RegeneRx Biopharmaceuticals 10Q 2009 Q1 Quarterly report

RegeneRx Biopharmaceuticals (RGRX) 10-Q2009 Q1 Quarterly report

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Securities and Exchange Commission

Washington, DC 20549

FORM 10-Q


þ		Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period endedMarch 31, 2009


o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number001-15070

RegeneRx Biopharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		52-1253406
(State of Incorporation)		(IRS Employer I.D. Number)

3 Bethesda Metro Center
Suite 630
Bethesda, Maryland 20814

(Address of Principal Executive Offices)

(301) 280-1992

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):


Large accelerated filero		Accelerated filero		Non-accelerated filero(Do not check if a smaller reporting company)		Smaller reporting companyþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

54,675,122 shares of common stock, par value $0.001 per share, were outstanding as of May 8, 2009.

RegeneRx Biopharmaceuticals, Inc.
Form 10-Q
Quarterly Period Ended March 31, 2009

Index


	Page No.
Part I. Financial Information

Item 1. Financial Statements

Balance Sheets at March 31, 2009 (unaudited) and December 31, 2008		3

Statements of Operations for the three months ended March 31, 2009 and 2008 (unaudited)		4

Statements of Cash Flows for the three months ended March 31, 2009 and 2008 (unaudited)		5

Notes to Financial Statements (unaudited)		6-8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9

Item 3. Quantitative and Qualitative Disclosures About Market Risk		14

Item 4 Controls and Procedures		15

Part II. Other Information

Item 1. Legal Proceedings		15

Item 1A. Risk Factors		15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		34

Item 3. Defaults Upon Senior Securities		34

Item 4. Submission of Matters to a Vote of Security Holders		35

Item 5. Other Information		35

Item 6. Exhibits		35-37

Signatures		38

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Part I — Financial Information

Item 1. Financial Statements

RegeneRx Biopharmaceuticals, Inc.

Balance Sheets


	March 31,			December 31,
	2009			2008
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,904,308		$	5,655,367
Prepaid expenses and other current assets		164,072			236,477

Total current assets		4,068,380			5,891,844
Fixed assets, net of accumulated depreciation of $86,090 and $81,623		20,572			25,039
Other non-current assets		5,693			5,693

Total assets	$	4,094,645		$	5,922,576


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	371,629		$	70,554
Accrued expenses		1,374,374			1,255,358

Total current liabilities		1,746,003			1,325,912

Commitments		—			—

Stockholders’ equity
Preferred stock, $.001 par value per share, 1,000,000 authorized; no shares issued		—			—
Common stock, par value $.001 per share, 100,000,000 shares authorized; 53,622,491 issued and outstanding		53,623			53,623
Additional paid-in capital		82,817,213			82,550,585
Accumulated deficit		(80,522,194	)		(78,007,544	)

Total stockholders’ equity		2,348,642			4,596,664

Total liabilities and stockholders’ equity	$	4,094,645		$	5,922,576

The accompanying notes are an integral part of these financial statements.

RegeneRx Biopharmaceuticals, Inc.

Statements of Operations

(unaudited)


	Three Months ended March 31,
	2009			2008
Revenues	$	—		$	32,167

Operating expenses:
Research and development		1,661,600			1,634,466
General and administrative		859,568			1,074,897

Total operating expenses		2,521,168			2,709,363

Loss from operations		(2,521,168	)		(2,677,196	)

Interest income		6,518			63,855

Net loss	$	(2,514,650	)	$	(2,613,341	)


Basic and diluted net loss per common share	$	(0.05	)	$	(0.05	)

Weighted average number of common shares outstanding		53,622,491			48,696,819

The accompanying notes are an integral part of these financial statements.

RegeneRx Biopharmaceuticals, Inc.

Statements of Cash Flows

(unaudited)


	For the Three Months ended March 31,
	2009			2008

Operating activities:
Net loss	$	(2,514,650	)	$	(2,613,341	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		4,467			5,177
Non-cash share-based compensation		266,628			262,202
Changes in operating assets and liabilities:
Accounts receivable		—			(5,216	)
Prepaid expenses and other current assets		72,405			39,862
Accounts payable		301,075			240,373
Accrued expenses		119,016			(1,195,797	)

Net cash used in operating activities		(1,751,059	)		(3,266,740	)


Investing activities:
Proceeds from sales/maturities of short-term investments		—			4,581,135

Net cash provided by investing activities		—			4,581,135


Financing activities:
Net proceeds from issuance of common stock		—			4,947,760

Net cash provided by financing activities		—			4,947,760

Net (decrease) increase in cash and cash equivalents		(1,751,059	)		6,262,155


Cash and cash equivalents at beginning of period		5,655,367			3,696,878

Cash and cash equivalents at end of period	$	3,904,308		$	9,959,033

The accompanying notes are an integral part of these financial statements.

RegeneRx Biopharmaceuticals, Inc.

Notes to Financial Statements

For the three months ended March 31, 2009 and 2008 (Unaudited)

A.organization, business overview and basis of presentation

Organization and Nature of Operations.RegeneRx Biopharmaceuticals, Inc. (the “Company”, “We”, “Us”, “Our”), a Delaware corporation, was incorporated in 1982. We are focused on the discovery and development of novel molecules to accelerate tissue and organ repair. Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires an enterprise to report segment information based on how management internally evaluates the operating performance of its business units (“segments”). Our operations are confined to one business segment: the development and marketing of product candidates based on Thymosin Beta 4 (“Tb4”), an amino acid peptide.

Management Plans to Address Operating Conditions.We incurred a net loss of $2.5 million for the three months ended March 31, 2009. Since inception, and through March 31, 2009, we have an accumulated deficit of $80.5 million and we had cash and cash equivalents of $3.9 million as of March 31, 2009. On April 30, 2009 we issued 1,052,631 shares of common stock and warrants to purchase 263,158 shares of our common stock to an affiliate of Sigma-Tau Group, our largest stockholder group, for gross proceeds of $600,000. We have also reduced our ongoing monthly cash outflows through salary reductions and reductions in director fees in exchange for the issuance of stock options to our non-employee directors and certain of our executives and employees. We expect the aggregate cash savings from these salary and fee reductions to be approximately $400,000 through December 31, 2009. Based on our operating plan with our expected reduced monthly cash outflows and the additional funds raised from this financing with Sigma-Tau, we believe that our cash and cash equivalents will fund our operations into early 2010.

We anticipate incurring additional losses in the future as we continue to explore the potential clinical benefits of Tb4-based product candidates over multiple medical indications. We will need substantial additional funds in order to initiate any further preclinical studies or clinical trials, and to fund our operations beyond early 2010. Accordingly, we need financing and are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities, debt financing, corporate collaborations, licensing arrangements or the sale of our company or certain of our intellectual property rights.

Although we intend to continue to seek additional financing and/or strategic partners, we may not be able to complete a financing or strategic transaction, either on favorable terms or at all. If we are unable to complete a financing or strategic transaction, we may not be able to continue as a going concern after our funds have been exhausted, and we could be required to significantly curtail or cease operations, file for bankruptcy or liquidate and dissolve. There can be no assurance that we will be able to obtain any sources of funding.

In addition to our current operational requirements, we expect to continue to expend substantial funds to complete our planned product development efforts. We continually refine our operating strategy and evaluate alternative clinical uses of Tb4. However, substantial additional resources will be needed before we will be able to achieve sustained profitability. Consequently, we continually evaluate alternative sources of financing such as the sharing of development costs through strategic collaboration agreements. There can be no assurance that our financing efforts will be successful, and if we are not able to obtain sufficient levels of financing, we would delay certain clinical and/or research activities, and our financial condition would be materially and adversely affected. Even if we are able to obtain sufficient funding, other factors including competition, dependence on third parties, uncertainty regarding patents, protection of proprietary rights, manufacturing of peptides and technology obsolescence could have a significant impact on us and our operations.

To achieve profitability we, or a strategic partner, must successfully conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market those pharmaceutical products we wish to commercialize. The time required to reach profitability is highly uncertain and there can be no assurance that we will be able to achieve sustained profitability, if at all.

The accompanying unaudited interim financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial position, results of operations and cash flows for each period presented. These statements have been prepared in accordance with U. S. generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP. The accounting policies underlying our unaudited interim financial statements are consistent with those underlying our audited annual financial statements. These unaudited interim financial statements should be read in conjunction with the audited annual financial statements as of and for the year ended December 31, 2008, and related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2008 (the “Annual Report”).

The accompanying December 31, 2008 financial information was derived from our audited financial statements. Operating results for the three-month period ended March 31, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009 or any other future period.

B.Sponsored Research Revenues

We account for non-refundable grants as “Sponsored Research Revenues.” Associated revenues are recognized when the associated research has been performed and the related underlying costs are incurred.

C.Net Loss per Common Share

Net loss per common share for the three-month periods ended March 31, 2009 and 2008, respectively, is based on the weighted-average number of shares of common stock outstanding during the periods. Basic and diluted loss per share are identical for all periods presented as potentially dilutive securities have been excluded from the calculation of the diluted net loss per common share because the inclusion of such securities would be antidilutive. The potentially dilutive securities include 9,366,590 shares and 8,048,986 shares in 2009 and 2008, respectively, reserved for the exercise of outstanding options and warrants.

D.Stock Based Compensation

We recognized $266,628 and $262,202 in stock-based compensation expense for the three months ended March 31, 2009 and 2008, respectively. Given our current estimates of future forfeitures, we expect to recognize the compensation cost related to non-vested options as of March 31, 2009 of $1,088,000 over the weighted average remaining recognition period of 1.2 years.

During the first three months of 2009 and 2008, we did not grant options.

E.Income Taxes

As of March 31, 2009, there have been no material changes to our uncertain tax positions disclosures as provided in Note 8 of the Annual Report. We do not anticipate that total unrecognized tax benefits will significantly change prior to March 31, 2010.

F.Fair Value Measurements

We adopted FAS 157 on January 1, 2008 for our financial assets and liabilities which did not have an impact on our results of operations, financial position or cash flows. FAS 157 establishes a framework regarding the methods used for measuring fair value and expands disclosure about such fair value measurements. FAS 157 does not require assets and liabilities that were previously recorded at cost to be recorded at fair value. For assets and liabilities that are already required to be disclosed at fair value, FAS 157 introduced, or reiterated, a number of key concepts which form the foundation of the fair value measurement approach to be used for financial reporting purposes. Namely, fair values should reflect the amounts that we estimate to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (the “exit price”). To facilitate the determination of these estimates, FAS 157 established a hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

•

Level 1 — Quoted prices in active markets for identical assets and liabilities.

•

Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities.

•

Level 3 — Unobservable inputs.

At March 31, 2009, we held no qualifying liabilities, and our only qualifying assets that required measurement under the foregoing fair value hierarchy were money market funds included in Cash and Cash Equivalents valued at $0.2 million using Level 1 inputs.

We adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115” (“FAS 159”) on January 1, 2008. Under this statement, an entity may elect to use fair value to measure eligible items. We currently do not have any instruments eligible for election of the fair value option. Therefore, the adoption of FAS 159 in the first quarter of fiscal 2008 did not impact our financial position, results of operations or cash flows.

G.Subsequent Event

Effective April 1, 2009, we implemented initiatives to reduce our monthly cash outflows, including a 35% reduction in salaries of substantially all executives and staff. In return, the employees participating in the salary reduction have received, in the aggregate, options to purchase 701,282 shares of common stock at an exercise price of $0.57 per share, one-third of which are scheduled to vest at the end of each remaining calendar quarter during 2009. Our board of directors also approved a 35% reduction in compensation of non-employee directors. In return, our non-employee directors have received, in the aggregate, options to purchase 64,157 shares of common stock at an exercise price of $0.57 per share, which options are also scheduled to vest at the end of each remaining calendar quarter during 2009. We expect to incur a non-cash compensation expense in the aggregate of approximately $89,000 in each of the final three calendar quarters of 2009 as a result of these option grants.

On April 30, 2009 we issued 1,052,631 shares of common stock at a price of $0.57 per share, and warrants to purchase 263,158 shares of our common stock at $0.91 per share, to an affiliate of Sigma-Tau Group, our largest stockholder group, for gross proceeds of $600,000.

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report onForm 10-Q, including this Part I., Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding us and our business, financial condition, results of operations and prospects within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the words “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may” or other similar expressions. In addition, any statements that refer to projections of our future financial performance, our clinical development programs and schedules, our future capital resources and funding requirements, our anticipated growth and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We cannot guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make, including those described under “Risk Factors” set forth below in Part II., Item 1A. In addition, any forward-looking statements we make in this document speak only as of the date of this document, and we do not intend to update any such forward-looking statements to reflect events or circumstances that occur after that date.

Overview

Our operations consist primarily of pre-clinical studies and clinical trials related to the development of product candidates based on Thymosin beta 4 (“Tb4”), a 43 amino acid peptide. Currently, we have three Tb4-based drug formulations in clinical development: RGN-137, a topically applied gel product candidate for chronic dermal wounds; RGN-259, a sterile eye drop for ophthalmic injuries; and RGN-352, a parenteral (injectable) formulation for systemic delivery anticipated to be used in a Phase II acute myocardial infarction (“AMI”), or heart attack, trial. We are also seeking a partner for development of an inhaled formulation of Tb4 known as RGN-457, which is in preclinical development targeting cystic fibrosis.

In the first quarter of 2009, we completed and reported results from two Phase II dermal wound healing clinical trials using RGN-137 and terminated a proof-of-concept Phase II ophthalmic wound healing trial using RGN-259, due to slow patient enrollment in the trial and encouraging compassionate use data in another study. Under a compassionate use Investigational New Drug Application (“IND”), corneal wound healing was observed following treatment of four patients with RGN-259. Subject to our ability to obtain additional financing, we intend to initiate in late 2009 or early 2010 a new Phase II/III trial to evaluate RGN-259 in an ophthalmic indication more similar to that observed under the compassionate use IND. We have also finished treating 80 healthy subjects in a Phase I clinical trial utilizing RGN-352, consisting of 40 subjects in each of two phases, to support our cardiovascular clinical program, and to date there have been no reported drug-related adverse events. These healthy subjects will be followed for six months after treatment, at which time we will report final results from this trial.

We are currently enrolling patients in one ongoing Phase II dermal wound healing clinical trial evaluating RGN-137 in the treatment of Epidermolysis Bullosa, or EB, which we expect to complete no earlier than 2010.

An affiliate of Sigma-Tau Group, who together with its affiliates are our largest stockholder group, funded all costs associated with one of the Phase II dermal wound healing clinical trials for RGN-137 in the European Union. We have been primarily responsible for the costs associated with the other completed trials as well as the ongoing Phase II trial for EB.

We incurred a net loss of $2.5 million for the three months ended March 31, 2009. Since inception, and through March 31, 2009, we have an accumulated deficit of $80.5 million and we had cash and cash equivalents of $3.9 million as of March 31, 2009. On April 30, 2009 we issued 1,052,631 shares of common stock and warrants to purchase 263,158 shares of our common stock to an affiliate of Sigma-Tau Group, our largest stockholder group, for gross proceeds of $600,000. We have also reduced our ongoing monthly cash outflows through salary reductions and reductions in director fees in exchange for the issuance of stock options to our non-employee directors and certain of our executives and employees. We expect the aggregate cash savings from these salary and fee reductions to be approximately $400,000 through December 31, 2009. Based on our operating plan with our expected reduced monthly cash outflows and the additional funds raised from this financing with Sigma-Tau, we believe that our cash and cash equivalents will fund our operations into early 2010.

Most of our expenditures to date have been for Research and Development activities (“R&D”) and General and Administrative (“G&A”) activities. R&D costs include all of the wholly-allocable costs associated with our various clinical programs passed through to us by our outsourced vendors. Those costs include: manufacturing Tb4 and peptide fragments; formulation of Tb4 into our various product candidates; stability studies for both Tb4 and the various formulations; pre-clinical toxicology; safety and pharmacokinetic studies; clinical trial management; medical oversight; laboratory evaluations; statistical data analysis; regulatory compliance; quality assurance; and other related activities. R&D includes cash and non-cash compensation, employee benefits, travel and other miscellaneous costs of our internal R&D personnel, seven persons in total, who are wholly dedicated to R&D efforts. R&D also includes a proration of our common infrastructure costs for office space and communications. We expense our R&D costs as they are incurred.

R&D expenditures are subject to the risks and uncertainties associated with clinical trials and the FDA review and approval process. As a result, these expenses could exceed our expectations, possibly materially. We are uncertain as to what we will incur in future research and development costs for our clinical studies, as these amounts are subject to the outcome of current studies, management’s continuing assessment of the economics of each individual research and development project and the internal competition for project funding.

G&A costs include outside professional fees for legal, audit and accounting services, including the costs to maintain our intellectual property portfolio. G&A also includes cash and non-cash compensation, employee benefits, travel and other miscellaneous costs of our internal G&A personnel, three in total, who are wholly dedicated to G&A efforts. G&A also includes a proration of our common infrastructure costs for office space, and communications.

Critical Accounting Policies

In Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) of our Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the SEC on April 15, 2009 (the “Annual Report”), we included a discussion of the most significant accounting policies and estimates used in the preparation of our financial statements. There has been no material change in the policies and estimates used in the preparation of our financial statements since the filing of our Annual Report.

Results of Operations

Comparison of the three months ended March 31, 2009 and 2008

Revenues. For the three months ended March 31, 2009 and 2008, revenues recognized under our grant from the National Institutes of Health (“NIH”) for the orphan indication Epidermolysis Bullosa (“EB”) decreased from approximately $32 thousand in 2008 to $0 in 2009 as we had exhausted all funds available to us under this grant. As of March 31, 2009, all of the $681,000 in funding had been received and we do not expect to receive any additional funds under this grant.

R&D Expenses. For the three months ended March 31, 2009 and 2008, our R&D expenses increased by approximately $27 thousand, or 1.7% from $1.634 million to $1.661 million. While the underlying clinical trial activity varied between the periods, the net overall expenditures remained consistent. During the three-month period ended March 31, 2009 the Phase I trial for the injectable formulation RGN-352 was enrolling the last cohorts of healthy subjects and incurred costs of approximately $522 thousand, an increase of approximately $355 thousand over the same period in 2008. This increase in activity was largely offset by decreased activity in our Phase II pressure ulcer trial evaluating RGN-137 which incurred virtually no costs, a reduction of approximately $200 thousand compared to the same period last year. We also terminated our Phase II ophthalmic trial evaluating RGN-259 during the first quarter of 2009. For the three-month period ended March 31, 2009 we incurred approximately $492 thousand on this trial, which was a reduction of approximately $98 thousand compared to the same period in 2008. Enrollment for our EB trial evaluating RGN-137 has been erratic due to the orphan nature of this disease and our costs to treat patients also varies widely from period to period. For the three-month period ended March 31, 2009 we incurred approximately $30 thousand in costs for this trial, a reduction of approximately $67 thousand compared to the same period in 2008. The remaining difference, an increase in R&D costs for the three-month period ended March 31, 2009 of approximately $37 thousand, primarily relates to consulting services of medical specialists and bio-statisticians who have been reviewing the significant amounts of data supporting our clinical announcements during the first quarter of 2009, namely the data from our Phase II trials evaluating RGN-137 in the treatment of pressure ulcers and venous stasis ulcers and our Phase I trial of RGN-352.

G&A Expenses.Our G&A expenses decreased $215 thousand, or 20%, from $1.075 million to $0.860 million, during the three months ended March 31, 2009 and 2008. This difference was attributable to a decrease in legal costs needed to support our intellectual property portfolio and other business development matters. All other elements of our G&A expenses remained relatively the same between the periods.

Liquidity and Capital Resources

Sources of Liquidity

We have not commercialized any of our product candidates to date and have incurred significant losses since inception. We have primarily financed our operations through the issuance of common stock and common stock warrants in private and public financings. During 2008 and 2009, we have been dependent on our largest stockholder group, Sigma-Tau Group and its affiliates, to provide the necessary funding in order to continue our operations. In 2008, we raised approximately $8.0 million from Sigma-Tau and its affiliates through the sale of common stock and warrants. In April 2009, we raised an additional $600,000 from an affiliate of Sigma-Tau through the sale of common stock and warrants.

As of March 31, 2009, we had cash and cash equivalents of approximately $3.9 million. This compares to cash and cash equivalents of approximately $5.7 million at December 31, 2008. Our cash position decreased in the first three months of 2009 by a net $1.8 million. During the three-month period the full $1.8 million decrease was attributable to operating activities, and there was no sources or uses of cash for investing or financing activities.

We are party to a license agreement with an affiliate of Sigma-Tau Pharmaceuticals that provides the opportunity for us to receive milestone payments upon specified events and royalty payments upon commercial sales of Tb4 in Europe. However, there can be no assurance that we will be able to attain such milestones and generate any such payments under the agreement.

Potential sources of outside capital include entering into strategic business relationships, public or private sales of shares of our capital stock, or debt, or other similar financial instruments. While we closed private placements of common stock and warrants to purchase common stock involving Sigma-Tau and its affiliates in December 2008 and April 2009, we do not have any other committed sources of outside capital at this time. Consequently, there can be no assurance that we will be able to obtain additional capital in sufficient amounts, on acceptable terms, or at all.

If we raise additional capital through such a strategic business relationship, we may have to give up valuable short- and/or long-term rights to intellectual property. If we raise funds by selling additional shares of our common stock or securities convertible into our common stock, the ownership interest of our existing stockholders may be significantly diluted. In addition, if additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants and the granting of security interests in our assets.

Cash Flows

Net Cash Used in Operating Activities.Net cash used in operating activities for the three months ended March 31, 2009 was approximately $1.8 million, approximately $1.5 million less than net cash used in operating activities during the same period in 2008. While the net operating losses and the non cash expenses for the two periods were relatively similar, the difference was primarily due to cash used in the first quarter of 2008 to pay down liabilities incurred towards the end of 2007, related primarily to a periodic production of Tb4, along with some significant clinical activities that had been performed but not billed.

Net Cash Provided By Investing Activities.Net cash provided by investing activities was $0 for the three months ended March 31, 2009 and was approximately $4.6 million for the three months ended March 31, 2008. Our investing activities provided cash in the first three months of 2008 from the maturity of various short-term investments which were re-invested in U.S. Treasury Bills at the time, which were accounted for as a cash equivalent.

Net Cash Provided by Financing Activities.Net cash provided by financing activities was $0 for the three months ended March 31, 2009 and was approximately $4.9 million for the three months ended March 31, 2008. Our financing activities provided cash for the first three months of 2008 from a private placement of securities on February 29, 2008 with affiliates of the Sigma-Tau Group.

Future Funding Requirements

The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties that may adversely affect our liquidity and capital resources. During the first quarter of 2009, we completed two Phase II clinical trials, closed one additional Phase II clinical trial and completed the treatment phase of another Phase I clinical trial. As a result, as of the date of this report, we are actively enrolling patients in only one trial. In order to continue the development of our product candidates, we intend to conduct additional clinical trials, the timing of which is uncertain.

As of the date of this report, we believe we will have sufficient liquidity and capital resources to fund our operations until early 2010, without considering the benefits of any potential future milestone payments that we may receive under the license agreement described above. Accordingly, we need financing and are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities, debt financing or corporate collaboration and licensing arrangements, or the sale of certain of our intellectual property rights. However, we do not currently have any commitments for future external funding and additional equity or debt financing may not be available on a timely basis, on acceptable terms, or at all.

In the first quarter of 2009, we also initiated a number of cash preservation initiatives, including salary reductions and reductions in non-employee director fees in exchange for stock options to our non-employee directors and certain of our executives and other key employees. We expect these efforts to preserve approximately $400,000 through the end of 2009.

We cannot assure you that our current liquidity and capital resources will be sufficient to fund our operations as set forth above. The expenditures that will be necessary to execute our business plan, and upon which our current liquidity and capital resources estimate is based, are subject to numerous uncertainties, which may adversely affect our liquidity and capital resources. These uncertainties primarily concern our development efforts.

The length of time required for clinical trials varies substantially according to the type, complexity, novelty and intended use of a product candidate. Some of the factors that could decrease our liquidity and increase our capital needs beyond our current expectations include, but are not limited to:

•

the progress of our clinical trials,

•

the progress of our research activities,

•

the number and scope of our research programs,

•

the progress of our pre-clinical development activities,

•

the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent and other intellectual property claims,

•

the costs related to development and manufacture of pre-clinical, clinical and validation lots for regulatory purposes and commercialization of drug supply associated with our product candidates,

•

our ability to enter into corporate collaborations and the terms and success of these collaborations,

•

the costs and timing of regulatory approvals. and

•

the costs of establishing manufacturing, sales and distribution capabilities.

In addition to our obligations under clinical trials, we are committed under an office space lease that expires on December 31, 2009 that requires monthly rental payments of approximately $7,300.

If adequate funds are not available in the near future, we may be required to delay, reduce the scope of or eliminate our research and development programs or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as such term is defined in Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

At March 31, 2009, our cash and cash equivalents, which totaled approximately $3.9 million, were comprised primarily of FDIC insured bank deposits as set forth in Note F to the unaudited financial statements included elsewhere in this report, with the remainder in money-market investments backed by U.S. government obligations, U.S. government agency obligations and investment-grade corporate bonds. Money market investments are subject to default, changes in credit ratings and changes in market value. We limit our default risk by investing in high-quality, investment grade instruments. Our exposure to market risks associated with changes in interest rates relates primarily to the increase or decrease in the amount of interest income earned on our investment portfolio. Due to the short-term nature of these investments, if market interest rates were to increase by 10% from levels as of March 31, 2009, the decline in fair value would not be material.

Item 4.Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of March 31, 2009. Based upon this evaluation, management has concluded that, as of March 31, 2009, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified under applicable rules of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

b) Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II — Other Information

Item 1.Legal Proceedings

None.

Item 1A.Risk Factors

Set forth below and elsewhere in this report and in other documents we file with the Securities and Exchange Commission are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. The descriptions below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part II, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2008.

Risks Related to Our Liquidity and Need for Financing

We estimate that our current liquidity and capital resources are sufficient to fund our operations into early 2010. However, we will need substantial additional funds to expand operations, which we may not be able to raise on favorable terms, or at all.

In the first quarter of 2009, we reported on several trials in our clinical program: the results of a Phase II clinical trial evaluating our topical gel product candidate RGN-137 in patients with pressure ulcers; the results of a Phase II clinical trial evaluating our topical gel product candidate RGN-137 in patients with venous stasis ulcers; the results of a Phase I clinical trial evaluating our injectable product candidate RGN-352 in healthy volunteers; and the early termination of a Phase I clinical trial evaluating our ophthalmic product candidate RGN-259 due to data obtained under a compassionate IND indicating RGN-259’s positive effects on corneal wound healing. As of the date of this report, we are continuing to enroll patients in our Phase II clinical trial evaluating our topical gel product candidate RGN-137 in patients with EB, furthering our research with our peptide fragments targeting the cosmeceutical market and actively pursuing potential licensing partnerships for our other product candidates. As of the date of this report, we believe we have sufficient liquidity and capital resources to fund our operations into early 2010. However, we will need substantial additional funds in order to initiate any further preclinical studies or clinical trials, and to fund our operations beyond early 2010. Accordingly, we need financing and are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities, debt financing or corporate collaboration and licensing arrangements or the sale of certain of our intellectual property rights.

A significant portion of our operating expenses are variable, as opposed to fixed costs. Accordingly, we believe that we have the ability to reduce costs to offset the results of a prolonged or severe economic downturn. Management has been closely monitoring expenditures and intends to restrict such expenditures to those expenses that are necessary to complete activities related to existing clinical trials, identifying additional sources of working capital and general administrative costs in support of these activities. We continue to actively seek new sources of working capital.

We have recently implemented a number of efforts to preserve our cash, including salary reductions for certain of our employees and reductions in non-employee director fees, and we recently obtained $600,000 in equity financing from an affiliate of Sigma-Tau Group, our largest stockholder group. With our expected reduced monthly cash outflows and these additional funds, we believe that our cash and cash equivalents, which were approximately $3.9 million at March 31, 2009, will fund our operations into early 2010. Although we intend to continue to seek additional financing or a strategic partner, we may not be able to complete a financing or corporate transaction, either on favorable terms or at all. If we are unable to complete a financing or strategic transaction, we may not be able to continue as a going concern after our funds have been exhausted, and we could be required to take actions that may result in stockholders having little or no continuing interest in our assets, such as ceasing operations, seeking protection under the provisions of the U.S. Bankruptcy Code or liquidating and dissolving our company.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in these risk factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

We are seeking to maximize the value of our assets and to address our liabilities and raise additional capital for our existing business. We are attempting to pursue asset out-licenses, asset sales, mergers or similar strategic transactions. There can be no assurance that we will be successful in executing a strategic transaction.

We are actively considering strategic alternatives with the goal of maximizing the value of our assets. In addition, we are considering restructuring alternatives, including business arrangements such as the out-licensing or sale of product candidates or our company as a whole. There are substantial challenges and risks which will make it difficult to successfully implement any of these opportunities before early 2010, after which we may not be able to fund our current operations without additional financing. Even if we determine to pursue one or more of these alternatives, we may be unable to do so on acceptable terms, if at all.

We have incurred losses since inception and expect to incur significant losses in the foreseeable future and may never become profitable.

We have incurred net operating losses every year since our inception in 1982. We believe these losses will continue for the foreseeable future, and may increase, as we pursue our product development efforts related to Tb4. As of March 31, 2009, our accumulated deficit totaled $80.5 million and our cash and cash equivalents totaled $3.9 million.

We anticipate substantial and increasing operating losses over the next several years as we continue our research and development efforts and seek to obtain regulatory approval of our product candidates to make them commercially viable. Our ability to generate additional revenues and to become profitable will depend largely on our ability, alone or through the efforts of third-party licensees and collaborators, to efficiently and successfully complete the development of our product candidates, obtain necessary regulatory approvals for commercialization, scale-up commercial quantity manufacturing capabilities either internally or through third-party suppliers, and market our product candidates. There can be no assurance that we will achieve any of these objectives or that we will ever become profitable or be able to maintain profitability. Even if we do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an extended period of time and are not otherwise able to raise necessary funds to continue our development efforts and maintain our operations, we may be forced to cease operations.

The recent downturn in the U.S. economy and the recent pressure on capital markets increase the possibility of and may exacerbate the impact of any adverse effects on our financial position and business prospects. Continued economic adversity may lead to or accelerate a decrease in the trading price of our common stock and make it more difficult for us to raise capital, enter into collaborations or maintain our compliance with the minimum listing standards of the NYSE Amex stock exchange.

The recent downturn in the U.S. economy and the extraordinary pressure being placed on both debt and equity markets have led to significant retraction in U.S. businesses, sudden and severe decreases in the prices of U.S. equities generally and a severe shortage in available credit. These factors have made it more difficult, in general, for companies to expand or maintain their current operations and have increased the likelihood that certain companies will fail. Although we cannot say with certainty the impact the current economic crises has had on us to date or may have on us in the future, continued pressure on the U.S. economy and its capital markets may make it more difficult for us to raise capital or enter into collaborations or licensing relationships for purposes of developing our technology and/or increasing our liquidity. Any inability for us to raise capital or enter into strategic relationships, as a result of the economic downturn or otherwise, would make it more difficult or impossible for us to continue operations after the end of 2009 or early 2010. The economic downturn may also lead to or accelerate a decrease in the trading price of our common stock, which could make it more difficult for us to maintain compliance with certain continued listing requirements of the NYSE Amex exchange, including a market capitalization of at least $50 million, as described below.

If we are unable to successfully implement our cash preservation efforts, our business could be materially adversely affected.

We incurred a net loss of approximately $10.6 million for 2008 and $2.5 million for the three-month period ended March 31, 2009. In light of our current cash position, we have taken, and we plan to undertake, a number of actions intended to preserve our cash balances in 2009. In April 2009, we initiated activities to reduce monthly cash outflows, including salary reductions for certain of our employees, reductions in general and administrative expenses and reductions in non-employee director fees. If these reductions are not effectively managed, or if our management and key employees do not continue with us, we may experience unanticipated effects from these reductions causing harm to our business and our relationships with third parties.

We are currently not in compliance with NYSE Amex rules regarding the minimum shareholders’ equity requirement and are at risk of being delisted from the NYSE Amex stock exchange, which may subject us to the SEC’s penny stock rules and decrease the liquidity of our common stock. If our common stock is delisted, this would likely make capital raising efforts more difficult.

Because of our historical losses from operations, NYSE Amex rules require that we maintain a minimum shareholders’ equity of $6 million, unless our market capitalization exceeds $50 million. As of March 31, 2009, our total stockholders’ equity was $2.3 million, and our market capitalization is below $50 million. In April 2009, we received a notice from NYSE Amex indicating that were below certain of the exchange’s continued listing standards.

We may submit a plan of compliance to NYSE Amex by May 25, 2009 that demonstrates our ability to regain compliance with the listing standards within an 18 month remediation period. We currently intend to submit such a plan, but there can be no assurance that we will be able to do so in a timely manner or that any such plan we submit will be accepted. If the plan is accepted, we may be able to continue our listing during the 18-month plan period, during which time we will be subject to periodic review to determine whether we are making progress consistent with the plan. There can be no assurance that, if accepted, such a plan will ultimately be successful, or that, if the plan is rejected or we are determined to not be making progress consistent with the plan, any appeals by us to the exchange would be successful.

If at the conclusion of compliance periods described above, we have not achieved compliance, we expect that our common stock would be delisted from the NYSE Amex exchange. Following any such delisting, our common stock may be traded over-the-counter on the OTC Bulletin Board or in the “pink sheets.” These alternative markets, however, are generally considered to be less efficient than, and not as broad as, the NYSE Amex exchange. Many OTC Bulletin Board and pink sheets stocks trade less frequently and in smaller volumes than securities traded on the NYSE Amex, which could have a material adverse effect on the liquidity of our common stock. If our common stock is delisted from NYSE Amex, there may be a limited market for our stock, trading in our stock may become more difficult and our share price could decrease even further. Specifically, you may not be able to resell your shares of common stock at or above the price you paid for such shares or at all.

In addition, if our common stock is delisted, our ability to raise additional capital may be impaired because of the less liquid nature of the OTC Bulletin Board and the pink sheets. While we cannot guarantee that we would be able to complete an equity financing on acceptable terms, or at all, we believe that dilution from any equity financing while our shares are quoted on the OTC Bulletin Board or the pink sheets would likely be substantially greater than if we were to complete the financing while our common stock is traded on the NYSE Amex exchange.

In the event our common stock is delisted, it may also become subject to penny stock rules. The SEC generally defines “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. We are not currently subject to the penny stock rules because our common stock qualifies for an exception to the SEC’s penny stock rules for companies that have an equity security that is quoted on an exchange. However, if we were delisted, our common stock would become subject to the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell our common stock. If our common stock were considered penny stock, the ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares in the secondary market would be limited and, as a result, the market liquidity for our common stock may be adversely affected. We cannot assure you that trading in our securities will not be subject to these or other regulations in the future.

In addition to our current operational requirements, we will need substantial additional capital to develop our product candidates and for our future operations. If we are unable to obtain such funds when needed, we may have to delay, scale back or terminate our product development efforts or our business.

Beyond our current liquidity needs, we anticipate that substantial new capital resources will be required to continue our independent product development efforts, including any and all follow-on trials that will result from our current clinical programs, and to scale up manufacturing processes for our product candidates. The actual amount of funds that we will need will be determined by many factors, some of which are beyond our control. These factors include, without limitation:

	•		the scope of our clinical trials, which is significantly influenced by the quality of clinical data achieved as trials are completed and the requirements established by regulatory authorities;

	•		the speed with which we complete our clinical trials, which depends on our ability to attract and enroll qualifying patients and the quality of the work performed by our clinical investigators;

	•		the time required to prosecute, enforce and defend our intellectual property rights, which depends on evolving legal regimes and infringement claims that may arise between us and third parties;

	•		the ability to manufacture at scales sufficient to supply commercial quantities of any of our product candidates that receive regulatory approval, which may require levels of effort not currently anticipated; and

	•		the successful commercialization of our product candidates, which will depend on our ability to either create or partner with an effective commercialization organization and which could be delayed or prevented by the emergence of equal or more effective therapies.

Potential sources of outside capital include entering into strategic business relationships, public or private sales of shares of our capital stock, or the issuance of debt, or other similar financial instruments. We do not have any committed sources of outside capital at this time, and there can be no assurance that we will be able to obtain further capital in sufficient amounts, or on acceptable terms, or in the timeframe needed to ensure the uninterrupted execution of our business strategy.

Emerging biotechnology companies like us may raise capital by licensing intellectual property rights to other biotechnology or pharmaceutical enterprises. We intend to pursue this strategy, but there can be no assurance that we will be able to license our intellectual property or product development programs on commercially reasonable terms, if at all. If we are successful in raising additional capital through such a license, we may have to give up valuable short- and/or long-term rights to our intellectual property. In addition, the business priorities of the strategic partner may change over time, which creates the possibility that the interests of the strategic partner in developing our technology may diminish, which could have a potentially material negative impact on the value of our interest in the licensed intellectual property or product candidates.

In addition, if we raise funds by selling shares of our common stock or securities convertible into our common stock, the ownership interest of our existing stockholders may be significantly diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictive covenants or the granting of security interests in our assets.

Our failure to successfully address ongoing liquidity requirements would have a material negative impact on our business, including the possibility of surrendering our rights to some technologies or product opportunities, delaying our clinical trials, or ceasing our operations.

Risks Related to Our Business and Operations

Our business prospects are difficult to evaluate because we are developing complex and novel medical product candidates.

Since our product candidates rely on complex technologies, it may be difficult for you to assess our growth, licensing and earnings potential. It is likely we will face many of the difficulties that companies developing new biological or pharmaceutical technologies often face. These include, among others:

	•		limited financial resources;

	•		developing novel, commercial-grade drug substances;

	•		testing and evaluating a new chemical entity and its effects in highly-complex biological systems;

	•		marketing new products for which a market is not yet established and may never become established;

	•		challenges related to the approval and acceptance of drug candidates by United States federal and international regulatory authorities;

	•		delays inherent in the execution of clinical trials;

	•		high product development costs that result from all of these factors;

	•		competition from other therapies and drug candidates promoted by entities with significantly more capital resources and marketing expertise than us; and

	•		difficulty recruiting qualified employees for management and other positions.

We will likely face these and other difficulties in the future, some of which may be beyond our control. If we are unable to successfully address these difficulties as they arise, our future results of operations and business prospects will be negatively affected. We cannot be certain that our product candidates will prove safe and efficacious, that our business strategies will be successful or that we will successfully address any and all problems that may arise.

We may not successfully establish and maintain development and testing relationships with third party service providers and collaborators, which could adversely affect our ability to develop our product candidates.

We have only limited resources, experience with and capacity to conduct requisite testing and clinical trials of our drug candidates. As a result, we rely and expect to continue to rely on third-party service providers and collaborators, including corporate partners, licensors and contract research organizations, or CROs, to perform a number of activities relating to the development of our drug candidates, including the design and conduct of clinical trials, and potentially the obtaining of regulatory approvals. For example, we currently rely on several third-party contractors to manufacture and formulate Tb4 into the product candidates used in our clinical trials, develop assays to assess Tb4’s effectiveness in complex biological systems, recruit clinical investigators and sites to participate in our trials, manage the clinical trial process and collect, evaluate and report clinical results.

We may not be able to maintain or expand our current arrangements with these third parties or maintain such relationships on favorable terms. Our agreements with these third parties may also contain provisions that restrict our ability to develop and test our product candidates or that give third parties rights to control aspects of our product development and clinical programs. In addition, conflicts may arise with our collaborators, such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration. If any conflicts arise with our existing or future collaborators, they may act in their self-interest, which may be adverse to our best interests. Any failure to maintain our collaborative agreements and any conflicts with our collaborators could delay or prevent us from developing our product candidates. We and our collaborators may fail to develop products covered by our present and future collaborations if, among other things:

	•		we do not achieve our objectives under our collaboration agreements;

	•		we or our collaborators are unable to obtain patent protection for the products or proprietary technologies we develop in our collaborations;

	•		we are unable to manage multiple simultaneous product development collaborations;

	•		our collaborators become competitors of ours or enter into agreements with our competitors;

	•		we or our collaborators encounter regulatory hurdles that prevent commercialization of our product candidates; or

	•		we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators.

We also have less control over the timing and other aspects of our clinical trials than if we conducted the monitoring and supervision entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations. We also rely on clinical research organizations to perform much of our data management and analysis. They may not provide these services as required or in a timely manner. If any of these parties do not meet deadlines or follow proper procedures, including procedures required by law, the pre-clinical studies and clinical trials may take longer than expected, may be delayed or may be terminated, which would have a materially negative impact on our product development efforts. If we were forced to find a replacement entity to perform any of our pre-clinical studies or clinical trials, we may not be able to find a suitable entity on favorable terms or at all. Even if we were able to find a replacement, resulting delays in the tests or trials may result in significant additional expenditures and delays in obtaining regulatory approval for drug candidates, which could have a material adverse impact on our results of operations and business prospects.

We are subject to intense government regulation and we may not receive regulatory approvals for our new drug candidates.

Our product candidates will require regulatory approvals prior to sale. In particular, therapeutic agents are subject to stringent approval processes, prior to commercial marketing, by the FDA and by comparable agencies in most foreign countries. The process of obtaining FDA and corresponding foreign approvals is costly and time-consuming, and we cannot assure you that such approvals will be granted. Also, the regulations we are subject to change frequently and such changes could cause delays in the development of our product candidates. In addition, the timing of clinical trials necessary for FDA approval is dependent on, among other things, FDA and investigational review board, or IRB reviews, clinical site approvals, successful manufacturing of clinical materials, sufficient funding, eligible patient enrollment and other factors outside of our control. There can be no assurance that our clinical trials will in fact demonstrate, to the satisfaction of the FDA and others, that our product candidates are sufficiently safe or effective. The FDA or we may also restrict or suspend our clinical trials at any time if either believes that we are exposing the subjects participating in the trials to unacceptable health risks.

As a consequence, we may need to perform more or larger clinical trials than planned, for reasons such as:

	•		the FDA or other health regulatory authorities, or IRBs, do not approve a clinical trial protocol or place a clinical trial on hold;

	•		suitable patients do not enroll in a clinical trial in sufficient numbers or at the expected rate, or data is adversely affected by trial conduct or patient drop out;

	•		patients experience serious adverse events, including adverse side effects of our drug candidates, for a variety of reasons that may or may not be related to our product candidates, including the advanced stage of their disease and other medical problems;

	•		patients in the placebo or untreated control group exhibit greater than expected improvements or fewer than expected adverse events;

	•		third-party clinical investigators do not perform the clinical trials on the anticipated schedule or consistent with the clinical trial protocol and good clinical practices, or other third-party organizations do not perform data collection and analysis in a timely or accurate manner;

	•		service providers, collaborators or co-sponsors do not adequately perform their obligations in relation to the clinical trial or cause the trial to be delayed or terminated;

	•		regulatory inspections of manufacturing facilities, which may, among other things, require us or a co-sponsor to undertake corrective action or suspend the clinical trials;

	•		the interim results of the clinical trial are inconclusive or negative;

	•		the clinical trial, although approved and completed, generates data that is not considered by the FDA or others to be sufficient to demonstrate safety and efficacy; and

	•		changes in governmental regulations or administrative actions affect the conduct of the clinical trial or the interpretation of its results.

Any failure to obtain or any delay in obtaining regulatory approvals would have a material adverse impact on our ability to develop and commercialize our product candidates.

Mauro Bove, a member of our Board, is also a director and officer of Sigma-Tau Finanziaria S.p.A, which together with its affiliates comprise our largest stockholder group, a relationship which could give rise to a conflict of interest involving Mr. Bove.

Mauro Bove, a member of our Board of Directors, is also a director and officer of Sigma-Tau Finanziaria S.p.A, who with its affiliated entities are collectively our largest stockholder group. Sigma-Tau Pharmaceuticals is also our strategic partner in Europe with respect to the development of certain of our drug candidates. During 2008, we issued shares of common stock and common stock warrants to affiliates of Sigma-Tau in two private placement financing transactions, but we retained the right to repurchase some of these shares under certain circumstances. In April 2009, we sold common stock and warrants for $600,000 in gross proceeds to an affiliate of Sigma-Tau.

We have licensed certain rights to our product candidates generally for the treatment of dermal and internal wounds, to Defiante Farmaceutica S.p.A., a wholly-owned subsidiary of Sigma-Tau, in Europe. Under the license agreement, upon the completion of a Phase II clinical trial of either of these product candidates that yields positive results in terms of clinical efficacy and safety, Defiante is obligated to either make a $5 million milestone payment to us or to initiate and fund a pivotal Phase III clinical trial of the product candidate. As described elsewhere in this report, we have recently completed two Phase II clinical trials of RGN-137 in the treatment of pressure ulcers and venous stasis ulcers. However, due to the lack of statistical significance of the reported efficacy results, we cannot assure you that the results of these trials will be sufficient to trigger the milestone obligation described above, and there can be no assurance that we will ever receive this payment or be able to initiate a pivotal Phase III clinical trial of RGN-137 under this provision. As a result of Mr. Bove’s relationship with Sigma-Tau, there could be a conflict of interest between Mr. Bove and our stockholders other than Sigma-Tau with respect to these and other agreements and circumstances that may require the exercise of the Board’s discretion with respect to Sigma-Tau. Any decision in the best interests of Sigma-Tau may not be in the best interest of our other stockholders.

We are heavily reliant on our license from the National Institutes of Health for the rights to Tß4, and any loss of these rights would adversely affect our business.

We have received an exclusive worldwide license to intellectual property discovered at the National Institutes of Health, or NIH, pertaining to the use of Tb4 in wound healing and tissue repair. The intellectual property rights from this license form the basis for our current commercial development focus with Tb4. This license terminates upon the last to expire of the patent applications that are filed in connection with the license. This license requires us to pay a minimum annual royalty to the NIH, regardless of the success of our product development efforts, plus certain other royalties upon the sale of products created by the intellectual property granted under the license. We rely on this license for a significant portion of our business. This license may be terminated for a number of reasons, including non-payment of the royalty or lack of continued product development, among others. While to date we believe that we have complied with all requirements to maintain the license, the loss of this license would have a material adverse effect on our business and business prospects and may require us to cease development of our current line of Tb4-based product candidates.

All of our drug candidates are based on a single compound that has yet to be proven effective in human subjects.

Our current primary business focus is the development of Tb4, and its analogues, derivatives and fragments, for the treatment of non-healing wounds and other conditions. While we have in the past explored and may in the future explore the use of other compounds for the treatment of other medical conditions, we presently have no immediate plans to develop products for such purposes. Unlike many pharmaceutical companies that have a number of unique chemical entities in development, we are dependent on a single molecule, formulated for different administrations, for our potential commercial success. As a result, any common safety or efficacy concerns for Tb4-based products that cross formulations would have a much greater impact on our business prospects than if our product pipeline were more diversified.

Our drug candidates are still in research and development, and we do not expect them to be commercially available for the foreseeable future, if at all. Only a small number of research and development programs ultimately result in commercially successful drugs. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. These include the possibility that the potential products may:

	•		be found ineffective or cause harmful side effects during pre-clinical studies or clinical trials;

	•		fail to receive necessary regulatory approvals;

	•		be precluded from commercialization by proprietary rights of third parties;

	•		be difficult to manufacture on a large scale; or

	•		be uneconomical or otherwise fail to achieve market acceptance.

If any of these potential problems occurs, we may never successfully market Tb4-based products.

We have no manufacturing or formulation capabilities and are dependent upon third-party suppliers to provide us with our product candidates. If these suppliers do not manufacture our product candidates in sufficient quantities, at acceptable quality levels and at acceptable cost, or if we are unable to identify suitable replacement suppliers if needed, our clinical development efforts could be delayed, prevented or impaired.

We do not own or operate manufacturing facilities and have little experience in manufacturing pharmaceutical products. We currently rely, and expect to continue to rely, primarily on one of the leading peptide manufacturers to supply us with Tb4 for further formulation into our product candidates. We have engaged three separate smaller drug formulation contractors for the formulation of clinical grade product candidates, one each for RGN-137, RGN-259 and RGN-352. We currently do not have an alternative source of supply for either Tb4 or the individual drug candidates. If these suppliers, together or individually, are not able to supply us with either Tb4 or individual product candidates on a timely basis, in sufficient quantities, at acceptable levels of quality and at a competitive price, or if we are unable to identify a replacement manufacturer to perform these functions on acceptable terms as needed, our development programs could be seriously jeopardized.

The risks of relying solely on single suppliers for our product candidates include:

	•		Their respective abilities to ensure quality and compliance with regulations relating to the manufacture of pharmaceuticals;

	•		Their manufacturing capacity may not be sufficient or available to produce the required quantities of our product candidates based on our planned clinical development schedule, if at all;

	•		They may not have access to the capital necessary to expand their manufacturing facilities in response to our needs;

	•		Commissioning replacement suppliers would be difficult and time-consuming;

	•		Individual suppliers may have used substantial proprietary know-how relating to the manufacture of our product candidates and, in the event we must find a replacement or supplemental supplier, our ability to transfer this know-how to the new supplier could be an expensive and/or time-consuming process;

	•		An individual supplier may experience events, such as a fire or natural disaster, that force it to stop or curtail production for an extended period;

	•		An individual supplier could encounter significant increases in labor, capital or other costs that would make it difficult for them to produce our products cost-effectively; or

	•		An individual supplier may not be able to obtain the raw materials or validated drug containers in sufficient quantities, at acceptable costs or in sufficient time to complete the manufacture, formulation and delivery of our product candidates.

If any of our key employees discontinue their services with us, our efforts to develop our business may be delayed.

We are highly dependent on the principal members of our management team. The loss of our chairman and chief scientific advisor, Allan Goldstein, or our chief executive officer, J.J. Finkelstein, could prevent or significantly delay the achievement of our goals. We have employment agreements with Dr. Goldstein and Mr. Finkelstein. As described elsewhere in this report, we have recently initiated salary reductions for our employees, including Dr. Goldstein and Mr. Finkelstein. However, we cannot assure you that such agreements would prevent them from terminating their employment with or without good reason, and they, or other key employees, may elect to terminate their employment as a result of recent salary reductions or for other reasons. In addition, we do not maintain a key man life insurance policy with respect to Dr. Goldstein or Mr. Finkelstein. In the future, we anticipate that we may need to add additional management and other personnel. Competition for qualified personnel in our industry is intense, and our success will depend in part on our ability to attract and retain highly skilled personnel. We cannot assure you that our efforts to attract or retain such personnel will be successful.

We are subject to intense competition from companies with greater resources and more mature products, which may result in our competitors developing or commercializing products before or more successfully than we do.

We are engaged in a business that is highly competitive. Research and development activities for the development of drugs to treat indications within our focus are being sponsored or conducted by private and public research institutions and by major pharmaceutical companies located in the United States and a number of foreign countries. Most of these companies and institutions have financial and human resources that are substantially greater than our own, and they have extensive experience in conducting research and development activities and clinical trials and in obtaining the regulatory approvals necessary to market pharmaceutical products that we do not have. As a result, they may develop competing products more rapidly that are safer, more effective, or have fewer side effects, or are less expensive, or they may develop and commercialize products that render our product candidates non-competitive or obsolete.

With respect to wound healing, Johnson & Johnson is marketing Regranex™ for this purpose in patients with diabetic foot ulcers. Other companies, such as Novartis, are developing and marketing artificial skins, which could compete with our product candidates in certain wound healing areas. Moreover, wound healing is a large and highly fragmented marketplace attracting many companies, large and small, to develop products for treating acute and chronic wounds, including, for example, honey-based ointments and low frequency cavitational ultrasound. Additionally, most large pharmaceutical companies and many smaller biomedical companies are vigorously pursuing therapeutics to treat patients after heart attacks and other cardiovascular indications.

We face the risk of product liability claims, which could adversely affect our business and financial condition.

We may be subject to product liability claims as a result of our testing, manufacturing, and marketing of drugs. In addition, the use of our product candidates, when and if developed and sold, will expose us to the risk of product liability claims. Product liability may result from harm to patients using our product candidates, such as a complication that was either not communicated as a potential side effect or was more extreme than anticipated. We require all patients enrolled in our clinical trials to sign consents, which explain various risks involved with participating in the trial. However, patient consents provide only a limited level of protection, and it may be alleged that the consent did not address or did not adequately address a risk that the patient suffered. Additionally, we will generally be required to indemnify our clinical product manufacturers, clinical trial centers, medical professionals and other parties conducting related activities in connection with losses they may incur through their involvement in the clinical trials.

Our ability to reduce our liability exposure for human clinical trials and commercial sales, if any, of Tb4 is dependent in part on our ability to obtain sufficient product liability insurance or to collaborate with third parties that have adequate insurance. Although we intend to obtain and maintain product liability insurance coverage, we cannot guarantee that product liability insurance will continue to be available to us on acceptable terms, or at all, or that its coverage will be sufficient to cover all claims against us. A product liability claim, even one without merit or for which we have substantial coverage, could result in significant legal defense costs, thereby potentially exposing us to expenses significantly in excess of our revenues.

Governmental and third-party payers may subject any product candidates we develop to sales and pharmaceutical pricing controls that could limit our product revenues and delay profitability.

The successful commercialization of our product candidates will likely depend on our ability to obtain reimbursement for the cost of the product and treatment. Government authorities, private health insurers and other organizations, such as health maintenance organizations, are increasingly seeking to lower the prices charged for medical products and services. Also, the trend toward managed health care in the United States, the growth of healthcare maintenance organizations, and legislative proposals to reform healthcare and government insurance programs could have a significant influence on the purchase of healthcare services and products, resulting in lower prices and reducing demand for our product candidates. The cost containment measures that healthcare providers are instituting and any healthcare reform could reduce our ability to sell our product candidates and may have a material adverse effect on our operations. We cannot assure you that reimbursement in the United States or foreign countries will be available for any of our product candidates, that any reimbursement granted will be maintained, or that limits on reimbursement available from third-party payors will not reduce the demand for, or the price of, our product candidates. The lack or inadequacy of third-party reimbursements for our product candidates would decrease the potential profitability of our operations. We cannot forecast what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect the legislation or regulation would have on our business.

Clinical trials could be delayed or fail to show efficacy, resulting in additional cost or failure to commercialize our technology platform.

All of our drug candidates are currently in the clinical stage and we cannot be certain that a collaborator or we will successfully complete the clinical trials necessary to receive regulatory product approvals. This process is lengthy, unpredictable and expensive. To obtain regulatory approvals, a collaborator or we must ultimately demonstrate to the satisfaction of the FDA and others that our product candidates are sufficiently safe and effective for their proposed use. Many factors, known and unknown, can adversely impact clinical trials and the ability to evaluate a product candidate’s safety and efficacy, including unexpected delays in the initiation of clinical sites, slower than projected enrollment, competition with ongoing clinical trials and scheduling conflicts with participating clinicians, regulatory requirements, limits on manufacturing capacity and failure of a product candidate to meet required standards for administration to humans. Such factors may have a negative impact on our business by making it difficult to advance product candidates or by reducing or eliminating their potential or perceived value. Further, if we are forced to contribute greater financial and clinical resources to a study, valuable resources will be diverted from other areas of our business.

Clinical trials for product candidates such as ours are often conducted with patients who have more advanced forms of a particular condition and/or other unrelated conditions. For example, in clinical trials for our lead product candidate RGN-137, we have studied patients who are not only suffering from chronic epidermal wounds but are also older and much more likely to have other serious adverse conditions. During the course of treatment with our product candidates, patients could die or suffer other adverse events for reasons that may or may not be related to the drug candidate being tested. Furthermore, and as a consequence of all of our drug candidates being based on Tb4, cross-over risk exists such that a patient in one trial may be adversely impacted by one drug candidate, and that adverse event may have implications for our other trials and other drug candidates. However, even if unrelated to our product candidates, such adverse events can nevertheless negatively impact our clinical trials, and our business prospects would suffer.

Our ability to complete clinical trials depends on many factors, including obtaining adequate clinical supplies and having a sufficient rate of patient recruitment. For example, patient recruitment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the perceptions of investigators and patients regarding safety, and the availability of other treatment options. Even if patients are successfully recruited, we cannot be sure they will complete the treatment process. Delays in patient enrollment or treatment in clinical trials may result in increased costs, program delays, or failure, any of which can substantially affect our business or perceived value.

If we fail to complete or if we experience material delays in completing our clinical trials as currently planned, or we otherwise fail to commence or complete, or experience delays in, any of our other present or planned clinical trials, including as a result of the actions of third parties upon which we rely for these functions, our ability to conduct our business as currently planned could materially suffer. Development costs will increase if we experience any future delays in our clinical trials or if we need to perform more or larger clinical trials than we currently plan. If the delays or costs are significant, our financial results and our ability to commercialize our product candidates will be adversely affected.

We have no marketing experience, sales force or distribution capabilities. If our product candidates are approved, and we are unable to recruit key personnel to perform these functions, we may not be able to commercialize them successfully.

Although we do not currently have any marketable products, our ability to produce revenues ultimately depends on our ability to sell our product candidates if and when they are approved by the FDA and other regulatory authorities. We currently have no experience in marketing or selling pharmaceutical products and we do not have a marketing and sales staff or distribution capabilities. Developing a marketing and sales force is also time-consuming and could delay the launch of new products or expansion of existing product sales. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations. If we fail to establish successful marketing and sales capabilities or fail to enter into successful marketing arrangements with third parties, our ability to generate revenues will suffer.

Even if approved for marketing, our technologies and product candidates are unproven and they may fail to gain market acceptance.

Our drug candidates, which are all based on the molecule Tb4, are new and rapidly evolving and have not been shown to be effective on a widespread basis. Our product candidates, and the technology underlying them, are new and unproven and there is no guarantee that health care providers or patients will be interested in our product candidates even if they are approved for use. Our success will depend in part on our ability to demonstrate sufficient clinical benefits, reliability, safety, and cost effectiveness of our product candidates and technology relative to other approaches, as well as on our ability to continue to develop our product candidates to respond to competitive and technological changes. If the market does not accept our product candidates, when and if we are able to commercialize them, then we may never become profitable. Factors that could delay, inhibit or prevent market acceptance of our product candidates may include:

	•		the timing and receipt of marketing approvals;

	•		the safety and efficacy of the products;

	•		the emergence of equivalent or superior products;

	•		the cost-effectiveness of the products; and

	•		ineffective marketing.

It is difficult to predict the future growth of our business, if any, and the size of the market for our product candidates because the markets and technologies are continually evolving. There can be no assurance that our technologies and product candidates will prove superior to technologies and products that may currently be available or may become available in the future or that our technologies or research and development activities will result in any commercially profitable products.

Our technologies and product candidates may have unacceptable side effects that could delay or prevent product approval.

Possible side effects of therapeutic technologies may be serious and life threatening. The occurrence of any unacceptable side effects with our product candidates, during or after pre-clinical studies and clinical trials, or the perception or possibility that our product candidates cause or could cause such side effects, could delay or prevent approval of our product candidates and negatively impact our business.

Our suppliers may use hazardous and biological materials in their businesses. Any claims relating to improper handling, storage or disposal of these materials could be time-consuming and costly to us, and we are not insured against such claims.

Our product candidates and processes involve the controlled storage, use and disposal by our suppliers of certain hazardous and biological materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for any damages that result, and we do not carry insurance for this type of claim. We may also incur significant costs to comply with current or future environmental laws and regulations.

If we enter markets outside the United States our business will be subject to political, economic, legal and social risks in those markets, which could adversely affect our business.

There are significant regulatory and legal barriers to entering markets outside the United States that we must overcome if we seek regulatory approval to market our product candidates in countries other than the United States. We would be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would be subject to political, economic and social uncertainties including, among others:

	•		changes and limits in import and export controls;

	•		increases in custom duties and tariffs;

	•		changes in currency exchange rates;

	•		economic and political instability;

	•		changes in government regulations and laws;

	•		absence in some jurisdictions of effective laws to protect our intellectual property rights; and

	•		currency transfer and other restrictions and regulations that may limit our ability to sell certain product candidates or repatriate profits to the United States.

Any changes related to these and other factors could adversely affect our business if and to the extent we enter markets outside the United States.

Risks Related To Our Intellectual Property

If we are not able to maintain adequate patent protection for our product candidates, we may be unable to prevent our competitors from using our technology or technology that we license.

Our success will depend in substantial part on our ability to obtain, defend and enforce patents, maintain trade secrets and operate without infringing upon the proprietary rights of others, both in the United States and abroad. Pursuant to an exclusive worldwide license from the NIH, we have exclusive rights under a patent application filed by the NIH for the use of Tb4 in the treatment of non-healing wounds. While this patent has issued in certain countries, we cannot guarantee whether or when the patent will be issued or the scope of the patent issued in other countries. We have attempted to create a substantial intellectual property portfolio, submitting patent applications for various compositions of matter, methods of use and fragments and derivatives of Tb4. We have also in-licensed other intellectual property rights from third parties that could be subject to the same risks as our own patents. If any of these patent applications do not issue, or do not issue in certain countries, or are not enforceable, the ability to commercialize Tb4 in various medical indications could be substantially limited or eliminated.

In addition, the patent positions of the technologies being developed by us and our collaborators involve complex legal and factual uncertainties. As a result, we cannot assure you that any patent applications filed by us, or by others under which we have rights, will result in patents being issued in the United States or foreign countries. In addition, there can be no assurance that (i) any patents will be issued from any pending or future patent applications of ours or our collaborators; (ii) the scope of any patent protection will be sufficient to provide us with competitive advantages; (iii) any patents obtained by us or our collaborators will be held valid if subsequently challenged; or (iv) others will not claim rights in or ownership of the patents and other proprietary rights we or our collaborators may hold. Unauthorized parties may try to copy aspects of our product candidates and technologies or obtain and use information we consider proprietary. Policing the unauthorized use of our proprietary rights is difficult. We cannot guarantee that no harm or threat will be made to our or our collaborators’ intellectual property. In addition, changes in, or different interpretations of, patent laws in the United States and other countries may also adversely affect the scope of our patent protection and our competitive situation.

Due to the significant time lag between the filing of patent applications and the publication of such patents, we cannot be certain that our licensors were the first to file the patent applications we license or, even if they were the first to file, also were the first to invent, particularly with regards to patent rights in the United States. In addition, a number of pharmaceutical and biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received patents on various technologies that may be related to our operations. Some of these technologies, applications or patents may conflict with our or our licensors’ technologies or patent applications. A conflict could limit the scope of the patents, if any, that we or our licensors may be able to obtain or result in denial of our or our licensors’ patent applications. If patents that cover our activities are issued to other companies, we may not be able to develop or obtain alternative technology.

Additionally, there is certain subject matter that is patentable in the United States but not generally patentable outside of the United States. Differences in what constitutes patentable subject matter in various countries may limit the protection we can obtain outside of the United States. For example, methods of treating humans are not patentable in many countries outside of the United States. These and other issues may prevent us from obtaining patent protection outside of the United States, which would have a material adverse effect on our business, financial condition and results of operations.

Changes to U.S. patent laws could materially reduce any value our patent portfolio may have.

The value of our patents depends in part on their duration. A shorter period of patent protection could lessen the value of our rights under any patents that may be obtained and may decrease revenues derived from its patents. For example, the United States patent laws were previously amended to change the term of patent protection from 17 years following patent issuance to 20 years from the earliest effective filing date of the application. Because the time from filing to issuance of biotechnology applications may be more than three years depending on the subject matter, a 20-year patent term from the filing date may result in substantially shorter patent protection. Future changes to patent laws could shorten our period of patent exclusivity and may decrease the revenues that we might derive from the patents and the value of our patent portfolio.

We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.

In addition to our patents, we also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. However, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, we may not have such agreements in place with all such parties and, where we do, these agreements may not provide meaningful protection of our trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information. Also, our trade secrets or know-how may become known through other means or be independently discovered by our competitors. Any of these events could prevent us from developing or commercializing our product candidates.

We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of former employers.

As is commonplace in the biotechnology industry, we employ now, and may hire in the future, individuals who were previously employed at other biotechnology or pharmaceutical companies, including competitors or potential competitors. Although there are no claims currently pending against us, we may be subject to claims that we or certain employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and would be a significant distraction to management.

Risks Related To Our Common Stock

Our common stock price is volatile, our stock is highly illiquid, and any investment in our stock could decline substantially in value.

For the period from January 1, 2008 through March 31, 2009, our closing stock price has ranged from $0.42 to $1.92 with an average daily trading volume of approximately 29,000 shares. In light of our small size and limited resources, as well as the uncertainties and risks that can affect our business and industry, our stock price is expected to continue to be highly volatile and can be subject to substantial drops, with or even in the absence of news affecting our business. The following factors, in addition to the other risk factors described in this report, and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:

	•		results of pre-clinical studies and clinical trials;

	•		commercial success of approved products;

	•		corporate partnerships;

	•		technological innovations by us or competitors;

	•		changes in laws and government regulations both in the U.S. and overseas;

	•		changes in key personnel at our company;

	•		developments concerning proprietary rights, including patents and litigation matters;

	•		public perception relating to the commercial value or safety of any of our product candidates;

	•		future sales of our common stock;

	•		future issuance of our common stock causing dilution;

	•		anticipated or unanticipated changes in our financial performance;

	•		general trends related to the biopharmaceutical and biotechnological industries; and

	•		general conditions in the stock market.

The stock market in general has recently experienced relatively large price and volume fluctuations. In particular, the market prices of securities of smaller biotechnology companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in its value. You should also be aware that price volatility may be worse if the trading volume of the common stock remains limited or declines.

We have never paid dividends on our common stock.

We have paid no cash dividends on any of our classes of capital stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt or credit facility may preclude or limit our ability to pay any dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain for the foreseeable future.

Our principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

As of April 30, 2009, our officers, directors and principal stockholders together control approximately 55% of our outstanding common stock. Included in this group is Sigma-Tau and its affiliates, which together hold outstanding shares representing approximately 44% of our outstanding common stock. A portion of the shares of common stock currently held by Sigma-Tau and its affiliates, representing 16% of our outstanding common stock, are subject to voting agreements under which our Board controls the voting power of such stock. We cannot assure you that such voting agreements would prevent Sigma-Tau and its affiliates from taking actions not in your best interests and effectively exercising control over us. These voting agreements expire between June 2010 and April 2012. After such time, we will have no control over the voting of these shares controlled by Sigma-Tau, including with respect to the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock, and therefore may not be in the best interest of our other stockholders.

Our rights to repurchase certain shares of stock held by Sigma-Tau expire over time, and we may never be able or elect to exercise these rights.

Until June 2010, we have the right to repurchase at a price of $5.00 per share a number of shares of common stock issued to Sigma-Tau and its affiliates equal to the lesser of the shares sold to Sigma-Tau and its affiliates in connection with our private placement of securities in June 2005, or the number of shares necessary to reduce Sigma-Tau’s ownership of our outstanding capital stock to an aggregate of approximately 30% at the time of such repurchase. In addition, we have the right to repurchase at any time until December 31, 2009, for $2.00 per share or, at any time between January 1, 2010 and December 31, 2010, for $2.50 per share, up to 5,000,000 shares of common stock issued to Sigma-Tau in connection with a private placement of securities in February 2008. After December 31, 2010, our rights to repurchase common stock held by Sigma-Tau and its affiliates will expire. These provisions could, under certain circumstances, allow us to reduce dilution by repurchasing these shares at prices lower than the then-prevailing market price of our common stock. However, we cannot assure you that our share price will increase sufficiently to make such repurchases economically feasible or that we would avail ourselves of the opportunity to make such repurchases even if our share price had risen to such a level.

A sale of a substantial number of shares of our common stock, or the perception that such sales will occur, may cause the price of our common stock to decline.

Currently, we are authorized to issue up to 100,000,000 shares of our common stock, and as of April 30, 2009, there were issued and outstanding 54,675,122 shares of our common stock. The authorized but unissued shares may be issued by us in such transactions and at such times as our Board considers appropriate, whether in public or private offerings, as stock splits or dividends or in connection with mergers and acquisitions or otherwise. Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to decline.

The exercise of options and warrants and other issuances of shares of common stock or securities convertible into common stock will dilute your interest.

As of April 30, 2009, there were outstanding options to purchase an aggregate of 4,882,939 shares of our common stock at exercise prices ranging from $0.28 per share to $3.82 per share, of which options to purchase 2,938,999 shares were exercisable as of such date. As of April 30, 2009, there were exercisable warrants to purchase 5,178,916 shares of our common stock, at a weighted average exercise price of $2.70. The exercise of options and warrants at prices below the market price of our common stock could adversely affect the price of shares of our common stock. Additional dilution may result from the issuance of shares of our capital stock in connection with collaborations or manufacturing arrangements or in connection with other financing efforts.

Any issuance of our common stock that is not made solely to then-existing stockholders proportionate to their interests, such as in the case of a stock dividend or stock split, will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase our common stock in the future and those options or warrants are exercised or we issue restricted stock, stockholders may experience further dilution. Holders of shares of our common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of shares of any class or series.

In addition, certain warrants to purchase shares of our common stock currently contain an exercise price above the current market price for the common stock, or above-market warrants. As a result, these warrants may not be exercised prior to their expiration and we may not realize any proceeds from their exercise.

Our certificate of incorporation, our stockholder rights plan and Delaware law contain provisions that could discourage or prevent a takeover or other change in control, even if such a transaction would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.

Our certificate of incorporation provides our Board with the power to issue shares of preferred stock without stockholder approval. In addition, under our stockholder rights plan, our Board has the discretion to issue certain rights to purchase our capital stock when a person acquires in excess of 25% of our outstanding common shares. These provisions may make it more difficult for stockholders to take corporate actions and may have the effect of delaying or preventing a change in control, even if such actions or change in control would be in your best interests. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Subject to specified exceptions, this section provides that a corporation may not engage in any business combination with any interested stockholder, as defined in that statute, during the three-year period following the time that such stockholder becomes an interested stockholder. This provision could also have the effect of delaying or preventing a change of control of our company. The foregoing factors could reduce the price that investors or an acquirer might be willing to pay in the future for shares of our common stock.

We may become involved in securities class action litigation that could divert management’s attention and harm our business and our insurance coverage may not be sufficient to cover all costs and damages.

The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stock of pharmaceutical and biotechnology companies. These broad market fluctuations may cause the market price of our common stock to decline. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could hurt our business, operating results and financial condition.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Submission of Matters to a Vote of Security Holders

None.

Item 5.Other Information

None.

Item 6.Exhibits


Exhibit No.		Description of Exhibit	Reference*

	3.1	Restated Certificate of Incorporation	Exhibit 3.1 to Amendment No. 1 to Registration Statement (File No. 33-9370) (filed November 26, 1986)

	3.2	Certificate of Amendment	Exhibit 3.2 to the Company’s Transitional Report on Form 10-K (File No. 1-15070) (filed March 18, 1991)

	3.3	Certificate of Amendment	Exhibit 3.3 to the Company’s Annual Report on Form 10-KSB (File No. 1-15070) (filed April 2, 2001)

	3.4	Certificate of Designation of Series A Participating Cumulative Preferred Stock	Exhibit 2 to the Company’s Current Report on Form 10-K (File No. 1-15070) (filed May 2, 1994)

	3.5	Amended and Restated Bylaws of the Company	Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q (filed August 14, 2006)

	3.6	Amendment to Amended and Restated Bylaws of the Company	Exhibit 3.6 to the Company’s Registration Statement on Form S-8 (File No. 333-152250) (filed July 10, 2008)

	4.1	Form of Stock Certificate	Exhibit 4.1 to Amendment No. 1 to Registration Statement (File No. 33-9370) (filed November 26, 1986)

	4.2	Form of Rights Certificate	Exhibit 3 to the Company’s Current Report on Form 8-K (File No. 1-15070) (filed May 2, 1994)


Exhibit No.			Description of Exhibit	Reference*

	4.3		Rights Agreement, dated April 29, 1994, between the Company and American Stock Transfer & Trust Company, as Rights Agent	Exhibit 1 to the Company’s Current Report on Form 8-K (File No. 1-15070) (filed May 2, 1994)

	4.4		Amendment No. 1 to Rights Agreement, dated March 4, 2004, between the Company and American Stock Transfer & Trust Company, as Rights Agent	Exhibit 4.3 to the Company’s Annual Report on Form 10-KSB (filed March 31, 2006)

	10.1	^	Second Amended and Restated Employment Agreement, dated March 11, 2009, between the Company and Allan L. Goldstein, as amended	Exhibit 10.4 to Amendment No. 1 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008 (filed April 30, 2009)

	10.2	^	Second Amended and Restated Employment Agreement, dated March 12, 2009, between the Company and J.J. Finkelstein, as amended	Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (filed on April 15, 2009)

	10.3	^	Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and C. Neil Lyons, as amended	Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (filed on April 15, 2009)

	10.4	^	Second Amended and Restated Employment Agreement, dated March 31, 2009, between the Company and David Crockford	Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (filed on April 15, 2009)

	31.1		Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934	Filed herewith

	31.2		Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934	Filed herewith


*		Except where noted, the exhibits referred to in this column have heretofore been filed with the Securities and Exchange Commission as exhibits to the documents indicated and are hereby incorporated by reference thereto. The Registration Statements referred to are Registration Statements of the Company.

^		Compensatory plan, contract or arrangement.

Signatures

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RegeneRx Biopharmaceuticals, Inc. (Registrant)
Date: May 15, 2009	/s/ J.J. Finkelstein
	J.J. Finkelstein
	President and Chief Executive Officer

	/s/ C. Neil Lyons
	C. Neil Lyons
	Chief Financial Officer

Exhibit Index


Exhibit No.		Description of Exhibit

	31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

	31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

	32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Good

Exhibit No.

Description of Exhibit

Reference*

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith