control may also have an impact on the price of our stock. For
example, to the extent that other large companies within our industry experience declines in their
stock price, our stock price may decline as well. In addition, when the market price of a company&#146;s
common stock drops significantly, stockholders often institute securities class action lawsuits
against the company. A lawsuit against us could cause us to incur substantial costs and could
divert the time and attention of our management and other resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>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.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Anti-takeover provisions of our certificate of incorporation and by-laws and provisions of
Delaware law may discourage, delay or prevent a merger or other change of control that stockholders
may consider favorable, or may impede the ability of the holders of our common stock to change our
management. These provisions of our certificate of incorporation and by-laws, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Divide our board of directors into three classes, with members of each class
to be elected for staggered three-year terms,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Limit the right of stockholders to remove directors,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Regulate how stockholders may present proposals or nominate directors for
election at annual meetings of stockholders, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Authorize our board of directors to issue preferred stock in one or more
series, without stockholder approval.</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Section&nbsp;203 of the Delaware General Corporation Law provides that, subject to
limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than
15% of the outstanding voting stock of a Delaware corporation such as our company shall not engage
in any business combination with that corporation, including by merger, consolidation or
acquisitions of additional shares for a three-year period following the date on which that person
or its affiliate crosses the 15% stock ownership threshold. Section&nbsp;203 could operate to delay or
prevent a change of control of our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We may acquire other businesses or form joint ventures that may be unsuccessful and could adversely
dilute your ownership of our company.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our business strategy, we may pursue future acquisitions of other complementary
businesses and technology licensing arrangements. We also may pursue strategic alliances. We have
no experience with respect to acquiring other companies and limited experience with respect to the
formation of collaborations, strategic alliances and joint ventures. If we were to make any
acquisitions, we may not be able to integrate these acquisitions successfully into our existing
business and we could assume unknown or contingent liabilities. We also could experience adverse
effects on our reported results of operations from acquisition related charges, amortization of
acquired technology and other intangibles and impairment charges relating to write-offs of goodwill
and other intangible assets from time to time following the acquisition. Integration of an acquired
company also may require management resources that otherwise would be available for ongoing
development of our existing business. We may not identify or complete these transactions in a
timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated
benefits of any acquisition, technology license or strategic alliance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To finance acquisitions, we may choose to issue shares of our common stock as consideration,
which would dilute your ownership interest in us. Alternatively, it may be necessary for us to
raise additional funds through public or private financings. 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 stockholders. Any future acquisitions by us also could result in large and immediate
write-offs, the incurrence of contingent liabilities or amortization of expenses related to
acquired intangible assets, any of which could harm our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to this Offering</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Management will have broad discretion as to the use of the proceeds of this offering.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not designated the amount of net proceeds we will receive from this offering for any
particular purpose. Accordingly, our management will have broad discretion as to the application of
these net proceeds and could use them for purposes other than those contemplated at the time of
this offering. Our stockholders may not agree with the manner in which our management chooses to
allocate and spend the net proceeds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Investors in this offering will pay a much higher price than the book value of our common
stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You will suffer substantial dilution in the net tangible book value of the common stock you
purchase in this offering because the price per share of our common stock being offered hereby is
substantially higher than the book value per share of our common
stock. If you purchase shares of common stock in this
offering, you will suffer immediate and substantial dilution of
$1.02 per share in the net tangible
book value of the common stock. See &#147;Dilution&#148; on page
S-21 of this prospectus supplement for a
more detailed discussion of the dilution you will incur in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Future sales of substantial amounts of our common stock could affect the market price of our
common stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future sales of substantial amounts of our common stock, or securities convertible or
exchangeable into shares of our common stock, into the public market, including shares of our
common stock issued upon exercise of options and warrants, or perceptions that those sales could
occur, could adversely affect the prevailing market price of our common stock and our ability to
raise capital in the future.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>There is no public market for the warrants to purchase common stock in this offering.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no established public trading market for the warrants being offered in this offering,
and we do not expect a market to develop. In addition, we do not intend to apply for listing the
warrants on any securities exchange, including the Nasdaq Capital Market. Without an active market,
the liquidity of the warrants will be limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We have never declared or paid dividends on our capital stock and we do not anticipate paying
dividends in the foreseeable future.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business requires significant funding, and we currently invest more in product development
than we earn from sales of our products. In addition, the agreements governing our debt restrict
our ability to pay dividends on our common stock. Therefore, we do not anticipate paying any cash
dividends on our common stock in the foreseeable future. We currently plan to invest all available
funds and future earnings in the development and growth of our business. As a result, capital
appreciation, if any, of our common stock will be your sole source of potential gain for the
foreseeable future.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B85186104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus supplement, the accompanying prospectus, any free writing prospectus used in
connection with this offering and the other documents we have filed with the SEC that are
incorporated herein by reference contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well as
assumptions that, if they never materialize or prove incorrect, could cause our results to differ
materially from those expressed or implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be deemed forward-looking statements,
including any projections of financing needs, revenue, expenses, earnings or losses from
operations, or other financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements concerning product research, development and
commercialization plans and timelines; any statements regarding safety and efficacy of product
candidates; any statements of expectation or belief; and any statements of assumptions underlying
any of the foregoing. All forward-looking statements attributable to us or to persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements and risk factors set
forth in Risk factors and elsewhere in this prospectus supplement and set forth in our Form 10-K
for the year ended December&nbsp;31, 2009 and our Form 10-Qs for the fiscal quarters ended March&nbsp;30,
2010, June&nbsp;30, 2010 and September&nbsp;30, 2010. In addition, forward-looking statements may contain the
words &#147;believe,&#148; &#147;anticipate,&#148; &#147;expect,&#148; &#147;estimate,&#148; &#147;intend,&#148; &#147;plan,&#148; &#147;project,&#148; &#147;will be,&#148; &#147;will
continue,&#148; &#147;will result,&#148; &#147;seek,&#148; &#147;could,&#148; &#147;may,&#148; &#147;might,&#148; or any variations of such words or other
words with similar meanings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given these uncertainties, you should not place undue reliance on these forward-looking
statements. You should read this prospectus supplement, the accompanying prospectus and the
documents that we reference in this prospectus with the understanding that our actual future
results may be materially different from what we expect. Except as required by law, we do not
undertake any obligation to update or revise any forward-looking statements contained in this
prospectus and any supplements to this prospectus, whether as a result of new information, future
events or otherwise.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B85186105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the net proceeds from the sale of the units offered by this prospectus
supplement, excluding the proceeds, if any, from the exercise of the warrants issued in this
offering and after deducting underwriting discounts and commissions and estimated offering expenses
payable by us, will be approximately $7.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently intend to use the net proceeds of this offering for general corporate purposes,
which may include working capital, capital expenditures, research and development expenditures,
pre-clinical and clinical trial expenditures, commercial expenditures, acquisitions of new
technologies or businesses that are complementary to our current technologies or business focus,
and investments. As of the date of this prospectus supplement, we cannot specify with certainty all
of the particular uses of the proceeds from this offering. As a result, our management will retain
broad discretion in the allocation and use of the net proceeds from this offering.
</DIV>
<DIV align="left">
<A name="B85186106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DILUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in our common stock, you will experience dilution to the extent of the
difference between the price per share you pay in this offering and the net tangible book value per
share of our common stock immediately after this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;Our net tangible book value as of December&nbsp;31, 2010 was
approximately $750,000, or $0.04 per share
of common stock. Net tangible book value per share is equal to
our total tangible assets minus
total liabilities, divided by the number of shares of common stock outstanding as of
December&nbsp;31,
2010. After giving effect to the sale of 6,000,000&nbsp;shares of common stock by us at a public
offering price of $1.35 per share, and after deducting our
estimated underwriting discounts
and commissions and estimated offering expenses payable by us, our as adjusted net tangible book
value would have been approximately $8,108,000 or
approximately $0.33 per share of common stock, as of
December&nbsp;31, 2010. This represents an immediate increase in net tangible book value of
approximately $0.29 per share to existing stockholders and an immediate dilution of approximately
$1.02 per share to investors participating in this offering. The following table illustrates this
calculation on a per share basis:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Public offering price for one share of common stock
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.35</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Net tangible book value per share as of December&nbsp;31, 2010
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.04</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Increase per share attributable to the offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As adjusted net tangible book value per share after this offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.33</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dilution per share to investors participating in this offering
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.02</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->S-21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares of common stock shown above to be outstanding after this offering is
based on 18,373,166&nbsp;shares outstanding as of December&nbsp;31, 2010 and excludes:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
  <TD width="2%" style="background: transparent">&nbsp;</TD>
  <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
  <TD width="1%">&nbsp;</TD>
  <TD>4,333,136&nbsp;shares of our common stock subject to options outstanding as of December
31, 2010 having a weighted average exercise price of $5.10 per share;</TD>
</TR>

<TR>
  <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
  <TD width="2%" style="background: transparent">&nbsp;</TD>
  <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
  <TD width="1%">&nbsp;</TD>
  <TD>2,199,497 shares of our common stock that have been reserved for issuance in
connection with future grants under our stock option plans as of December&nbsp;31, 2010;</TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>250,000 shares of our common stock that have been reserved for
issuance under our employee stock purchase plan as of December 31,
2010;</TD>
</TR>


<TR>
  <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
  <TD width="2%" style="background: transparent">&nbsp;</TD>
  <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
  <TD width="1%">&nbsp;</TD>
  <TD>2,100,642&nbsp;shares of our common stock that have been reserved for issuance upon
exercise of outstanding warrants as of December&nbsp;31, 2010 having a weighted average exercise
price of $5.24 per share; and</TD>
</TR>

<TR>
  <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
  <TD width="2%" style="background: transparent">&nbsp;</TD>
  <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
  <TD width="1%">&nbsp;</TD>
  <TD>shares of our common stock issuable upon the exercise of warrants offered
hereby.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that outstanding warrants are exercised, you may experience further dilution.
The above illustration of dilution per share to investors participating in this offering assumes no
exercise of outstanding options to purchase our common stock or outstanding warrants to purchase
shares of our common stock. The exercise of outstanding options and warrants having an exercise
price less than the offering price will increase dilution to new investors.
</DIV>
<DIV align="left">
<A name="B85186107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION
OF SECURITIES WE ARE OFFERING</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this offering, we are offering a maximum of
6,000,000&nbsp;units,
consisting
of 6,000,000&nbsp;shares
of common stock, 13-month warrants to purchase an aggregate of up to
3,000,000&nbsp;shares of common stock, and
five-year warrants to purchase an aggregate of up to 3,000,000&nbsp;shares of common stock.
Each unit consists of one share
of common stock, one 13-month warrant to purchase 0.50 of a share of common stock
at an exercise price of $1.70 per share and one five-year warrant
to purchase 0.50 of a share of common stock at an exercise price of
$1.87 per share. Units will not be issued or certificated. The shares of common stock and warrants
are immediately separable and will be issued separately. This prospectus supplement also relates to
the offering of shares of our common stock upon exercise, if any, of the warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The material terms and provisions of our common stock are described under the caption
&#147;Description of Common Stock&#148; starting on page 9 of the accompanying prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following summary of certain terms and provisions of the warrants offered hereby is not
complete and is subject to, and qualified in its entirety by reference to, the terms and provisions
set forth in the form of warrant annexed hereto as Annex A. Prospective investors should carefully renew the terms
and provisions set forth in the form of warrant.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Term.</i>
The 13-month warrants are exercisable beginning on the date of original issuance and at any
time up to the date that is 13 months after such date. The five-year warrants are exercisable beginning on the date of
original issuance and at any time up to the date that is five years
after such date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Anti-Dilution
Protection</I>. The warrants contain full-ratchet anti-dilution protection upon
the issuance of any common stock, securities convertible into common
stock or certain other issuances at a price below the then-existing
exercise price of the warrants, with certain exceptions. The terms of the
warrants, including these anti-dilution protections, may make it
difficult for us to raise additional capital at prevailing market
terms in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exercise Price. </I>The exercise
price of the
13-month warrant is $1.70 per share of common stock and
$1.87 per
share of common stock for the five-year warrant. The exercise price is subject to
appropriate adjustment in the event of certain stock dividends and distributions, stock splits,
stock combinations, stock issuances, reclassifications or similar events affecting our common
stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exercisability. </I>Holders may exercise
the warrants beginning on the date of issuance and at any time during
the applicable term of the warrant. The warrants will be exercisable, at the option of each holder, in
whole or in part by delivering to us a duly executed exercise notice accompanied by payment in full
for the number of shares of our common stock purchased upon such exercise (except in the case of a
cashless exercise as discussed below). A holder (together with its affiliates) may not exercise
any portion of the warrant to the extent that the holder would own more than 4.9% of the
outstanding common stock after exercise, except that upon at least 61&nbsp;days&#146; prior notice from the
holder to us, the holder may increase the amount of ownership of outstanding stock after exercising
the holder&#146;s warrants up to 9.9% of the number of shares of our common stock
outstanding immediately after giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the warrants.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cashless Exercise</I>. If at the time a holder exercises its warrant there is no effective
registration statement registering, or the prospectus contained therein is not available for an
issuance of the shares underlying the warrant to the holder, then in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in payment of the
aggregate exercise price, the holder may elect instead to receive upon such exercise (either in
whole or in part) the net number of shares of common stock determined according to a formula set
forth in the warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Transferability</I>. Subjects to applicable laws and the restriction on transfer set forth in the
warrant, the warrant may be transferred at the option of the holder upon surrender of the warrant
to us together with the appropriate instruments of transfer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Authorized Shares. </I>During the period the warrant is outstanding, the Company will reserve
from its authorized and unissued common stock a sufficient number of shares to provide for the
issuance of shares of common stock underlying the warrant upon the exercise of the warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exchange Listing. </I>We do not plan on making an application to list the warrants on the Nasdaq
Capital Market, any national securities exchange or other nationally recognized trading system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fundamental Transactions</I>. In the event of any fundamental transaction, as described in the
warrants and generally including any merger with or into another entity, sale of all or
substantially all of our assets, tender offer or exchange offer, or reclassification of our common
stock, then upon any subsequent exercise of a warrant, the holder shall have the right to receive
as alternative consideration, for each share of our common stock that would have been issuable upon
such exercise immediately prior to the occurrence of such fundamental transaction, the number of
shares of common stock of the successor or acquiring corporation or of RXi Pharmaceuticals
Corporation, if it is the surviving corporation, and any additional consideration receivable upon
or as a result of such transaction by a holder of the number of shares of our common stock for
which the warrant is exercisable immediately prior to such event. In addition, in the event of a
fundamental transaction in which the amount of the alternate consideration is less than the
exercise price of the warrant, then we or any successor entity shall pay at the holder&#146;s option,
exercisable at any time concurrently with or within ninety (90)&nbsp;days after the consummation of the
fundamental transaction, an amount of cash equal to the value of the warrant as determined in
accordance with the Black Scholes option pricing model.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Right as a Stockholder</I>. Except as otherwise provided in the warrants or by virtue of such
holder&#146;s ownership of shares of our common stock, the holders of the warrants do not have the
rights or privileges of holders of our common stock, including any voting rights, until they
exercise their warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Waivers and Amendments</I>. Any term of the warrants issued in the offering may be amended or
waived with our written consent and the written consent of the holder of the warrant.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B85186108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>UNDERWRITING</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms and subject to the conditions in an underwriting agreement dated the date of
this prospectus supplement, the underwriters named below, for whom Lazard Capital Markets LLC is
acting as the representative, have each agreed to purchase, and we have agreed to sell to them, the
number of units (each unit consisting of one share of common stock,
one 13-month warrant to
purchase 0.50 of a share of common stock and one
five-year warrant to purchase 0.50 of a share of common stock) at the public offering price, less the underwriting
discount, as set forth on the cover page of this prospectus supplement, as indicated below:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Underwriter</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number of Units</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lazard Capital Markets LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4,800,000</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ROTH Capital Partners, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1,200,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Total</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6,000,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters are offering the units subject to their acceptance of the securities included
in the units from us and subject to prior sale. The underwriting agreement provides that the
obligations of the underwriters to pay for and accept delivery of the units offered by this
prospectus supplement are subject to the approval of certain legal matters by their counsel and to
other conditions. The underwriters are obligated to take and pay for all of the units offered by
this prospectus supplement if any such units are taken.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters initially propose to offer the units directly to the public at the public
offering price listed on the cover page of this prospectus supplement. After the initial offering
of the units, the offering price and other selling terms may from time to time be varied by the
underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriting agreement provides that the obligations of the underwriters are subject to
certain conditions precedent, including the absence of any material adverse change in our business
and the receipt of customary legal opinions, letters and certificates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Discount and Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the public offering price, underwriting discount and proceeds
before expenses to us:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Per</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Unit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Public offering price</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.35
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$8,100,000</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Underwriting discount</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.095
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$567,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Proceeds to us (before expenses)</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$1.256
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$7,533,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The expenses of the offering, not including the underwriting discount, payable by us are
estimated to be $175,000. We have also agreed to reimburse the underwriters for their legal fees
incurred in connection with this offering up to $100,000. The aggregate value of all
compensation received or to be received by any participating FINRA members does not exceed 8% of
the offering proceeds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The relationship between Lazard Fr&#232;res &#038; Co. LLC and Lazard Capital Markets LLC is governed by
a business alliance agreement between their respective parent companies. Pursuant to such
agreement, Lazard Fr&#232;res &#038; Co. LLC referred this transaction to Lazard Capital Markets LLC and will
receive a referral fee from
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lazard Capital Markets LLC in connection therewith; however, such referral fee is not in addition to
the fee paid by us to Lazard Capital Markets LLC described above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Listing on the Nasdaq Capital Market</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shares of common stock included in the units are listed on the Nasdaq Capital Market under
the symbol &#147;RXII.&#148; Our registrar and transfer agent for all shares of common stock is
Computershare Trust Company, N.A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>No Sales of Similar Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
and each of our executive officers and directors, subject to certain
customary exceptions and except in connection with sales of securities
received from the Company as equity grants solely to pay applicable withholding taxes,
have agreed with the underwriters not to dispose of or hedge any of our shares of common stock or
securities convertible into or exercisable or exchangeable for common stock for ninety (90)&nbsp;days
after the date of this prospectus without first obtaining the written consent of Lazard Capital
Markets LLC. However, we may issue securities (i)&nbsp;pursuant to our employee benefit and
compensation plans and (ii)&nbsp;in connection with strategic alliances involving us and in other cases
as specified in the underwriting agreement. The 90-day &#147;lock-up&#148; period is subject to extension
such that, in the event that either (i)&nbsp;during the last 17&nbsp;days of the &#147;lock-up&#148; period, we issue
an earnings or financial results release or material news or a material event relating to us
occurs, or (ii)&nbsp;prior to the expiration of the &#147;lock-up&#148; period, we announce that we will release
earnings or financial results during the 16-day period beginning on the last day of the &#147;lock-up&#148;
period, then in either case the expiration of the &#147;lock-up&#148; period will be extended until the
expiration of the 18-day period beginning on the issuance of the earnings or financial results
release or the occurrence of the material news or material event, as applicable, unless Lazard
Capital Markets LLC waives, in writing, such an extension.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Price Stabilization, Short Positions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to facilitate the offering of the units, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of our common stock. Specifically, the
underwriters may sell more units than they are obligated to purchase under the underwriting
agreement, creating a short position. The underwriters must close out any short position by
purchasing shares of common stock in the open market. A short position may be created if the
underwriters are concerned that there may be downward pressure on the price of the common stock in
the open market after pricing that could adversely affect investors who purchased in this offering.
As an additional means of facilitating this offering, the underwriters may bid for, and purchase,
shares of our common stock in the open market to stabilize the price of the common stock. These
activities may raise or maintain the market price of our common stock above independent market
levels or prevent or slow a decline in the market price of our common stock. The underwriters are
not required to engage in these activities, and may end any of these activities at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Indemnification</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the underwriters have agreed to indemnify each other, and we have also agreed to
indemnify the underwriters against certain liabilities, including liabilities under the Securities
Act of 1933, as amended, and liabilities arising from breaches of representations and warranties
contained in the underwriting agreement. We have also agreed to contribute to payments the
underwriters and Lazard Fr&#232;res &#038; Co. LLC may be required to make in respect of such liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A prospectus in electronic format may be made available on websites maintained by the
underwriters, Lazard Capital Markets LLC, as representative of the underwriters, may agree to
allocate a number of units to other underwriters for sale to online brokerage account holders.
Internet distributions will be allocated by the underwriters on the same basis as other
allocations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United Kingdom</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This document is only being distributed to and is only directed at (i)&nbsp;persons who are outside
the United Kingdom or (ii)&nbsp;to investment professionals falling within Article&nbsp;19(5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the &#147;Order&#148;) or (iii)
high net worth entities, and other persons to whom it may lawfully be communicated, falling within
Article&nbsp;49(2)(a) to (e)&nbsp;of the Order (all such persons together being referred to as &#147;relevant
persons&#148;). The units are only available to, and any invitation, offer or agreement to subscribe,
purchase or otherwise acquire such units will be engaged in only with, relevant persons. Any person
who is not a relevant person should not act or rely on this document or any of its contents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each underwriter has represented and agreed that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;it has only communicated or caused to be communicated and will only communicate or cause
to be communicated an invitation or inducement to engage in investment activity (within the meaning
of Section&nbsp;21 of the Financial Services and Markets Act 2000 or FSMA) received by them in
connection with the issue or sale of the units in circumstances in which Section&nbsp;21(1) of the FSMA
does not apply to us, and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;it has complied with, and will comply with all applicable provisions of FSMA with respect
to anything done by them in relation to the units in, from or otherwise involving the United
Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>European Economic Area</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the offer of the units is made in any Member State of the European Economic
Area that has implemented the Prospectus Directive before the date of publication of a prospectus
in relation to the units which has been approved by the competent authority in the Member State in
accordance with the Prospectus Directive (or, where appropriate, published in accordance with the
Prospectus Directive and notified to the competent authority in the Member State in accordance with
the Prospectus Directive), the offer (including any offer pursuant to this document) is only
addressed to qualified investors in that Member State within the meaning of the Prospectus
Directive or has been or will be made otherwise in circumstances that do not require us to publish
a prospectus pursuant to the Prospectus Directive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a &#147;Relevant Member State&#148;), each underwriter has represented and agreed
that with effect from and including the date on which the Prospectus Directive is implemented in
that Relevant Member State (the &#147;Relevant Implementation Date&#148;) it has not made and will not make
an offer of shares to the public in that Relevant Member State prior to the publication of a
prospectus in relation to the shares which has been approved by the competent authority in that
Relevant Member State or, where appropriate, approved in another Relevant Member State and notified
to the competent authority in that Relevant Member State, all in accordance with the Prospectus
Directive, except that it may, with effect from and including the Relevant Implementation Date,
make an offer of units to the public in that Relevant Member State at any time:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;to legal entities which are authorized or regulated to operate in the financial markets
or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;to any legal entity which has two or more of (1)&nbsp;an average of at least 250 employees
during the last financial year; (2)&nbsp;a total balance sheet of more than &#128;43,000,000 and (3)&nbsp;an
annual net turnover of more than &#128;50,000,000, as shown in its last annual or consolidated accounts,
or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;in any other circumstances which do not require the publication by us of a prospectus
pursuant to Article&nbsp;3 of the Prospectus Directive. For the purposes of this provision, the
expression an &#147;offer of units to the public&#148; in relation to any shares in any Relevant Member State
means the communication in any form and by any means of sufficient information on the terms of the
offer and the units to be offered so as to enable an investor to decide to purchase or subscribe
the units, as the same may be varied in that Relevant Member State by any measure implementing the
Prospectus Directive in that Relevant Member State and the expression &#147;Prospectus Directive&#148; means
Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->S-26<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The EEA selling restriction is in addition to any other selling restrictions set out below. In
relation to each Relevant Member State, each purchaser of units (other than either underwriter)
will be deemed to have represented, acknowledged and agreed that it will not make an offer of units
to the public in any Relevant Member State, except that it may, with effect from and including the
date on which the Prospectus Directive is implemented in the Relevant Member State, make an offer
of units to the public in that Relevant Member State at any time in any circumstances which do not
require the publication by us of a prospectus pursuant to Article&nbsp;3 of the Prospectus Directive,
provided that such purchaser agrees that it has not and will not make an offer of any units in
reliance or purported reliance on Article&nbsp;3(2)(b) of the Prospectus Directive. For the purposes of
this provision, the expression an &#147;offer of units to the public&#148; in relation to any units in any
Relevant Member State has the same meaning as in the preceding paragraph.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the issuance of the securities offered hereby will be passed upon for us by
Ropes &#038; Gray LLP, Boston, Massachusetts. Proskauer Rose LLP, New York, New York is acting as
counsel for the underwriters in connection with certain legal matters related to this offering.
</DIV>
<DIV align="left">
<A name="B85186109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements as of December&nbsp;31, 2009 and 2008 and for the years then ended and for
the cumulative period from inception (January&nbsp;1, 2003) through December&nbsp;31, 2009 incorporated by
reference in this prospectus supplement have been so incorporated in reliance on the report of BDO
USA, LLP (formerly BDO Seidman, LLP), an independent registered public accounting firm, upon the authority of said firm as
experts in auditing and accounting.
</DIV>
<DIV align="left">
<A name="B85186110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and current reports, proxy statements and other information with the
SEC. Our SEC filings are available to the public over the Internet at the SEC&#146;s website at
<I>http://www.sec.gov</I>. The SEC&#146;s website contains reports, proxy and information statements and other
information regarding issuers, such as us, that file electronically with the SEC. You may also read
and copy any document we file with the SEC at the SEC&#146;s Public Reference Room at 100 F Street,
N.E., Room&nbsp;1580, Washington, D.C. 20549. You may also obtain copies of these documents at
prescribed rates by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its Public Reference Room.
</DIV>
<DIV align="left">
<A name="B85186111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to &#147;incorporate by reference&#148; into this prospectus supplement the
information we have filed with the SEC. The information we incorporate by reference into this
prospectus supplement is an important part of this prospectus supplement. Any statement in a
document we incorporate by reference into this prospectus supplement or the accompanying prospectus
will be considered to be modified or superseded to the extent a statement contained in this
prospectus supplement or any other subsequently filed document that is incorporated by reference
into this prospectus supplement modifies or supersedes that statement. The modified or superseded
statement will not be considered to be a part of this prospectus supplement or accompanying
prospectus, as applicable, except as modified or superseded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incorporate by reference into this prospectus supplement the information contained in the
documents listed below, which is considered to be a part of this prospectus supplement:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Annual Report on Form 10-K for the year ended December&nbsp;31, 2009;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarterly periods ending March&nbsp;31,
2010, June&nbsp;30, 2010 and September&nbsp;30, 2010;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Current Reports on Form 8-K filed with the SEC on March&nbsp;23, 2010 and June
10, 2010;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Proxy Statement of Schedule&nbsp;14A filed with the SEC on April&nbsp;23, 2010; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the description of our common stock and related rights contained in our
registration statements on Form 8-A (file no. 001-33958) filed under the Exchange Act,
including any amendment or report filed for the purpose of updating such description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also incorporate by reference all documents filed pursuant to Sections&nbsp;13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus supplement and prior to the termination
of this offering; provided, however, that we are not incorporating any information furnished under
Item&nbsp;2.02 or Item&nbsp;7.01 of any current report on Form 8-K we may subsequently file.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statements made in this prospectus supplement or the accompanying prospectus or in any
document incorporated by reference in this prospectus supplement or the accompanying prospectus as
to the contents of any contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or other document
filed as an exhibit to the documents incorporated by reference, each such statement being qualified
in all material respects by such reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may request a copy of these filings, at no cost, by writing or telephoning us at the
following:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">RXi Pharmaceuticals Corporation<BR>
60 Prescott Street<BR>
Worcester, MA 01650<BR>
Attention: Investor Relations<BR>
Phone: (508)&nbsp;767-3861
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Copies of these filings are also available, without charge, through the &#147;Investor Relations&#148;
section of our website (www.rxipharma.com) as soon as reasonably practicable after they are filed
electronically with the SEC. The information contained on our website is not a part of this
prospectus.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="right" style="font-size: 10pt; margin-top: 18pt">Annex A
to Prospectus Supplement
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMMON STOCK PURCHASE WARRANT</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>RXI PHARMACEUTICALS CORPORATION</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Warrant Shares: &#091;&nbsp;&nbsp;&#093;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Issue Date: March &#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;, 2011</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS COMMON STOCK PURCHASE WARRANT (the &#147;<U>Warrant</U>&#148;) certifies that, for value received,
&#091;&nbsp;&nbsp;&#093; (the &#147;<U>Holder</U>&#148;) is entitled, upon the terms and subject to the limitations on exercise
and the conditions hereinafter set forth, at any time on or after the date hereof (the
&#147;<U>Exercisability Date</U>&#148;) and on or prior to the close of business on &#091;&nbsp;&nbsp;&#093;, 201&#091;&nbsp;&nbsp;&#093; (the
&#147;<U>Termination Date</U>&#148;) but not thereafter, to subscribe for and purchase from RXi
Pharmaceuticals Corporation, a Delaware corporation (the &#147;<U>Company</U>&#148;), up to &#091;&nbsp;&nbsp;&#093; shares (the
&#147;<U>Warrant Shares</U>&#148;) of common stock of the Company (&#147;<U>Common Stock</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;1</U>. <U>Definitions</U>. Capitalized terms used herein shall have the meanings
given to them herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;2</U>. <U>Exercise</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Exercise of Warrant</U>. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Exercisability Date and on or before the Termination Date by delivery to the Company (or
such other office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of the Holder appearing on the books of the Company) of a
duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within
three (3)&nbsp;business days of the date said Notice of Exercise is delivered to the Company, the
Company shall have received payment of the aggregate Exercise
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Price of the shares thereby
purchased by wire transfer or cashier&#146;s check drawn on a United States bank or, if
available, pursuant to the cashless exercise procedure specified in Section 2(c) below.
Notwithstanding anything herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full, in which
case, the Holder shall surrender this Warrant to the Company for cancellation within three
(3)&nbsp;business days of the date the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of
Warrant Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases. The Company shall
deliver any objection to any Notice of Exercise Form within one (1)&nbsp;business day of receipt
of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on the face hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Exercise Price</U>. The exercise price per share of the Common Stock under this
Warrant shall be <B>$&#091;&nbsp;&nbsp;&#093;</B>, subject to adjustment hereunder (the &#147;<U>Exercise Price</U>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Cashless Exercise</U>. If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not available for
the issuance of the Warrant Shares to the Holder, then this Warrant may also be exercised,
in whole or in part, at such time by means of a &#147;cashless exercise&#148; in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing &#091;(A-B) (X)&#093; by (A), where:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>= the VWAP on the business day immediately preceding the date
on which Holder elects to exercise this Warrant by means of a &#147;cashless
exercise,&#148; as set forth in the applicable Notice of Exercise;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(B)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>= the Exercise Price of this Warrant, as adjusted hereunder;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(X)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>= the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this Warrant if such
exercise were by means of a cash exercise rather than a cashless exercise.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>VWAP</U>&#148; means, for any date, the price determined by the first of the following
clauses that applies: (a)&nbsp;if the Common Stock is then listed or quoted on a market or
exchange, the daily volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the on such market or exchange on which the Common Stock is then
listed or quoted as reported by Bloomberg L.P. (based on a business day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time)), (b)&nbsp;if the OTC Bulletin Board is not a
market or exchange, the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Board, (c)&nbsp;if the Common Stock is not then
listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the &#147;Pink Sheets&#148; published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d)&nbsp;in all other cases, the fair market
value of a share of Common Stock as determined by an independent appraiser selected in good
faith by the Company and reasonably acceptable to the Holders of a majority in interest of
the Securities then outstanding, the fees and expenses of which shall be paid by the
Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant,
to the extent not exercised prior thereto, shall be automatically exercised via cashless
exercise pursuant to this Section&nbsp;2(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Mechanics of Exercise</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Delivery of Certificates Upon Exercise</U>. Certificates for
shares purchased hereunder shall be transmitted by the transfer agent to the
Holder by crediting the account of the Holder&#146;s prime broker with the
depository trust company through its Deposit Withdrawal Agent
Commission (&#147;<U>DWAC</U>&#148;) system if the Company is then a participant
in such system and either (A)&nbsp;there is an effective Registration Statement
covering the issuance of the Warrant Shares to the Holder or (B)&nbsp;this
Warrant is being exercised via cashless exercise, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise by
the date that is three (3)&nbsp;business days after the latest of (A)&nbsp;the
delivery to the Company of the Notice of Exercise Form, (B)&nbsp;surrender of
this Warrant (if required) and (C)&nbsp;payment of the aggregate Exercise Price
as set forth above (including by cashless exercise, if permitted) (such
date, the &#147;<U>Warrant Share Delivery Date</U>&#148;). This Warrant shall be
deemed to have been exercised on the first date on which all of the
foregoing have been delivered to the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the Warrant has been properly
exercised, with payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if
any, pursuant to Section&nbsp;2(d)(vi) prior to the issuance of such shares,
having been paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <U>Delivery of New Warrants Upon Exercise</U>. If this Warrant
shall have been exercised in part, the Company shall, at the request of the
Holder and upon surrender of this Warrant certificate, at the time of
delivery of the certificate or certificates representing Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii. <U>Rescission Rights</U>. If the Company fails to cause the
transfer agent to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to Section&nbsp;2(d)(i) by the Warrant
Share Delivery Date, then, the Holder will have the right to rescind such
exercise.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv. <U>Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise</U>. In addition to any other rights available
to the Holder, if the Company fails to cause the transfer agent to transmit
to the Holder a certificate or the certificates representing the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date,
and if after such Warrant Share Delivery Date, the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares that the Holder
anticipated receiving from the Company (a &#147;<U>Buy-In</U>&#148;), then the
Company shall, within five (5)&nbsp;business days after the Holder&#146;s request and
in the Holder&#146;s discretion, either (i)&nbsp;pay cash to the Holder in an amount,
equal to the Holder&#146;s total purchase price (including reasonable
brokerage commissions, if any) for the shares of Common Stock so
purchased (the &#147;<U>Buy-In Price</U>&#148;), at which point the Company&#146;s
obligation to deliver such certificate (and to issue such Common Stock)
shall terminate and this Warrant shall be restored to its pre-exercise
numbers of shares, or (ii)&nbsp;promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A)&nbsp;such number of shares of Common Stock, times
(B)&nbsp;the VWAP (as reported by Bloomberg) on the date of the event giving rise
to the Company&#146;s obligation to deliver such certificate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Notwithstanding the foregoing, the Company shall not be required to make the
payments set forth herein in the case of uncertificated Warrant Shares if
the Holder fails to timely file a request with the depository trust company
to receive such uncertificated Warrant Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Notwithstanding the foregoing, if the Company fails to cause the transfer
agent to transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to an exercise on or before the
Warrant Share Delivery Date, then the Holder will have the right to rescind
such Notice of Exercise. Nothing herein shall limit a Holder&#146;s right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company&#146;s failure to timely deliver a
Certificate pursuant to the terms hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v. <U>No Fractional Shares or Scrip</U>. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which the Holder would
otherwise
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">be entitled to purchase upon such exercise, the Company shall, at
its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi. <U>Charges, Taxes and Expenses</U>. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; <U>provided</U>,
<U>however</U>, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii. <U>Closing of Books</U>. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Holder&#146;s Exercise Limitations</U>. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section&nbsp;2 or otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holder&#146;s affiliates, and any other Persons acting as a group together with the Holder or
any of the Holder&#146;s affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i)&nbsp;exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by the Holder or any of its affiliates and (ii)&nbsp;exercise or
conversion of the unexercised or nonconverted portion of any other securities of the Company
including, without limitation, any other securities of the Company or any Company
subsidiary consolidated in the Company&#146;s financial statements which would entitle the holder
thereof to acquire at any time Common Stock (&#147;<U>Common Stock Equivalents</U>&#148;) subject to
a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section&nbsp;2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and the Holder is solely responsible for any schedules required to be filed
in accordance therewith. To the extent that the limitation contained in this Section 2(e)
applies, the determination of
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any affiliates) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder&#146;s determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder together with
any affiliates) and of which portion of this Warrant is exercisable, in each case subject to
the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination and shall have no liability for exercises of the
Warrant that are in non-compliance with the Beneficial Ownership Limitation. In addition,
a determination as to any group status as contemplated above shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section&nbsp;2(e), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (A)&nbsp;the Company&#146;s most recent periodic or annual report filed with the
Commission, as the case may be, (B)&nbsp;a more recent public announcement by the Company or (C)
a more recent written notice by the Company or the transfer agent setting forth the number
of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two (2)&nbsp;business days confirm orally
and in writing to the Holder the number of shares of Common Stock then outstanding as
established by (A), (B)&nbsp;or (C)&nbsp;above, as applicable. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Warrant, by the Holder or its affiliates since
the date as of which such number of outstanding shares of Common Stock was reported. The
&#147;<U>Beneficial Ownership Limitation</U>&#148; shall be 4.9% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61&nbsp;days&#146; prior
notice to the Company, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section&nbsp;2(e), provided that the Beneficial Ownership Limitation in no
event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any
such increase or decrease will not be effective until the 61<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP> day after such
notice is delivered to the Company and shall only be effective with respect to such Holder.
The provisions of this paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;3</U>. <U>Certain Adjustments</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Stock Dividends and Splits</U>. If the Company, at any time while this Warrant
is outstanding: (i)&nbsp;pays a stock dividend or otherwise makes a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">include any shares of
Common Stock issued by the Company upon exercise of this Warrant), (ii)&nbsp;subdivides
outstanding shares of Common Stock into a larger number of shares, (iii)&nbsp;combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (iv)&nbsp;issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding immediately after such
event, and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Adjustment upon Issuance of Shares of Common Stock</U>. If and whenever on or
after the date hereof, the Company issues or sells, or in
accordance with this Section 3(b) is deemed to have issued or sold, any shares of
Common Stock, including the issuance or sale of shares of Common Stock owned or held by or
for the account of the Company, but excluding shares of Common Stock deemed to have been
issued by the Company in connection with any Exempt Issuance (defined below), for a
consideration per share (the &#147;<U>New Issuance Price</U>&#148;) less than a price (the
&#147;<U>Applicable Price</U>&#148;) equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a &#147;<U>Dilutive Issuance</U>&#148;), then
immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced
and only reduced to an amount equal to the New Issuance Price. For purposes of determining
the adjusted Exercise Price under this Section&nbsp;3(b), the following shall be applicable:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Issuance of Options</U>. If the Company in any manner grants
any Options (as defined below), other than in connection with any Exempt Issuance,
and the lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities (as defined below) issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">share. For purposes of this
Section&nbsp;3(b)(i), the &#147;lowest price per share for which one share of Common Stock is
issuable upon exercise of such Options or upon conversion, exercise or exchange of
such Convertible Securities issuable upon exercise of any such Option&#148; shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon the
granting or sale of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon exercise of such
Option. No further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such shares of Common Stock
upon conversion, exercise or exchange of such Convertible Securities.
&#147;<U>Options</U>&#148; means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Common Stock Equivalents. &#147;<U>Convertible
Securities</U>&#148; means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for shares of Common Stock or Common Stock
Equivalents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <U>Issuance of Convertible Securities</U>. If the Company in any
manner issues or sells any Convertible Securities, other than in connection with any
Exempt Issuance, and the lowest price per share for which one share of Common Stock
is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the issuance or sale
of such Convertible Securities for such price per share. For the purposes of this
Section&nbsp;3(b)(ii), the &#147;lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange thereof&#148; shall be equal to the
sum of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale of the
Convertible Security and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price shall be made upon the actual
issuance of such shares of Common Stock upon conversion, exercise or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this Warrant
has been or is to be made pursuant to other provisions of this Section&nbsp;3(b), no
further adjustment of the Exercise Price shares shall be made by reason of such
issue or sale.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <U>Change in Option Price or Rate of Conversion.</U> If the
purchase price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion, exercise or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases at any
time, then the Exercise Price in effect at the time of such increase or decrease
shall be adjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities provided for such
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">increased or decreased
purchase price, additional consideration or increased or decreased conversion rate,
as the case may be, at the time initially granted, issued or sold. For purposes of
this Section&nbsp;3(b)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or decreased in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the date of
such increase or decrease. No adjustment pursuant to this Section 3(b) shall be
made if such adjustment would result in an increase of the Exercise Price then in
effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <U>Calculation of Consideration Received</U>. If any shares of
Common Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of such consideration received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the VWAP of such security on the date of receipt.
If any shares of Common Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within ten (10)&nbsp;days after
the occurrence of an event requiring valuation (the &#147;<U>Valuation Event</U>&#148;), the
fair value of such consideration will be determined within five (5)&nbsp;Business Days
after the tenth (10<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP>) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the Holder.
The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne by
the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) <U>Record Date</U>. If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A)&nbsp;to receive a
dividend or other distribution payable in shares of Common Stock, Options or in
Convertible Securities or (B)&nbsp;to subscribe for or purchase shares of Common Stock,
Options or Convertible Securities, then such record date will be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or purchase,
as the case may be.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) &#147;<U>Exempt Issuance</U>.&#148; For the purposes of this Warrant, &#147;Exempt
Issuance&#148; means the issuance of (a)&nbsp;shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b)&nbsp;securities upon the exercise or exchange of or
exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date hereof, provided that such securities have not been amended since date
hereof to increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities and (c)&nbsp;securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall only
be a Person (or to the equityholders of a Person) which is, itself or through its
subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not, for the purposes of this
clause (c), include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business
is investing in securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Subsequent Rights Offerings</U>. If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and
not to the Holders) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the VWAP on the record date mentioned below, then, the Exercise
Price shall be multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights, options or warrants plus the number of
shares which the aggregate offering price of the total number of shares so offered (assuming
receipt by the Company in full of all consideration payable upon exercise of such rights,
options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights, options or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such rights,
options or warrants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Pro Rata Distributions</U>. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security other than the Common Stock (which shall
be subject to Section&nbsp;3(b)), then in each such case the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a fraction of which
the denominator shall be the VWAP determined as of the record date mentioned
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">above, and of
which the numerator shall be such VWAP on such record date less the then per share fair
market value at such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as determined by the
Board of Directors in good faith. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Fundamental Transaction</U>. If, at any time while this Warrant is outstanding,
(i)&nbsp;the Company, directly or indirectly, in one or more related transactions effects any
merger or consolidation of the Company with or into another Person, (ii)&nbsp;the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a series of related
transactions, (iii)&nbsp;any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv)&nbsp;the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v)&nbsp;the Company,
directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with another Person
whereby such other Person acquires more than 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person or other Persons making
or party to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a &#147;<U>Fundamental
Transaction</U>&#148;), then, upon any subsequent exercise of this Warrant, the Holder shall have
the right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at the option
of the Holder (without regard to any limitation in Section 2(e) on the exercise of this
Warrant), the number of shares of Common Stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and any additional consideration (the
&#147;<U>Alternate Consideration</U>&#148;) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any limitation in
Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing, in the event of a Fundamental Transaction, at the
request of the Holder delivered before the 90th day after such Fundamental Transaction, the
Company (or the Successor Entity, as defined below) shall purchase this Warrant from the
Holder by paying to the Holder, within five Business Days after such request (or, if later,
on the effective date of the Fundamental Transaction), cash in an amount equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date of such
Fundamental Transaction. &#147;<U>Black Scholes Value</U>&#148; means the value of this Warrant
based on the Black Scholes Option Pricing Model obtained from the &#147;OV&#148; function on Bloomberg
using (i)&nbsp;a price per share of Common Stock equal to the Weighted Average Price of the
Common Stock for the business day immediately preceding the date of consummation of the
applicable Fundamental Transaction, (ii)&nbsp;a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date
of consummation of the applicable Fundamental Transaction and (iii)&nbsp;an expected volatility
equal to the lesser of 80% and the 60-day volatility obtained from the HVT function on
Bloomberg determined as of the business day next following the public announcement of the
applicable Fundamental Transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company shall cause any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the &#147;<U>Successor Entity</U>&#148;) to assume in writing all of the
obligations of the Company under this Warrant in accordance with the provisions of this
Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for
this Warrant a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant) prior to
such Fundamental Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares
of capital stock, such number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably satisfactory in form
and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant referring to the &#147;Company&#148;
shall refer instead to the Successor Entity), and may exercise every right and power of the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Company and shall assume all of the obligations of the Company under this Warrant with the
same effect as if such Successor Entity had been named as the Company herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Calculations</U>. All calculations under this Section&nbsp;3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section&nbsp;3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <U>Notice to Holder</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. <U>Adjustment to Exercise Price</U>. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section&nbsp;3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii. <U>Notice to Allow Exercise by Holder</U>. If during the term in
which this Warrant may be exercised by the Holder (A)&nbsp;the Company shall
declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B)&nbsp;the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C)&nbsp;the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of
any rights, (D)&nbsp;the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E)&nbsp;the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Company, then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x)&nbsp;the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y)&nbsp;the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to mail such notice or
any defect therein or in the mailing thereof shall not affect the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">validity of the corporate action required to be specified in such notice. To the
extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to exercise this Warrant during the period commencing on the
date of such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;4</U>. <U>Transfer of Warrant</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>Transferability</U>. Subject to compliance with applicable securities laws,
this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees, as applicable, and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The
Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>New Warrants</U>. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section&nbsp;4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall include reference to the initial issuance date set forth on the first page of this
Warrant and shall be identical with this Warrant except as to the number of Warrant Shares
issuable pursuant thereto and the Warrant number.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Warrant Register</U>. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the &#147;<U>Warrant Register</U>&#148;), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
written notice to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Representation by the Holder</U>. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise hereof,
will acquire the Warrant Shares issuable upon such exercise, for its own account and not
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">with a view to or for distributing or reselling such Warrant Shares or any part thereof in
violation of the Securities Act of 1933, as amended (the &#147;<U>Securities Act</U>&#148;) or any
applicable state securities law, except pursuant to sales registered or exempted under
the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Section&nbsp;5</U>. <U>Miscellaneous</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) <U>No Rights as Stockholder Until Exercise</U>. This Warrant does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the Company prior
to the exercise hereof as set forth in Section&nbsp;2(d)(i).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) <U>Loss, Theft, Destruction or Mutilation of Warrant</U>. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c) <U>Saturdays, Sundays, Holidays, etc</U>. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein shall not be
a business day, then, such action may be taken or such right may be exercised on the next
succeeding business day.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d) <U>Authorized Shares</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. &#147;<U>Trading Market</U>&#148; means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the ate in question: the NYSE AMEX, the Nasdaq Capital Market,
the Nasdq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange or the OTC Bulletin Board (or any successors to any of the foregoing). The
Company covenants that all Warrant Shares which may be issued upon the exercise of
the purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">nonassessable and free from all taxes, liens and charges created by the Company
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except and to the extent as waived or consented to by the Holder, the Company
shall not by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to
protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (i)&nbsp;not increase
the par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii)&nbsp;take all such action
as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant
and (iii)&nbsp;use commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction thereof,
as may be, necessary to enable the Company to perform its obligations under this
Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e) <U>Jurisdiction</U>. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
laws of the State of New York.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f) <U>Restrictions</U>. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, and the Holder does not utilize cashless
exercise, will have restrictions upon resale imposed by state and federal securities laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g) <U>Nonwaiver and Expenses</U>. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holder&#146;s rights, powers or remedies. Without limiting any other
provision of this Warrant, if the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder, the Company
shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys&#146; fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h) <U>Notices</U>. The Company shall provide Holder with prompt written notice of all
actions taken pursuant to this Warrant. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be given in writing, will be
mailed (a)&nbsp;if within the domestic United States by first-class registered or certified
airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile or (b)&nbsp;if delivered from outside the United States, by International Federal
Express or facsimile, and (c)&nbsp;will be deemed given (i)&nbsp;if delivered by first-class
registered or certified mail domestic, three business days after so mailed, (ii)&nbsp;if
delivered by nationally recognized overnight carrier, one business day after so mailed,
(iii)&nbsp;if delivered by International Federal Express, two business days after so mailed and
(iv)&nbsp;if delivered by facsimile, upon electronic confirmation of receipt, and will be
delivered and addressed as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>if to the Company, to</U>:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>RXi Pharmaceuticals Corporation<BR>
60 Prescott Street<BR>
Worcester, MA 01605<BR>
Attn: Chief Executive Officer<BR>
Facsimile: 508-767-3862</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With Copies to:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ropes &#038; Gray LLP<BR>
Prudential Tower<BR>
800 Boylston Street<BR>
Boston, MA 02199<BR>
Attn: Marc Rubenstein<BR>
Facsimile: 617-951-7050</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>if to the Holder</U>, at the address of the
Holder appearing on the books of the Company.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i) <U>Limitation of Liability</U>. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;j) <U>Remedies</U>. The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of
its rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;k) <U>Successors and Assigns</U>. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any
Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of
Warrant Shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;l) <U>Amendment</U>. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;m) <U>Severability</U>. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;n) <U>Headings</U>. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">********************
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><I>(Signature Page Follows)</I>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the date first above indicated.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>RXI PHARMACEUTICALS CORPORATION</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->A-19<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTICE OF EXERCISE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">TO: <B>RXI PHARMACEUTICALS CORPORATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;The undersigned hereby elects to purchase &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95; Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Payment shall take the form of (check applicable box):
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%">
<FONT style="font-family: Wingdings">&#111;</FONT> in lawful money of the United States; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 8%"><FONT style="font-family: Wingdings">&#111;</FONT> &#091;if permitted&#093; the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in
subsection 2(c).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:
</DIV>


<DIV align="center">
<DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:
</DIV>



<DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&#091;SIGNATURE OF HOLDER&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Name of Investing Entity:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><DIV align="center">
<DIV style="FONT-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="left" style="font-size: 10pt"><I>Signature of Authorized Signatory of Investing Entity</I>:</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt">Name of Authorized Signatory:</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt">Title of Authorized Signatory:</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt">Date:</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->A-20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASSIGNMENT FORM</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(To assign the foregoing warrant, execute<BR>
this form and supply required information.<BR>
Do not use this form to exercise the warrant.)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR VALUE RECEIVED, &#091;&#95;&#95;&#95;&#95;&#093; all of or &#091;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#093; shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 6pt; margin-right:30%"> whose address is
<DIV style="width: 100%; border-top: 1px solid #000000; margin-right:13%; FONT-size: 10px">&nbsp;
</div>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 0pt; margin-right:30%">.
<DIV style="width: 100%; border-top: 1px solid #000000; margin-right:0.5%; FONT-size: 1px">&nbsp;</DIV>
</div>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<DIV style="width: 70%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Dated: &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;, &#95;&#95;&#95;&#95;&#95;&#95;&#95;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="27%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Holder&#146;s Signature:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Holder&#146;s Address:
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Signature Guaranteed:
<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px; margin-left:122px; margin-right:90px">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->A-21<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PROSPECTUS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 18pt"><B>RXI PHARMACEUTICALS CORPORATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><IMG src="b85186psb8102401.gif" alt="(RXI LOGO)">
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">$75,000,000<BR>
Common Stock<BR>
Preferred Stock<BR>
Warrants<BR>
Debt Securities
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer to the public from time to time in one or more series or issuances:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shares of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shares of preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>warrants to purchase shares of our common stock, preferred stock and/or debt securities; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>debt securities consisting of debentures, notes or other evidences of indebtedness.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus provides a general description of the securities we may offer. Each time
we sell securities, we will provide specific terms of the securities offered in a supplement to
this prospectus. Such a prospectus supplement may also add, update or change information contained
in this prospectus. This prospectus may not be used to consummate a sale of securities unless
accompanied by the applicable prospectus supplement. You should read both this prospectus and the
applicable prospectus supplement together with additional information described under the heading
&#147;Where You Can Find More Information&#148; before you make your investment decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will sell the securities directly to our stockholders or to purchasers or through
agents on our behalf or through underwriters or dealers as designated from time to time. If any
agents or underwriters are involved in the sale of any of the securities, the applicable prospectus
supplement will provide the names of the agents or underwriters and any applicable fees,
commissions or discounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Nasdaq Capital Market under the symbol &#147;RXII.&#148; On May 19, 2010, the closing price of our common stock was $4.17.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;22, 2010, the aggregate market value of our outstanding common stock held by
non-affiliates was approximately $84,447,354 based on 16,241,125 shares of outstanding common stock, of
which approximately 10,412,744 shares are held by non-affiliates, and a per share price of $8.11 based on the closing sale price of our
common stock on March&nbsp;22, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our securities involves risks. Please see &#147;Risk Factors&#148; on page 5 and
other information included and incorporated by reference in this prospectus, and in any applicable
prospectus supplement, for a discussion of the factors you should consider carefully before
deciding to purchase our securities</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The date
of this prospectus is May 21, 2010
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="B81024tocpage"></A>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024101">About this Prospectus
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024102">The Company
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024103">Risk Factors
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024104">Forward-Looking Statements
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024105">Use of Proceeds
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024106">Plan of Distribution
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024107">Description of Common Stock
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024108">Description of Preferred Stock
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024109">Description of Warrants
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024110">Description of Debt Securities
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024111">Legal Matters
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024112">Experts
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024113">Where You Can Find More Information
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><A href="#B81024114">Incorporation of Certain Documents by Reference
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
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<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="B81024101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities described in this prospectus are part of a registration statement that we filed
with the Securities and Exchange Commission (the &#147;SEC&#148;) using a &#147;shelf&#148; registration process. Under
this shelf registration process, we may offer to sell any combination of the securities described
in this prospectus in one or more offerings up to a total dollar amount of $75,000,000. This
prospectus provides you with a general description of the securities we may offer. Each time we
sell securities under this shelf registration, we will provide a prospectus supplement that will
contain specific information about the terms of such offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read both this
prospectus and any applicable prospectus supplement, including all documents incorporated herein by
reference, together with additional information described under &#147;Where You Can Find More
Information&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not authorized any dealer, agent or other person to give any information or to
make any representation other than those contained or incorporated by reference in this prospectus
and any accompanying prospectus supplement. You must not rely upon any information or
representation not contained or incorporated by reference in this prospectus or an accompanying
prospectus supplement. This prospectus and the accompanying prospectus supplement, if any, do not
constitute an offer to sell or the solicitation of an offer to buy any securities other than the
registered securities to which they relate, nor do this prospectus and any accompanying prospectus
supplement constitute an offer to sell or the solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. You should not assume that the information contained in this prospectus and any
accompanying prospectus supplement is accurate on any date subsequent to the date set forth on the
front of the document or that any information we have incorporated by reference is correct on any
date subsequent to the date of the document incorporated by reference, even though this prospectus
and any accompanying prospectus supplement is delivered or securities are sold on a later date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, &#147;RXi,&#148; the &#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; &#147;our&#148; and
similar names refer to RXi Pharmaceuticals Corporation.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B81024102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE COMPANY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated as Argonaut Pharmaceuticals, Inc. in Delaware on April&nbsp;3, 2006, changed
our name to RXi Pharmaceuticals Corporation on November&nbsp;28, 2006, and began operations in January
2007. We are a discovery-stage biopharmaceutical company pursuing proprietary therapeutics based on
RNA interference, or &#147;RNAi&#148;, a naturally occurring cellular mechanism that has the potential to
effectively and selectively interfere with, or &#147;silence&#148;, expression of targeted disease-associated
genes. It is believed that this specific silencing can be used
to potentially treat human diseases by &#147;turning off&#148; genes that lead to disease. While no
therapeutic RNAi products have yet been approved, there has been significant growth in the field of
RNAi development and potential therapeutic applications in this field. 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 undruggable by other modalities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By utilizing our expertise in RNAi and the comprehensive RNAi therapeutic platform that we
have established, we believe we will be able to discover and develop lead compounds and progress
them into and through clinical development for potential commercialization more efficiently than
traditional drug development approaches.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our proprietary therapeutic platform is comprised of two main components:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Novel RNAi Compounds</B>, referred to as rxRNA&#153; compounds, that are distinct from, and we
believe convey significant advantages over classic siRNA (conventionally-designed &#147;small
interfering RNA&#148; 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 <I>in vitro </I>and <I>in
vivo. </I>These RNAi compounds include rxRNA<I>ori</I><SUP style="FONT-size: 85%; vertical-align: text-top">TM</SUP>,
rxRNA<I>solo</I><SUP style="FONT-size: 85%; vertical-align: text-top">TM</SUP> and <I>sd-</I>rxRNA<SUP style="FONT-size: 85%; vertical-align: text-top">TM</SUP>, or &#147;self delivering&#148;
RNA. Based on our research we believe that these different, novel siRNA configurations have
various advantages for therapeutic use. These advantages include high potency, increased
resistance to nucleases and off-target effects, and, in the case of the <I>sd</I>-rxRNA compounds,
access to cells and tissues with no additional formulation required.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Advanced Delivery Technologies</B>, may enable the delivery of our rxRNA compounds to 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&#146;s suite of delivery technologies is comprised of delivery vehicles, which
can be combined with various rxRNA compounds, as well as <I>sd</I>-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.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Local Applications. </I>An area of application of the RXi therapeutic platform
which uses rxRNA compounds to target genes expressed in tissues that can be silenced
by direct, local delivery. The numerous diseases common to tissues accessible by local
delivery represent significant unmet medical needs and large market opportunities.
Most of our initial targets are validated gene targets relevant in important
biological pathways and are implicated in multiple diseases enabling us to leverage
these targets and associated compounds across a broad array of therapeutic areas.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Systemic Applications. </I>RXi has active internal efforts to advance the
therapeutic platform to optimize robust systemic delivery to various tissues and
organs of the body. In some cases, such as in targeting a treatment to the liver, the
optimal route of administration is by systemic delivery. Efforts to improve the
systemic delivery of RNAi compounds are currently ongoing, and these efforts are
supported by internal activities targeting an undisclosed gene thought to be
responsible for elevated cholesterol. We have also in-licensed intellectual property
developed by Dr.&nbsp;Michael Czech (one of our scientific co-founders and scientific
advisory board members) on genes that
appear to be important regulators of metabolism, and continue to develop and validate
this approach with these other potential target genes.</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to use our RNAi therapeutic platform and our expertise in RNAi to identify lead
compounds against multiple target genes, and advance them towards pre-clinical and clinical
development in therapeutic areas that address broad unmet medical needs, in both acute and chronic
settings. There are many well-studied genes that have been associated with numerous diseases but
have been difficult to target with conventional medicinal chemistry or traditional modalities
involving both large and small molecules. We believe RNAi technology may play an important role in
targeting these genes and potentially treating the related diseases and disorders. We plan on
pursuing disease areas with the goal of creating multiple clinical development program
opportunities, either through independent internal efforts at the company or in conjunction with
partners through various collaborations and partnerships with pharmaceutical or biotechnology
companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we have created and established a strong intellectual property portfolio. We
have secured exclusive and nonexclusive licenses from both academic institutions and commercial
entities to certain issued and pending patents and patent applications covering RNAi technologies
in the following three categories: (i)&nbsp;therapeutic targets, (ii)&nbsp;chemistry and configurations of
RNAi compounds and (iii)&nbsp;formulation and delivery of RNAi compounds within the body. We have also
filed patents based on our internal discoveries in the each of the areas mentioned above, which
enables us to further strengthen our broad intellectual property portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our founding scientists recognized that the key to therapeutic success with RNAi lies in
delivering intact RNAi compounds to the target tissue and the interior of the target cells. To
accomplish this, we are developing a comprehensive platform that includes local, systemic and oral
delivery approaches that give rise to target silencing after RNAi compound administration. We work
with chemically synthesized RNAi compounds that we believe are optimized for stability and
efficacy. We endow these compounds with favorable delivery profiles and properties either by
covalent chemical modification or combination with appropriate formulations to achieve optimal
delivery to specific target tissues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Local Delivery</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The local delivery method may avoid some hurdles associated with systemic approaches such as
rapid clearance from the bloodstream and inefficient extravasation (e.g. crossing the endothelial
barrier from the blood stream). The <I>sd</I>-rxRNA molecules have unique properties which improve tissue
uptake in local delivery models. We have studied <I>sd</I>-rxRNA molecules in a rat model of dermal
delivery. Direct application of <I>sd</I>-rxRNA with no additional delivery vehicle to compromised skin
(incision introduced) demonstrates that target gene silencing can be measured after topical
delivery. We have also injected <I>sd</I>-rxRNA to the skin layers and observed efficient uptake and
target gene silencing. The dose levels required for these direct injection methods are small and
suitable for clinical development suggesting that local delivery indications will be very
accessible with the <I>sd</I>-rxRNA technology platform. Target tissues that are potentially accessible
for local delivery using rxRNA compounds include lung, eye, skin, CNS, mucosal tissues, sites of
inflammation, and tumors (locally).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Systemic Delivery</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Systemic delivery occurs when a drug accesses the tissue of interest through the circulatory
system. In some cases, such as in targeting a treatment to the liver, the optimal route of delivery
may be by a systemic route. We have a portfolio of systemic delivery solutions utilizing our RNAi
therapeutic platforms. One novel approach involves the use of <I>sd</I>-rxRNA compounds. The
self-delivering technology introduces properties required for <I>in vivo </I>efficacy such as cell and
tissue penetration and improved blood clearance and distribution properties. Systemic delivery of
these compounds to mice has resulted in gene specific inhibition at 50 mg/kg doses with no
additional delivery vehicle required. In addition, we have developed novel nanotransporter
formulations to aid in transport of RNAi compounds to both liver and various other target tissues
in the body. These nanotransporters are chemically synthesized molecules that form nanometer-sized
particles when mixed with RNAi compounds and alter the clearance, distribution and tissue
penetration properties of the RNAi compounds. Delivery of RNAi compounds to the
liver might be critical for the treatment of many diseases and using rxRNA in conjunction with such
delivery vehicles has enabled us to demonstrate gene specific inhibition at low doses (1 mg/kg) in
a mouse model after intravenous, systemic delivery. Target tissues that are potentially accessible
using rxRNA compounds by systemic
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">delivery approach include liver, lung, adipocytes, cardiomyocytes, bone marrow, sites of
inflammation, tumors, vascular endothelium, and kidney.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Oral Delivery</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most RNAi therapeutic products being developed today require recurring intravenous injections
or other forms of administration which are not patient friendly. To address the desire for RNAi
therapeutics with improved modes of administration, we are testing a novel formulation technology,
Glucan Encapsulated RNAi Particles (GeRPs) that may allow our rxRNA compounds to be incorporated
into orally administered pills. In research to date, the GeRP delivery system appears to be 5 to
250 times more potent than previous methods used for systemic delivery of RNAi therapeutics by
intravenous injection. The GeRP system is very flexible and can either be used to administer a
single RNAi compound, multiple RNAi compounds, or could potentially allow co-delivery of RNAi, DNA,
protein and small molecule combinations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Therapeutic Programs and Markets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By utilizing our expertise in RNAi compound design and delivery, we intend to identify lead
compounds to both tractable and intractable targets implicated in diseases that address broad unmet
medical needs in both acute and chronic settings. The broad applicability of our RNAi therapeutic
platform has the potential to enable delivery to various tissues in both a local setting as well as
in a systemic setting. Target tissues that are potentially accessible using our rxRNA compounds in
the context of a local delivery approach include lung, eye, skin, CNS, mucosal,
sites of inflammation, and tumors (locally). Similarly, target tissues that are potentially
accessible using our rxRNA compounds in the context of a systemic delivery approach include liver,
lung, adipocytes, cardiomyocytes, bone marrow, sites of inflammation, tumors, vascular endothelium,
and kidney. We will continue to focus our efforts selecting targets to prosecute internally, and as
we identify relevant compounds, we intend to begin preclinical development in specific areas as
appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices are located at 60 Prescott Street, Worcester, MA 01605, and
our phone number is (508)&nbsp;767-3861.
</DIV>

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</DIV>

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<DIV align="left">
<A name="B81024103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in our securities involves risk. You should consider the risks, uncertainties and
assumptions discussed under the heading &#147;Risk Factors&#148; in our Annual Report on Form 10-K for the
fiscal year ended December&nbsp;31, 2009 filed on March&nbsp;31, 2010 with the SEC, which is incorporated
herein by reference, and may be amended, supplemented or superseded from time to time by other
reports we file with the SEC in the future. The risks and uncertainties we have described are not
the only ones we face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our operations. If any of these risks were to occur, our
business, financial condition, and results of operations could be severely harmed. This could cause
the trading price of our common stock to decline, and you could lose all or part of your
investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, any prospectus supplement applicable to each offering of our securities will
contain a discussion of the risks applicable to such an investment in us. Prior to making a
decision about investing in our securities, you should carefully consider the specific factors
discussed under the heading &#147;Risk Factors&#148; in the applicable prospectus supplement, together with
all of the other information contained or incorporated by reference in such prospectus supplement
or appearing or incorporated by reference in this prospectus.
</DIV>
<DIV align="left">
<A name="B81024104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus, any prospectus supplement and the other documents we have filed with the SEC
that are incorporated herein by reference contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, as well
as assumptions that, if they never materialize or prove incorrect, could cause the results of RXi
to differ materially from those expressed or implied by such forward-looking statements. All
statements other than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of financing needs, revenue, expenses,
earnings or losses from operations, or other financial items; any statements of the plans,
strategies and objectives of management for future operations; any statements concerning product
research, development and commercialization plans and timelines; any statements regarding safety
and efficacy of product candidates; any statements of expectation or belief; and any statements of
assumptions underlying any of the foregoing. In addition, forward-looking statements may contain
the words &#147;believe,&#148; &#147;anticipate,&#148; &#147;expect,&#148; &#147;estimate,&#148; &#147;intend,&#148; &#147;plan,&#148; &#147;project,&#148; &#147;will be,&#148;
&#147;will continue,&#148; &#147;will result,&#148; &#147;seek,&#148; &#147;could,&#148; &#147;may,&#148; &#147;might,&#148; or any variations of such words or
other words with similar meanings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given these uncertainties, you should not place undue reliance on these forward-looking
statements. You should read this prospectus, any supplements to this prospectus and the documents
that we reference in this prospectus with the understanding that our actual future results may be
materially different from what we expect. Except as required by law, we do not undertake any
obligation to update or revise any forward-looking statements contained in this prospectus and any
supplements to this prospectus, whether as a result of new information, future events or otherwise.
</DIV>

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<DIV align="left">
<A name="B81024105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise provided in the applicable prospectus supplement, we intend to use
the net proceeds from the sale of the securities covered by this prospectus for general corporate
purposes, which may include working capital, capital expenditures, research and development
expenditures, clinical trial expenditures, commercial expenditures, acquisitions of new
technologies or businesses, and investments. Additional information on the use of net proceeds from
the sale of securities covered by this prospectus may be set forth in any prospectus supplement
relating to a specific offering.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B81024106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may sell the securities in any of the ways described below or in any combination:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to or through underwriters or dealers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through one or more agents; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>directly to purchasers or to a single purchaser.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The distribution of the securities may be effected from time to time in one or more
transactions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at a fixed price, or prices, which may be changed from time to time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at market prices prevailing at the time of sale;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at prices related to such prevailing market prices; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at negotiated prices.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each prospectus supplement will describe the method of distribution of the securities and
any applicable restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any prospectus supplement with respect to the securities of a particular series will
describe the terms of the offering of the securities, including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name or names of any underwriters, dealers or agents and
the amounts of securities underwritten or purchased by each of
them;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the public offering price of the securities and the proceeds
to us and any discounts, commissions or concessions allowed or
reallowed or paid to dealers; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any securities exchanges on which the securities may be listed.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Under no circumstances will any fees, discounts,
commissions or concessions received by any FINRA member or independent broker-dealer exceed eight
percent of the gross proceeds to us in any offering in the United States of the securities covered
by the prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only the agents or underwriters named in each prospectus supplement are agents or
underwriters in connection with the securities being offered thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may authorize underwriters, dealers or other persons acting as our agents to solicit
offers by certain institutions to purchase securities from us pursuant to delayed delivery
contracts providing for payment and delivery on the date stated in each applicable prospectus
supplement. Each contract will be for an amount not less than, and the aggregate amount of
securities sold pursuant to such contracts shall not be less nor more than, the respective amounts
stated in each applicable prospectus supplement. Institutions with whom the contracts, when
authorized, may be made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other institutions, but shall in
all cases be subject to our approval. Delayed delivery contracts will be subject only to those
conditions set forth in each applicable prospectus supplement, and each prospectus supplement will
set forth any commissions we pay for solicitation of these contracts.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agents, underwriters and other third parties described above may be entitled to
indemnification by us against certain civil liabilities, including liabilities under the Securities
Act of 1933, or to contribution from us with respect to payments which the agents, underwriters or
other third parties may be required to make in respect thereof. Agents, underwriters and such other
third parties may be customers of, engage in transactions with, or perform services for us in the
ordinary course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One or more firms, referred to as &#147;remarketing firms,&#148; may also offer or sell the securities,
if a prospectus supplement so indicates, in connection with a remarketing arrangement upon their
purchase. Remarketing firms will act as principals for their own accounts or as our agents. These
remarketing firms will offer or sell the securities in accordance with the terms of the securities.
Each prospectus supplement will identify and describe any remarketing firm and the terms of its
agreement, if any, with us and will describe the remarketing firm&#146;s compensation. Remarketing firms
may be deemed to be underwriters in connection with the securities they remarket. Remarketing firms
may be entitled under agreements that may be entered into with us to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act of 1933, and may be
customers of, engage in transactions with or perform services for us in the ordinary course of
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain underwriters may use this prospectus and any accompanying prospectus supplement
for offers and sales related to market-making transactions in the securities. These underwriters
may act as principal or agent in these transactions, and the sales will be made at prices related
to prevailing market prices at the time of sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities may be new issues of securities and may have no established trading
market. The securities may or may not be listed on a securities exchange. Underwriters may make a
market in these securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. We can make no assurance as to the liquidity of, or the
existence of trading markets for, any of the securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain persons participating in an offering may engage in overallotment, stabilizing
transactions, short covering transactions and penalty bids in accordance with rules and regulations
under the Securities Exchange Act of 1934. Overallotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified maximum. Short
covering transactions involve purchases of the securities in the open market after the distribution
is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the dealer are purchased in a short
covering transaction to cover short positions. Those activities may cause the price of the
securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue
any of the activities at any time.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="B81024107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF COMMON STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary of the terms of our common stock is subject to and qualified in its
entirety by reference to our charter and by-laws, copies of which are on file with the SEC as
exhibits to previous SEC filings. Please refer to &#147;Where You Can Find More Information&#148; below for
directions on obtaining these documents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May 21, 2010, we are authorized to issue 50,000,000 shares of common stock. As of May
21, 2010, we had 18,372,759 shares of common stock outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our common stock are entitled to one vote for each share on all matters voted
on by stockholders, including elections of directors, and, except as otherwise required by law or
provided in any resolution adopted by our board with respect to any series of preferred stock, the
holders of such shares possess all voting power. Our certificate of incorporation does not provide
for cumulative voting in the election of directors. Subject to any preferential rights of any
outstanding series of our preferred stock created by our board from time to time, the holders of
common stock are entitled to such dividends as may be declared from time to time by our board from
funds available therefore and upon liquidation are entitled to receive pro rata all assets
available for distribution to such holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our common stock, other than CytRx Corporation (&#147;CytRx&#148;), have no preemptive
rights. The rights, preferences and privileges of holders of common stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of preferred stock
which we may designate and issue in the future. Under our agreement with CytRx, with some
exceptions, CytRx has preemptive rights to acquire a portion of any new securities sold or issued
by us so as to maintain their percentage beneficial ownership of us at the time of such sale or
issuance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of our
 common stock, other than CytRx, have no redemption rights.
 Pursuant to a stock redemption agreement dated March 22, 2010 between us and CytRx, we are
 required to use 25% of the proceeds from the exercise of certain warrants that we issued in
 a March 2010 registered direct offering to repurchase from CytRx a number of shares of common
stock held by CytRx equal to 25% of shares issued upon the exercise of such warrants.  We issued
warrants to purchase an aggregate of 540,000 shares of our common stock in the March 2010 registered
 direct offering.  We estimate that we will be required to redeem 135,000 shares of common stock
from CytRx for an aggregate price of $810,000 if all of the warrants issued in the March 2010
registered direct offering are exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer Agent and Registrar</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Nasdaq Capital Market</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed for quotation on the Nasdaq Capital Market under the symbol &#147;RXII.&#148;
</DIV>
<DIV align="left">
<A name="B81024108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF PREFERRED STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue up to 5,000,000 shares of preferred stock, par value $0.0001 per
share. Our board of directors, without further action by the holders of our common stock, may issue
shares of our preferred stock. Our board is vested with the authority to fix by resolution the
designations, preferences and relative, participating, optional or other special rights, and such
qualifications, limitations or restrictions thereof, including, without limitation, redemption
rights, dividend rights, liquidation preferences and conversion or exchange rights of any class or
series of preferred stock, and to fix the number of classes or series of preferred stock, the
number of shares constituting any such class or series and the voting powers for each class or
series.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The authority possessed by our board to issue preferred stock could potentially be used to
discourage attempts by third parties to obtain control of RXi through a merger, tender offer, proxy
contest or otherwise by making such attempts more difficult or more costly. Our board may issue
preferred stock with voting rights or conversion rights that, if exercised, could adversely affect
the voting power of the holders of common stock. There are no current agreements or understandings
with respect to the issuance of preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we offer a specific class or series of preferred stock under this prospectus, we will
describe the terms of the preferred stock in the prospectus supplement for such offering and will
file a copy of the certificate establishing the terms of the preferred stock with the SEC. To the
extent required, this description will include:
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the title and stated value;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares offered, the liquidation preference per share and the
purchase price;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the dividend rate(s), period(s) and/or payment date(s), or method(s) of
calculation for such dividends;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether dividends will be cumulative or non-cumulative and, if cumulative, the
date from which dividends will accumulate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the procedures for any auction and remarketing, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the provisions for a sinking fund, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the provisions for redemption, if applicable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any listing of the preferred stock on any securities exchange or market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the preferred stock will be convertible into our common stock, and, if
applicable, the conversion price (or how it will be calculated) and conversion
period;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the preferred stock will be exchangeable into debt securities, and, if
applicable, the exchange price (or how it will be calculated) and exchange period;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>voting rights, if any, of the preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a discussion of any material U.S. federal income tax considerations applicable
to the preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the relative ranking and preferences of the preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the affairs of the
Company; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any material limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the series of preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preferred stock offered by this prospectus, when issued, will not have, or be subject to,
any preemptive or similar rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer Agent and Registrar</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for any series or class of preferred stock will be set forth
in each applicable prospectus supplement.
</DIV>
<DIV align="left">
<A name="B81024109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF WARRANTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May 21, 2010, we had 2,100,642 warrants outstanding to purchase shares of our common
stock. We may issue warrants to purchase shares of our common stock, preferred stock and/or debt
securities in one or more series together with other securities or separately, as described in each
applicable prospectus supplement. Below is a description of certain general terms and provisions of
the warrants that we may offer. Particular terms of the warrants will be described in the
applicable warrant agreements and the applicable prospectus supplement for the warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable prospectus supplement will contain, where applicable, the following terms of
and other information relating to the warrants:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the specific designation and aggregate number of, and the price at which we will
issue, the warrants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the currency or currency units in which the offering price, if any, and the
exercise price are payable;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the designation, amount and terms of the securities purchasable upon exercise of
the warrants;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if applicable, the exercise price for shares of our common stock and the number
of shares of common stock to be received upon exercise of the warrants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if applicable, the exercise price for shares of our preferred stock, the number
of shares of preferred stock to be received upon exercise, and a description of
that class or series of our preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if applicable, the exercise price for our debt securities, the amount of our
debt securities to be received upon exercise, and a description of that series of
debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date on which the right to exercise the warrants will begin and the date on
which that right will expire or, if the warrants may not be continuously exercised
throughout that period, the specific date or dates on which the warrants may be
exercised;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the warrants will be issued in fully registered form or bearer form, in
definitive or global form or in any combination of these forms, although, in any
case, the form of a warrant included in a unit will correspond to the form of the
unit and of any security included in that unit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any applicable material U.S. federal income tax consequences;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the identity of the warrant agent for the warrants and of any other
depositaries, execution or paying agents, transfer agents, registrars or other
agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the proposed listing, if any, of the warrants or any securities purchasable upon
exercise of the warrants on any securities exchange;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if applicable, the date from and after which the warrants and the common stock,
preferred stock and/or debt securities will be separately transferable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if applicable, the minimum or maximum amount of the warrants that may be
exercised at any one time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>information with respect to book-entry procedures, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the anti-dilution provisions of the warrants, if any;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any redemption or call provisions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the warrants are to be sold separately or with other securities as parts
of units; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any additional terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer Agent and Registrar</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for any warrants will be set forth in the applicable
prospectus supplement.
</DIV>
<DIV align="left">
<A name="B81024110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF DEBT SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will issue the debt securities offered by this prospectus and any accompanying prospectus
supplement under an indenture to be entered into between us and the trustee identified in the
applicable prospectus supplement. The terms of the debt securities will include those stated in the
indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as
in effect on the date of the indenture. We have previously filed a copy of the form of indenture as
an exhibit to a previous SEC filing. Please refer to &#147;Where You Can Find More Information&#148; below
for directions on obtaining this document. The indenture will be subject to and governed by the
terms of the Trust Indenture Act of 1939.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer under this
prospectus up to an aggregate principal amount of $75,000,000 in
debt securities, or if debt securities are issued at a discount, or in a foreign currency, foreign
currency units or composite currency, the principal amount as may be sold for an initial public
offering price of up to $75,000,000. Unless otherwise specified in the applicable prospectus
supplement, the debt securities will represent direct, unsecured obligations of RXi and will rank
equally with all of our other unsecured indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following statements relating to the debt securities and the indenture are summaries,
qualified in their entirety by reference to the detailed provisions of the indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue the debt securities in one or more series with the same or various maturities, at
par, at a premium, or at a discount. We will describe the particular terms of each series of debt
securities in a prospectus supplement relating to that series, which we will file with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prospectus supplement will set forth, to the extent required, the following terms of the
debt securities in respect of which the prospectus supplement is delivered:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the title of the series;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the aggregate principal amount;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the issue price or prices, expressed as a percentage of the aggregate principal
amount of the debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any limit on the aggregate principal amount;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date or dates on which principal is payable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the interest rate or rates (which may be fixed or variable) or, if applicable,
the method used to determine such rate or rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the date or dates from which interest, if any, will be payable and any regular
record date for the interest payable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the place or places where principal and, if applicable, premium and interest, is
payable;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the terms and conditions upon which we may, or the holders may require us to,
redeem or repurchase the debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the denominations in which such debt securities may be issuable, if other than
denominations of $1,000 or any integral multiple of that number;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the debt securities are to be issuable in the form of certificated
securities (as described below) or global securities (as described below);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the portion of principal amount that will be payable upon declaration of
acceleration of the maturity date if other than the principal amount of the debt
securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the currency of denomination;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the designation of the currency, currencies or currency units in which payment
of principal and, if applicable, premium and interest, will be made;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if payments of principal and, if applicable, premium or interest, on the debt
securities are to be made in one or more currencies or currency units other than
the currency of denomination, the manner in which the exchange rate with respect to
such payments will be determined;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if amounts of principal and, if applicable, premium and interest may be
determined by reference to an index based on a currency or currencies or by
reference to a commodity, commodity index, stock exchange index or financial index,
then the manner in which such amounts will be determined;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the provisions, if any, relating to any collateral provided for such debt
securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any addition to or change in the covenants and/or the acceleration provisions
described in this prospectus or in the indenture;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any events of default, if not otherwise described below under &#147;Events of
Default&#148;;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the terms and conditions, if any, for conversion into or exchange for shares of
our common stock or preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any depositaries, interest rate calculation agents, exchange rate calculation
agents or other agents; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the terms and conditions, if any, upon which the debt securities shall be
subordinated in right of payment to other indebtedness of the Company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue discount debt securities that provide for an amount less than the stated
principal amount to be due and payable upon acceleration of the maturity of such debt securities in
accordance with the terms of the indenture. We may also issue debt securities in bearer form, with
or without coupons. If we issue discount debt securities or debt securities in bearer form, we will
describe material U.S. federal income tax considerations and other material special considerations
which apply to these debt securities in the applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue debt securities denominated in or payable in a foreign currency or currencies or
a foreign currency unit or units. If we do, we will describe the restrictions, elections, and
general tax considerations relating to the debt securities and the foreign currency or currencies
or foreign currency unit or units in the applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange and/or Conversion Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue debt securities which can be exchanged for or converted into shares of our common
stock or preferred stock. If we do, we will describe the terms of exchange or conversion in the
prospectus supplement relating to these debt securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer and Exchange</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue debt securities that will be represented by either:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;book-entry securities,&#148; which means that there will be one or more global
securities registered in the name of a depositary or a nominee of a depositary; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#147;certificated securities,&#148; which means that they will be represented by a
certificate issued in definitive registered form.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will specify in the prospectus supplement applicable to a particular offering whether the
debt securities offered will be book-entry or certificated securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certificated Debt Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you hold certificated debt securities, you may transfer or exchange such debt securities at
the trustee&#146;s office or at the paying agent&#146;s office or agency in accordance with the terms of the
indenture. You will not be charged a service charge for any transfer or exchange of certificated
debt securities but may be required to pay an amount sufficient to cover any tax or other
governmental charge payable in connection with such transfer or exchange.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may effect the transfer of certificated debt securities and of the right to receive the
principal of, premium, and/or interest, if any, on the certificated debt securities only by
surrendering the certificate representing the certificated debt securities and having us or the
trustee issue a new certificate to the new holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Global Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we decide to issue debt securities in the form of one or more global securities, then we
will register the global securities in the name of the depositary for the global securities or the
nominee of the depositary, and the global securities will be delivered by the trustee to the
depositary for credit to the accounts of the holders of beneficial interests in the debt
securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prospectus supplement will describe the specific terms of the depositary arrangement for
debt securities of a series that are issued in global form. None of RXi, the trustee, any payment
agent or the security registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership interests in a global debt
security or for maintaining, supervising or reviewing any records relating to these beneficial
ownership interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>No Protection in the Event of Change of Control</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indenture does not have any covenants or other provisions providing for a put or increased
interest or otherwise that would afford holders of our debt securities additional protection in the
event of a recapitalization transaction, a change of control of RXi, or a highly leveraged
transaction. If we offer any covenants or provisions of this type with respect to any debt
securities covered by this prospectus, we will describe them in the applicable prospectus
supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Covenants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated in this prospectus or the applicable prospectus supplement, our
debt securities will not have the benefit of any covenants that limit or restrict our business or
operations, the pledging of our assets or the incurrence by us of indebtedness. We will describe in
the applicable prospectus supplement any material covenants in respect of a series of debt
securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consolidation, Merger and Sale of Assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed in the indenture that we will not consolidate with or merge into any other
person or convey, transfer, sell or lease our properties and assets substantially as an entirety to
any person, unless:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the person formed by the consolidation or into or with which we are merged or
the person to which our properties and assets are conveyed, transferred, sold or
leased, is a corporation organized and existing under the laws of the U.S., any
state or the District of Columbia or a corporation or comparable legal entity
organized under the laws of a foreign jurisdiction and, if we are not the surviving
person, the surviving person has expressly assumed all of our obligations,
including the payment of the principal of and, premium, if any, and interest on the
debt securities and the performance of the other covenants under the indenture; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>immediately before and immediately after giving effect to the transaction, no
event of default, and no event which, after notice or lapse of time or both, would
become an event of default, has occurred and is continuing under the indenture.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Events of Default</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specified in the applicable prospectus supplement, the following events will
be events of default under the indenture with respect to debt securities of any series:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we fail to pay any principal or premium, if any, when it becomes due;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we fail to pay any interest within 30&nbsp;days after it becomes due;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we fail to observe or perform any other covenant in the debt securities or the
indenture for 60&nbsp;days after written notice specifying the failure from the trustee
or the holders of not less than 25% in aggregate principal amount of the
outstanding debt securities of that series; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain events involving bankruptcy, insolvency or reorganization of RXi or any
of our significant subsidiaries.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The trustee may withhold notice to the holders of the debt securities of any series of any
default, except in payment of principal of or premium, if any, or interest on the debt securities
of a series, if the trustee considers it to be in the best interest of the holders of the debt
securities of that series to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If an event of default (other than an event of default resulting from certain events of
bankruptcy, insolvency or reorganization) occurs, and is continuing, then the trustee or the
holders of not less than 25% in aggregate principal amount of the outstanding debt securities of
any series may accelerate the maturity of the debt securities. If this happens, the entire
principal amount, plus the premium, if any, of all the outstanding debt securities of the affected
series plus accrued interest to the date of acceleration will be immediately due and payable. At
any time after the acceleration, but before a judgment or decree based on such acceleration is
obtained by the trustee, the holders of a majority in aggregate principal amount of outstanding
debt securities of such series may rescind and annul such acceleration if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all events of default (other than nonpayment of accelerated principal, premium
or interest) have been cured or waived;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all lawful interest on overdue interest and overdue principal has been paid; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rescission would not conflict with any judgment or decree.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if the acceleration occurs at any time when we have outstanding indebtedness
which is senior to the debt securities, the payment of the principal amount of outstanding debt
securities may be subordinated in right of payment to the prior payment of any amounts due under
the senior indebtedness, in which case the holders of debt securities will be entitled to payment
under the terms prescribed in the instruments evidencing the senior indebtedness and the indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If an event of default resulting from certain events of bankruptcy, insolvency or
reorganization occurs, the principal, premium and interest amount with respect to all of the debt
securities of any series will be due and payable immediately without any declaration or other act
on the part of the trustee or the holders of the debt securities of that series.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of a majority in principal amount of the outstanding debt securities of a series
will have the right to waive any existing default or compliance with any provision of the indenture
or the debt securities of that series and to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, subject to certain limitations specified in the
indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No holder of any debt security of a series will have any right to institute any proceeding
with respect to the indenture or for any remedy under the indenture, unless:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holder gives to the trustee written notice of a continuing event of default;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holders of at least 25% in aggregate principal amount of the outstanding
debt securities of the affected series make a written request and offer reasonable
indemnity to the trustee to institute a proceeding as trustee;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the trustee fails to institute a proceeding within 60&nbsp;days after such request;
and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the holders of a majority in aggregate principal amount of the outstanding debt
securities of the affected series do not give the trustee a direction inconsistent
with such request during such 60-day period.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These limitations do not, however, apply to a suit instituted for payment on debt securities
of any series on or after the due dates expressed in the debt securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will periodically deliver certificates to the trustee regarding our compliance with our
obligations under the indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Modification and Waiver</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we and the trustee may, without the consent of holders of the debt
securities of one or more series, amend the indenture or the debt securities of one or more series,
or supplement the indenture, for certain specified purposes, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to provide that the surviving entity following a change of control of RXi
permitted under the indenture will assume all of our obligations under the
indenture and debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to provide for certificated debt securities in addition to uncertificated debt
securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to comply with any requirements of the SEC under the Trust Indenture Act of
1939;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to provide for the issuance of and establish the form and terms and conditions
of debt securities of any series as permitted by the indenture;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to cure any ambiguity, defect or inconsistency, or make any other change that
does not materially and adversely affect the rights of any holder; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to appoint a successor trustee under the indenture with respect to one or more
series.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time we and the trustee may, with the consent of holders of at least a majority
in principal amount of an outstanding series of debt securities, amend or supplement the indenture
or the debt securities series, or waive compliance in a particular instance by us with any
provision of the indenture or the debt securities. We may not, however, without the consent of each
holder affected by such action, modify or supplement the indenture or the debt securities or waive
compliance with any provision of the indenture or the debt securities in order to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduce the amount of debt securities whose holders must consent to an amendment,
supplement, or waiver to the indenture or such debt security;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduce the rate of or change the time for payment of interest or reduce the
amount of or postpone the date for payment of sinking fund or analogous
obligations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduce the principal of or change the stated maturity of the debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make any debt security payable in money other than that stated in the debt
security;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>change the amount or time of any payment required or reduce the premium payable
upon any redemption, or change the time before which no such redemption may be
made;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>waive a default in the payment of the principal of, premium, if any, or interest
on the debt securities or a redemption payment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>waive a redemption payment with respect to any debt securities or change any
provision with respect to redemption of debt securities; or</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>take any other action otherwise prohibited by the indenture to be taken without
the consent of each holder affected by the action.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Defeasance of Debt Securities and Certain Covenants in Certain Circumstances</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indenture permits us, at any time, to elect to discharge our obligations with respect to
one or more series of debt securities by following certain procedures described in the indenture.
These procedures will allow us either:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to defease and be discharged from any and all of our obligations with respect to
any debt securities except for the following obligations (which discharge is
referred to as &#147;legal defeasance&#148;):</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to register the transfer or exchange of such debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to replace temporary or mutilated, destroyed, lost or stolen debt securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to compensate and indemnify the trustee; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to maintain an office or agency in respect of the debt securities and to hold monies for
payment in trust; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to be released from our obligations with respect to the debt securities under
certain covenants contained in the indenture, as well as any additional covenants
which may be contained in the applicable supplemental indenture (which release is
referred to as &#147;covenant defeasance&#148;).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to exercise either defeasance option, we must deposit with the trustee or other
qualifying trustee, in trust for that purpose:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>money;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. Government Obligations (as described below) or Foreign Government
Obligations (as described below) which through the scheduled payment of principal
and interest in accordance with their terms will provide money; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a combination of money and/or U.S. Government Obligations and/or Foreign
Government Obligations sufficient in the written opinion of a nationally-recognized
firm of independent accountants to provide money;</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which in each case specified above, provides a sufficient amount to pay the principal of, premium,
if any, and interest, if any, on the debt securities of the series, on the scheduled due dates or
on a selected date of redemption in accordance with the terms of the indenture.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, defeasance may be effected only if, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of either legal or covenant defeasance, we deliver to the trustee an
opinion of counsel, as specified in the indenture, stating that as a result of the
defeasance neither the trust nor the trustee will be required to register as an
investment company under the Investment Company Act of 1940;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of legal defeasance, we deliver to the trustee an opinion of counsel
stating that we have received from, or there has been published by, the Internal
Revenue Service a ruling to the effect that, or there has been a change in any
applicable federal income tax law with the effect that (and the
opinion shall confirm that), the holders of outstanding debt securities will not
recognize income, gain or loss for U.S. federal income tax purposes solely as a
result of such legal defeasance and will be subject to U.S. federal income tax on
the same amounts, in the same manner, including as a result of prepayment, and at
the same times as would have been the case if legal defeasance had not occurred;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of covenant defeasance, we deliver to the trustee an opinion of
counsel to the effect that the holders of the outstanding debt securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result of
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
covenant defeasance had not occurred; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>certain other conditions described in the indenture are satisfied.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we fail to comply with our remaining obligations under the indenture and applicable
supplemental indenture after a covenant defeasance of the indenture and applicable supplemental
indenture, and the debt securities are declared due and payable because of the occurrence of any
undefeased event of default, the amount of money and/or U.S. Government Obligations and/or Foreign
Government Obligations on deposit with the trustee could be insufficient to pay amounts due under
the debt securities of the affected series at the time of acceleration. We will, however, remain
liable in respect of these payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term &#147;U.S. Government Obligations&#148; as used in the above discussion means securities which
are direct obligations of or non-callable obligations guaranteed by the United States of America
for the payment of which obligation or guarantee the full faith and credit of the United States of
America is pledged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The term &#147;Foreign Government Obligations&#148; as used in the above discussion means, with respect
to debt securities of any series that are denominated in a currency other than U.S. dollars (1)
direct obligations of the government that issued or caused to be issued such currency for the
payment of which obligations its full faith and credit is pledged or (2)&nbsp;obligations of a person
controlled or supervised by or acting as an agent or instrumentality of such government the timely
payment of which is unconditionally guaranteed as a full faith and credit obligation by that
government, which in either case under clauses (1)&nbsp;or (2), are not callable or redeemable at the
option of the issuer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Regarding the Trustee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will identify the trustee with respect to any series of debt securities in the prospectus
supplement relating to the applicable debt securities. You should note that if the trustee becomes
a creditor of RXi, the indenture and the Trust Indenture Act of 1939 limit the rights of the
trustee to obtain payment of claims in certain cases, or to realize on certain property received in
respect of any such claim, as security or otherwise. The trustee and its affiliates may engage in,
and will be permitted to continue to engage in, other transactions with us and our affiliates. If,
however, the trustee acquires any &#147;conflicting interest&#148; within the meaning of the Trust Indenture
Act of 1939, it must eliminate such conflict or resign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of a majority in principal amount of the then outstanding debt securities of any
series may direct the time, method and place of conducting any proceeding for exercising any remedy
available to the trustee. If an event of default occurs and is continuing, the trustee, in the
exercise of its rights and powers, must use the degree of care and skill of a prudent person in the
conduct of his or her own affairs. Subject to that provision, the trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the request of any of the
holders of the debt securities, unless they have offered to the trustee reasonable indemnity or
security.
</DIV>






<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="B81024111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the issuance of the securities offered hereby will be passed upon for us by
Ropes &#038; Gray LLP, Boston, Massachusetts. The validity of any securities will be passed upon for any
underwriters or agents by counsel that we will name in the applicable prospectus supplement.
</DIV>
<DIV align="left">
<A name="B81024112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements as of December&nbsp;31, 2009 and 2008 and for the years then ended and for
the cumulative period from inception (January&nbsp;1, 2003) through December&nbsp;31, 2009 incorporated by
reference in this Prospectus have been so incorporated in reliance on the report of BDO Seidman,
LLP, an independent registered public accounting firm, incorporated herein by reference, given on
the authority of said firm as experts in auditing and accounting.
</DIV>
<DIV align="left">
<A name="B81024113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed a registration statement on Form S-3 with the SEC for the securities we are
offering by this prospectus. This prospectus does not include all of the information contained in
the registration statement. You should refer to the registration statement and its exhibits for
additional information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to file annual and quarterly reports, special reports, proxy statements,
and other information with the SEC. We make these documents publicly available, free of charge, on
our website at www.rxipharma.com as soon as reasonably practicable after filing such documents with
the SEC. You can read our SEC filings, including the registration statement, on the SEC&#146;s website
at http://www.sec.gov. You also may read and copy any document we file with the SEC at its public
reference facility at:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Public Reference Room<BR>
100 F Street N.E.<BR>
Washington, DC 20549.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please call the SEC at 1-800-732-0330 for further information on the operation of the
public reference facilities.
</DIV>
<DIV align="left">
<A name="B81024114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to &#147;incorporate by reference&#148; into this prospectus the information we file
with it, which means that we can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be part of this prospectus,
and information in documents that we file later with the SEC will automatically update and
supersede information in this prospectus. We incorporate by reference into this prospectus the
documents listed below and any future filings made by us with the SEC under Section&nbsp;13(a), 13(c),
14 or 15(d) of the Exchange Act until we close this offering, including all filings made after the
date of the initial registration statement and prior to the effectiveness of the registration
statement; provided, however, that we are not incorporating any information furnished under Item
2.02 or Item&nbsp;7.01 of any current report on Form 8-K we may subsequently file. We hereby incorporate
by reference the following documents:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Annual Report on Form 10-K for the year ended December&nbsp;31, 2009 filed with
the SEC on March&nbsp;31, 2009, including any amendment filed for the purpose of
updating such Annual Report;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Quarterly Report on Form 10-Q for the quarterly period ending March&nbsp;31, 2010
filed with the SEC on May&nbsp;17, 2010;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Current Report on Form 8-K filed with the SEC on March&nbsp;23, 2010;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Proxy Statement on Schedule&nbsp;14A filed with the SEC on April&nbsp;23, 2010; and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#B81024tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the description of our common stock contained in our registration statement on
Form 8-A filed February&nbsp;8, 2008, under the Securities Act, including any amendment
or report filed for the purpose of updating such description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may request a copy of these filings, at no cost, by writing or telephoning us at the
following address:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">RXi Pharmaceuticals Corporation<BR>
60 Prescott Street<BR>
Worcester, MA 01650<BR>
Attention: Investor Relations<BR>
Phone: (508)&nbsp;767-3861
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Copies of these filings are also available, without charge, through the &#147;Investor Relations&#148;
section of our website (www.rxipharma.com) as soon as reasonably practicable after they are filed
electronically with the SEC. The information contained on our website is not a part of this
prospectus.
</DIV>






<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#B85186tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>6,000,000
  Shares of Common Stock<BR>
13-Month Warrants to Purchase 3,000,000 Shares of Common Stock<br>
Five-Year Warrants to Purchase 3,000,000 Shares of Common Stock</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 18pt"><IMG src="b85186psb8518600.gif" alt="(LOGO)">
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PROSPECTUS SUPPLEMENT</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="FONT-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 18pt"><FONT style="FONT-variant: SMALL-CAPS"><B>Lazard Capital Markets</B></FONT>
</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><FONT style="FONT-variant: SMALL-CAPS"><B>roth capital partners</B></FONT>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">March&nbsp;1, 2011
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>



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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
