RXi Pharmaceuticals to Strengthen Strategic Focus by Separating into Two Publicly Traded Companies Galena Biopharma to Focus on Targeted Cancer Therapies RXi Pharmaceuticals to Focus on RNAi-Based Therapeutics Separation

RXi Pharmaceuticals to Strengthen Strategic Focus by

Separating into Two Publicly Traded Companies

Galena Biopharma to Focus on Targeted Cancer Therapies

RXi Pharmaceuticals to Focus on RNAi-Based Therapeutics

WORCESTER, Mass., September 26, 2011 RXi Pharmaceuticals Corporation (NASDAQ: RXII), a

biotechnology company focused on discovering, developing and commercializing innovative therapies

addressing major unmet medical needs using targeted biotherapeutics, today reported that it will

separate its programs into two publicly traded companies: Galena Biopharma will focus on the

development of targeted cancer therapies; and RXi Pharmaceuticals will focus on the development of

RNAi-based therapeutics. The RNAi programs have been contributed to the new RXi, which is expected

to be spun off later this year. In connection with these transactions, the Company has changed its

name to Galena Biopharma, but will continue to trade under the ticker symbol RXII until the

completion of the spin-off.

As part of these transactions, institutional investors have agreed to invest $9.5 million in RXi

preferred stock and $2.5 million in Galena common stock, for a total of $12 million. The RXi

preferred stock will be convertible into 83% of the equity of RXi as of the completion of the

spin-off. The investment in Galena common stock will be priced at market based on a

volume-weighted average trading price. No warrants will be issued in the transaction.

It is expected that approximately 8% of the equity in RXi will be distributed on a share-for-share

basis so that a holder of one share of Galena common stock prior to the distribution will hold one

share of RXi and one share of Galena after the spin-off. Galena will retain a 4% equity position

in RXi, and Advirna, LLC, a private company and key licensor of RXi, will acquire5% of

the equity. The completion of the spin-off and the related transactions, including the financing

of RXi, are subject to certain conditions, including registration of the spin-off distribution with

the Securities and Exchange Commission.

Mark Ahn, Ph.D., the President and Chief Executive Officer of Galena Biopharma, will serve on the

board of RXi. Anastasia Khvorova, Ph.D., will serve as RXi s Senior Vice President and Chief

Scientific Officer, and Pamela Pavco, Ph.D., will serve as RXi s Senior Vice President of

Pharmaceutical Development. A search for RXi s Chief Executive Officer is underway.

We believe that the spin-off transaction will enhance shareholder value by providing a sharper

strategic focus for both of the Company s key programs, commented Dr. Ahn. Galena will focus its

resources on its lead product, NeuVax , a cancer immunotherapy that is expected to initiate its

Phase 3 PRESENT (Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low to

Intermediate HER2 Expression with NeuVax Treatment) study in the first half of 2012. Galena also

recently acquired Folate Binding Protein-E39 (FBP), a targeted vaccine scheduled to commence Phase

1/2 trials by year-end 2011.

Dr. Ahn also stated, RXi will focus on advancing its lead anti-scarring and anti-fibrosis product,

RXI-109, into the clinic in 2012, as well as unlocking the therapeutic potential of gene silencing

more broadly through its proprietary, next generation RNAi platform with several ongoing and future

Dr. Ahn concluded, We are delighted to be strengthening our balance sheet at this uncertain time

in the financial markets. We view this pair of financings from a strong group of investors as an

endorsement of both of our platforms and our planned path forward.

About Galena Biopharma

Galena Biopharma, Inc. (Nasdaq: RXII) is a Portland, Oregon-based biopharmaceutical company that

develops innovative, targeted oncology treatments that address major unmet medical needs to advance

cancer care. For more information please visit us at www.galenabiopharma.com.

NeuVax consists of the E75 peptide derived from human epidermal growth factor receptor 2 (HER2)

combined with the immune adjuvant granulocyte macrophage colony-stimulating factor (GM-CSF).

Treatment with NeuVax stimulates cytotoxic (CD8 ) T cells in a highly specific manner to target

cells expressing any level of HER2. NeuVax is given as an intradermal injection once a month for

six months, followed by a booster injection once every six months. Based on a successful Phase 2

trial, which achieved its primary endpoint of disease free survival (DFS), the Food and Drug

Administration (FDA) granted NeuVax a Special Protocol Assessment (SPA) for its Phase 3 PRESENT

(Prevention of Recurrence in Early-Stage, Node-Positive Breast

Low to Intermediate HER2 Expression with NeuVax Treatment) study. The

Phase 3 trial is expected to commence in the first half of 2012.

According to the National Cancer Institute, over 200,000 women in the U.S. are diagnosed with

breast cancer annually. Of these women, about 75% test positive for HER2 (IHC 1 , 2 or 3 ). Only

25% of all breast cancer patients, those with HER2 3 disease, are eligible for Herceptin

(trastuzumab; Roche-Genentech), which had revenues of over $5 billion in 2010. NeuVax targets the

remaining 50% of HER2-positive patients (HER2 1 and 2 ) who achieve remission with current

standard of care, but have no available HER2-targeted adjuvant treatment options to maintain their

disease-free status.

Folate Binding Protein (FBP)-E39

Folate Binding Protein-E39 (FBP) is a targeted vaccine aimed at preventing the recurrence of

ovarian, endometrial, and breast cancers. The FBP vaccine consists of the E39 peptide derived from

the folate binding protein combined with the immune adjuvant granulocyte macrophage colony

stimulating factor (GM-CSF). FBP is over-expressed (20-80 fold) in more than 90% of ovarian and

endometrial cancers, as well as 20 50% of breast, lung, colorectal, and renal cell carcinomas.

FBP has very limited tissue distribution and expression in non-malignant tissue, making it an ideal

immunotherapy target. A Phase 1/2 trial is expected to commence by year end 2011.

Ovarian cancer occurs in over 22,000 patients per year in the U.S. and is the most lethal

gynecologic cancer. Although the incidence of ovarian cancer is only approximately 20% of that of

breast cancer, the number of patients that die from ovarian cancer is nearly 50% greater than the

percentage of breast cancer patients who die from this disease. Endometrial cancer is the most

common gynecologic cancer and occurs in over 46,000 women, with over 8,000 deaths, in the U.S.

annually. While many patients respond to initial treatment and become clinically free of disease,

the majority of these patients will relapse, and, once the disease recurs, the treatment options

and successes drop dramatically.

About RXi Pharmaceuticals

RXi Pharmaceuticals is a wholly-owned biotechnology subsidiary of Galena focused on discovering,

developing and commercializing innovative therapies based on its proprietary, next-generation RNAi

platform. Therapeutics that use RNA interference, or RNAi, have great promise because of their

ability to silence, or down-regulate, the expression of a specific gene that may be overexpressed

in a disease condition. Building on the pioneering work of scientific founder and Nobel Laureate

Dr. Craig Mello, RXi s first RNAi product candidate, RXI-109, which targets CTGF (connective tissue

growth factor), is scheduled to commence human clinical trials in anti-scarring in 2012. RXi is

expected to be spun-out as an independent, publicly traded

company in late 2011, after which RXi s common stock is expected to commence trading under the

RXi Pharmaceuticals has initiated development of clinical candidate RXI-109, a self-delivering RNAi

compound (sd-rxRNA) for the reduction of dermal scarring in planned surgeries. RXI-109 is designed

to reduce the expression of CTGF, a critical regulator of several biological pathways

fibrosis, including scar formation in the skin. RXI-109 is expected to enter clinical trials in

About Self-delivering rxRNA (or sd-rxRNA)

RXi s sd-rxRNA compounds are designed for therapeutic use and have drug-like properties, such as

high potency, target specificity, serum stability, reduced immune response activation, and

efficient cellular uptake. They are hybrid oligonucleotide molecules that RXi believes combine the

beneficial properties of both conventional RNAi and antisense technologies. sd-rxRNAs have a

single-stranded phosphorothioate region, a short duplex region, and contain a variety of