REGENERX BIOPHARMACEUTICALS INC (Form: 10-Q, Received: 11/14/2012 16:09:41)

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 ended September 30, 2012

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

For the transition period from ___________________ to __________________.

Commission file number 001-15070

RegeneRx Biopharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

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

15245 Shady Grove Road

Suite 470

Rockville, Maryland 20850

(Address of Principal Executive Offices)

(301) 208-9191

(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.

Yes þ

No ¨

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).

Yes þ No ¨

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 filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller reporting company þ
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

81,733,247 shares of common stock, par value $0.001 per share, were outstanding as of November 14, 2012.

RegeneRx Biopharmaceuticals, Inc.

Form 10-Q

Quarterly Period Ended September 30, 2012

Index

			Page No.

Part I.	Financial Information

	Item 1.	Financial Statements	3

		Balance Sheets at September 30, 2012 (unaudited) and December 31, 2011	3

		Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited)	4

		Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)	5

		Notes to Financial Statements (unaudited)	6-12

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

	Item 4	Controls and Procedures	22

Part II.	Other Information

	Item 1.	Legal Proceedings	22

	Item 1A.	Risk Factors	22

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

	Item 3.	Defaults Upon Senior Securities	38

	Item 4.	Mine Safety Disclosures	38

	Item 5.	Other Information	38

	Item 6.	Exhibits	39-42

	Signatures		43

Part I – Financial Information

Item 1. Financial Statements

RegeneRx Biopharmaceuticals, Inc.

Balance Sheets

	September 30,			December 31,
	2012			2011
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	32,043		$	116,092
Grant receivable		40,497			214,450
Prepaid expenses and other current assets		13,761			24,603
Total current assets		86,301			355,145
Property and equipment, net of accumulated depreciation of $122,772 and $116,985		11,159			16,946
Other assets		11,503			11,503
Total assets	$	108,963		$	383,594

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	507,308		$	451,881
Accrued expenses		171,133			358,778
Total current liabilities		678,441			810,659

Long Term liabilities
Unearned Revenue		400,000			0
Total long term liabilities		400,000			0

Total Liabilities		1,078,441			810,659

Commitments		0			0

Stockholders' equity (deficit)
Preferred stock, $.001 par value per share, 1,000,000 shares authorized; no shares issued		0			0
Common stock, par value $.001 per share, 200,000,000 shares authorized; 81,733,247 issued and outstanding as of September 30, 2012; 81,390,618 issued and outstanding as of December 31, 2011		81,733			81,391
Additional paid-in capital		95,230,295			95,023,912
Accumulated deficit		(96,281,506	)		(95,532,368	)
Total stockholders' equity (deficit)		(969,478	)		(427,065	)
Total liabilities and stockholders' equity (deficit)	$	108,963		$	383,594

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

RegeneRx Biopharmaceuticals, Inc.

Statements of Operations

(Unaudited)

	Three Months ended September 30,						Nine Months ended September 30,
	2012			2011			2012			2011
Revenues:
Sponsored research revenue	$	295,360		$	31,160		$	1,061,894		$	1,222,192

Operating expenses:
Research and development		228,554			1,371,111			973,702			4,356,637
General and administrative		161,302			677,876			837,345			2,013,475
Total operating expenses		389,856			2,048,987			1,811,047			6,370,112
Loss from operations		(94,496	)		(2,017,827	)		(749,153	)		(5,147,920	)
Interest income		3			55			15			1,573
Net loss	$	(94,493	)	$	(2,017,772	)	$	(749,138	)	$	(5,146,347	)

Basic and diluted net loss per common share	$	(0.00	)	$	(0.03	)	$	(0.01	)	$	(0.06	)
Weighted average number of common shares outstanding		81,714,995			79,986,359			81,592,178			79,774,523

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

RegeneRx Biopharmaceuticals, Inc.

Statements of Cash Flows

(Unaudited)

	For the nine Months ended September 30,
	2012			2011

Operating activities:
Net loss	$	(749,138	)	$	(5,146,347	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,787			6,920
Non-cash share-based compensation		151,543			144,997
Changes in operating assets and liabilities:
Grants receivable		173,953			(4,195	)
Prepaid expenses and other current assets		10,842			302,090
Other assets		0			5,752
Accounts payable		110,609			(126,097	)
Accrued expenses		(187,645	)		(23,945	)
Unearned revenue		400,000			0
Net cash used in operating activities		(84,049	)		(4,840,825	)

Investing activities:
Purchase of property and equipment		0			(1,084	)
Net cash used in investing activities		0			(1,084	)

Financing activities:
Net proceeds from issuance of common stock		0			1,576,016
Net cash provided by financing activities		0			1,576,016
Net decrease in cash and cash equivalents		(84,049	)		(3,265,893	)
Cash and cash equivalents at beginning of period		116,092			3,790,352
Cash and cash equivalents at end of period	$	32,043		$	524,459

Supplemental Disclosure of Non-Cash Operating Activities:
Issuance of common stock for payment of accounts payable	$	55,182		$	-

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

RegeneRx Biopharmaceuticals, Inc.

Notes to Financial Statements

For the three and nine months ended September 30, 2012 and 2011 (Unaudited)

1. organization, business overview and basis of presentation

Organization and Nature of Operations.

RegeneRx Biopharmaceuticals, Inc. (“RegeneRx”, 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. Our operations are confined to one business segment: the development and marketing of product candidates based on Thymosin Beta 4 (“Tβ4”), an amino acid peptide.

Management Plans to Address Operating Conditions.

On October 19, 2012, we entered into a series of convertible promissory notes totaling $300,000 two members of management, an outside director, and an affiliated stockholder. The loan proceeds will allow us to maintain current operations and continue work on opportunities related to our ophthalmic and cardiac drug candidates, as well as certain strategic financial opportunities. The loan proceeds are expected to fund operations into the first quarter of 2013. On July 15, 2012, we entered into a License Agreement with Lee’s Pharmaceutical (HK) Limited (“Lee’s”) for the license of Tß4 in any pharmaceutical formulation, including our RGN-259, RGN-352 and RGN-137 product candidates, in China, Hong Kong, Macau and Taiwan. Lee’s paid us $200,000 upon signing of a term sheet on March 27, 2012, and Lee’s paid us an additional $200,000 upon signing of the definitive license agreement. Sigma-Tau Finanziaria S.P.A., an international pharmaceutical company, which together with its subsidiaries and affiliates, collectively beneficially own approximately 39% of our common stock and represent our largest stockholder group, also collectively own approximately 26% of Lee’s. The receipt of the $200,000 in July 2012, together with grant revenues allowed us to operate until the recent convertible debt offering. As noted above, we continue to evaluate potential strategic options, including the licensing of additional territorial rights to our proprietary clinical programs. Beginning in late 2011, we began implementing significant cost-saving measures to conserve capital resources and maintain a minimal level of operations, while seeking additional funding and/or to complete a strategic transaction. Beginning in January 2012, all employees became part-time hourly employees with reduced work schedules. Additionally, in January 2012, we discontinued providing employee health benefits and company-sponsored 401(k) matching contributions. The majority of our research and development staff’s efforts since this time have been directed to work under a grant that we received from the National Institutes of Health (“NIH”).

We have incurred a net loss of $749,000 for the nine-month period ended September 30, 2012. Since inception, and through September 30, 2012, we have an accumulated deficit of $96 million and we had cash and cash equivalents of $32,000 as of September 30, 2012. Currently, we are not enrolling patients in any of our clinical trials. We have closed a Phase 2 trial to evaluate RGN-137 in patients suffering from epidermolysis bullosa, or EB. We plan on conducting a preliminary analysis of the results of this trial in the fourth quarter of 2012. Given these objectives and as noted above, we project that our existing capital resources, coupled with the expected grant revenues, will only fund our planned operating activities into the first quarter of 2013, without giving effect to any other financing sources, including any purchases under our committed equity facility with Lincoln Park Capital, which is subject to a number of conditions that limit our ability to draw against such facility (See Note 6).

We anticipate incurring additional losses in the future as we continue to explore the potential clinical benefits of Tβ4-based product candidates over multiple indications. We will need substantial additional funds in order to initiate any further preclinical studies or clinical trials, and to fund our operations beyond the first quarter of 2013. Accordingly, we have an immediate need for financing and are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities, debt financing, corporate collaboration and licensing arrangements, or the sale of our company or certain of our intellectual property rights.

These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of our liabilities in the normal course of business.

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 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. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be forced to take any such actions.

In addition to our current operational requirements, we expect to continue to expend substantial funds to complete our planned product development efforts. Additionally, we continually refine our operating strategy and evaluate alternative clinical uses of Tβ4. 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, and/or a partner, must successfully conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market those pharmaceuticals 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.

Basis of Presentation.

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 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, 2011, and related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “Annual Report”).

The accompanying December 31, 2011 financial information was derived from our audited financial statements included in the Annual Report. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results to be expected for the year ending December 31, 2012 or any other future period.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” are to the Accounting Standards Codification issued by the Financial Accounting Standards Board (“FASB”).

Subsequent events have been evaluated through the filing date of these unaudited financial statements.

Use of Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Critical accounting policies involved in applying our accounting policies are those that require management to make assumptions about matters that are highly uncertain at the time the accounting estimate was made and those for which different estimates reasonably could have been used for the current period. Critical accounting estimates are also those which are reasonably likely to change from period to period, and would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. Our most critical accounting estimates relate to accounting policies for clinical trial accruals and share-based arrangements. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from those estimates.

Revenue Recognition.

We recognize revenue in accordance with the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller's price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. We also comply with the authoritative guidance for revenue recognition regarding arrangements with multiple deliverables.

Revenue associated with licensing agreements consist of non-refundable upfront license fees and milestone payments. Non-refundable upfront license fees received under license agreements, whereby continued performance or future obligations are considered inconsequential to the relevant license technology, are recognized as revenue upon delivery of the technology. If a licensing agreement has multiple elements, we analyze each element of our licensing agreements and consider a variety of factors in determining the appropriate method of revenue recognition of each element.

If a licensing agreement includes multiple elements, we identify which deliverables represent separate units of accounting, and then determine how the arrangement consideration should be allocated among the separate units of accounting, which may require the use of significant judgment .

If a licensing agreement includes multiple elements, a delivered item is considered a separate unit of accounting if both of the following criteria are met:

The delivered item has value to the licensing partner on a standalone basis based on the consideration of the relevant facts and circumstances for each agreement;

If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company's control.

Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement.

We recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:

The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance to achieve the milestone;

The consideration relates solely to past performance; and

The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity's performance or on the occurrence of a specific outcome resulting from the entity's performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the Company.

Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our accompanying balance sheets.

Sponsored Research Revenues.

We account for non-refundable grants as “Sponsored research revenues” in the accompanying statements of operations. Revenues are recognized when persuasive evidence of an arrangement exists, the associated research or other services have been performed, the related underlying costs are incurred, the contract price is fixed or determinable and collectability is reasonably assured. For the three and nine months ended September 30, 2012 and 2011, all of our revenues were from one NIH grant.

Research and Development .

Research and development (“R&D”) costs are expensed as incurred and 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 Tβ4; formulation of Tβ4 into the various product candidates; stability for both Tβ4 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, six persons in total, who are wholly dedicated to R&D efforts. R&D also includes a pro-ration of our common infrastructure costs for office space and communications.

Cost of Preclinical Studies and Clinical Trials .

We accrue estimated costs for preclinical studies based on estimates of work performed. We estimate expenses incurred for clinical trials that are in process based on patient enrollment and based on clinical data collection and management. Costs based on clinical data collection and management are recognized based on estimates of unbilled goods and services received in the reporting period. We monitor the progress of the trials and their related activities and adjust the accruals accordingly. Adjustments to accruals are charged to expense in the period in which the facts that give rise to the adjustment become known. In the event of early termination of a clinical trial, we would accrue an amount based on estimates of the remaining non-cancelable obligations associated with winding down the clinical trial.

Recent Accounting Pronouncements.

For a discussion of recent accounting pronouncements please refer to Note 2, "Summary of Significant Accounting Policies—Recent Accounting Pronouncements," in the Annual Report. We did not adopt any new accounting pronouncements during the three months ended September 30, 2012 that had or are expected to have a material impact on our financial statements.

2. Net Loss per Common Share

Net loss per common share for each of the three and nine months ended September 30, 2012 and 2011 is based on the weighted-average number of shares of common stock outstanding during the respective 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 17,173,500 shares and 21,055,056 shares for the nine month period in 2012 and 2011, respectively, reserved for the exercise of outstanding options and warrants.

3. Stock-Based Compensation

We measure stock-based compensation expense based on the grant date fair value of the awards, which is then recognized over the period which service is required to be provided. We estimate the value of our stock option awards on the date of grant using the Black-Scholes option pricing model and amortize that cost over the expected term of the grant. We recognized $26,566 and $41,417 in stock-based compensation expense for the three months and $151,542 and $144,997 for the nine months ended September 30, 2012 and 2011, respectively. We expect to recognize the compensation cost related to non-vested options as of September 30, 2012 of $175,789 over the weighted average remaining recognition period of 1.23 years.

We estimate the value of our stock option awards on the date of grant using the Black-Scholes option pricing model. We used the following forward-looking range of assumptions to value each stock option granted to employees and directors during the nine months ended September 30, 2012 and 2011:

	2012			2011

Dividend yield		0.0	%		0.0	%
Risk-free rate of return		0.7	%		1.5	%
Expected life in years		4.00			4.75
Volatility		72	%		70	%
Forfeiture rate		2.6	%		2.6	%

4. Income Taxes

As of September 30, 2012, 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 September 30, 2013.

5. Fair Value Measurements

The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

• 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 September 30, 2012, we held no qualifying liabilities, and our only qualifying assets that required measurement under the foregoing fair value hierarchy were money market funds and U.S. Treasury Bills included in Cash and Cash Equivalents valued at $32,000, using Level 1 inputs.

6. Stockholders’ Equity

On January 5, 2011, we entered into a securities purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which we sold in a registered direct offering 1,851,852 shares of our common stock to LPC at a price per share of $0.27, for gross proceeds of $500,000 before offering expenses (the "Registered Offering"). As part of the Registered Offering, we also issued to LPC, for no additional consideration, a warrant to purchase 740,741 shares of common stock at an exercise price of $0.38 per share (the "LPC Warrant"). Subject to certain ownership limitations, the LPC Warrant is exercisable until January 7, 2016. The exercise price of the LPC Warrant is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

The Registered Offering was made pursuant to an S-3 shelf registration statement on (SEC File No. 333-150675), which was declared effective by the SEC on May 16, 2008, pursuant to a prospectus supplement filed with the SEC on January 7, 2011.

The Registered Offering closed on January 7, 2011. No discounts or placement agent fees were payable in connection with the Registered Offering, and the Company used the proceeds from the Registered Offering for preclinical and clinical development of the Company's drug candidates and for general corporate purposes, including working capital.

On January 5, 2011, we entered into three separate securities purchase agreements (each, a "Sigma-Tau Purchase Agreement" and together, the "Sigma-Tau Purchase Agreements") with affiliates of Sigma-Tau Group, our largest stockholder (the "Sigma-Tau Purchasers"), with respect to the private placement (the "Private Placement") of an aggregate of 3,518,519 shares of common stock (the "Sigma-Tau Shares") at a price per share of $0.27, for gross proceeds of $950,000. No discounts or placement agent fees were payable in connection with the Private Placement, and we used the net proceeds of the Private Placement for working capital and other general corporate purposes.

In connection with the Private Placement, we also issued to the Sigma-Tau Purchasers warrants (the "Sigma-Tau Warrants") to purchase an aggregate of 1,407,407 additional shares of common stock at an exercise price of $0.38 per share. The Sigma-Tau Warrants are exercisable until January 7, 2016. The exercise price of the Sigma-Tau Warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The Private Placement closed on January 7, 2011.

In connection with the Private Placement, on January 5, 2011, we and the Sigma-Tau Purchasers entered into an agreement (the "Warrant Amendment") to amend the terms of certain outstanding warrants held by the holders of such warrants (the "Holders"). Under the Warrant Amendment, all outstanding warrants held by the Holders that were issued between March 2006 and December 2008, exercisable for an aggregate of 3,046,453 shares of Common Stock and with exercise prices between $1.60 per share and $4.06 per share, were amended to reduce their exercise prices to $0.38 per share and to extend their expiration dates to December 31, 2011. The incremental fair value transferred to the holders pursuant to the Warrant Amendment was not material. All of the amended warrants expired unexercised on December 31, 2011.

On January 4, 2011, we and LPC also entered into a committed equity facility (the "LPC Equity Facility"), together with a Registration Rights Agreement (the "Registration Rights Agreement"), whereby we have the right to sell to LPC up to $11,000,000 of our common stock through October 2013 (any such shares sold being referred to as the "Purchase Shares"). Under the Registration Rights Agreement, we filed a registration statement related to the transaction with the SEC covering the Purchase Shares and the Additional Commitment Shares (as defined below), which was declared effective by the SEC on February 11, 2011. We will generally have the right, but not the obligation, over a 30-month period that began in April 2011, to direct LPC to periodically purchase the Purchase Shares in specific amounts under certain conditions. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on the date of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date. In no event, however, will the Purchase Shares be sold to LPC at a price of less than $0.15 per share.

In consideration for entering into the LPC Equity Facility, we issued to LPC 958,333 shares of common stock as an initial commitment fee (the "Initial Commitment Shares") and are required to issue up to 958,333 shares of common stock as additional commitment shares on a pro rata basis (the "Additional Commitment Shares") as we direct LPC to purchase our shares under the Equity Facility over the term of the agreement. The LPC Equity Facility may be terminated by us at any time at our discretion without any cost to us. The proceeds that may be received by us under the LPC Equity Facility are expected to be used for preclinical and clinical development of our drug candidates and for general corporate purposes, including working capital.

Under the LPC Equity Facility, we have agreed that, subject to certain exceptions, we will not, during the term of the LPC Equity Facility, effect or enter into an agreement to effect any issuance of common stock or securities convertible into, exercisable for or exchangeable for common stock in a "Variable Rate Transaction," which means a transaction in which we:

issue or sell any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of common stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for the common stock; or

enter into any agreement, including, but not limited to, an equity line of credit, whereby we may sell securities at a future determined price.

We have also agreed to indemnify LPC against certain losses resulting from our breach of any of our representations, warranties or covenants under the agreements with LPC.

During 2011, we sold 1,500,000 shares of common stock to LPC as Purchase Shares for $348,200 in net proceeds. We also issued 30,336 Additional Commitment Shares in connection with this purchase. At December 31, 2011 additional sales to LPC were not available as our share price was less than $0.15 per share. During the nine months ended September 30, 2012 we did not sell any shares to LPC, and we may not sell additional shares to LPC until such time as we have filed a post-effective amendment to the original registration statement and such amendment has been declared effective by the SEC.

7. Subsequent Events

On October 19, 2012 we completed a private placement of convertible notes (the “Notes”) with two members of management, an outside director, and an affiliated stockholder raising an aggregate of $300,000 in gross proceeds. The Notes were issued pursuant to a Convertible Note and Warrant Purchase Agreement.

The Notes will pay interest at a rate of five percent (5%) per annum, mature twenty-four (24) months after their date of issuance and are convertible into shares of our common stock at a conversion price of fifteen cents ($0.15) per share (subject to adjustment as described in the Notes) at any time prior to repayment, at the election of the Note holder. In the aggregate, the Notes are initially convertible into up to 2,000,000 shares of our common stock, excluding interest. At any time prior to maturity of the Notes, with the consent of the holders of a majority in interest of the Notes, we may prepay the outstanding principal amount of the Notes plus unpaid accrued interest without penalty.

In connection with the issuance of the Notes we also issued warrants to each purchaser. The warrants are exercisable for an aggregate of 400,000 shares of Company common stock with an exercise price of fifteen cents ($0.15) per share for a period of five years.

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

This Quarterly Report on Form 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 report, and we do not intend to update any such forward-looking statements to reflect events or circumstances that occur after that date.

Business Overview

We are a biopharmaceutical company focused on the development of a novel therapeutic peptide, Thymosin beta 4, or Tß4, for tissue and organ protection, repair, and regeneration. We have formulated Tß4 into three distinct product candidates in clinical development:

• RGN-259, a topical eye drop for regeneration of corneal tissues damaged by injury, disease or other pathology;

• RGN-352, an injectable formulation to treat cardiovascular diseases, central and peripheral nervous system diseases, and other medical indications that may be treated by systemic administration; and

• RGN-137, a topical gel for dermal wounds and reduction of scar tissue.

We are continuing strategic partnership discussions with biotechnology and pharmaceutical companies regarding the further clinical development of all of our product candidates.

In addition to our four pharmaceutical product candidates, we are also pursuing the commercial development of peptide fragments and derivatives of Tß4 for potential cosmeceutical use. These fragments are amino acid sequences, and variations thereof, within the Tß4 molecule that have demonstrated activity in several in vitro preclinical research studies that we have sponsored. We believe the biological activities of these fragments may be useful, for example, in developing novel cosmeceutical products for the anti-aging market. Our strategy is to collaborate with another company to develop cosmeceutical formulations based on these peptides.

Development of Product Candidates

RGN-259

RGN-259 is our proprietary preservative-free eye drop formulation of Thymosin beta 4. In September 2011, we completed a Phase 2a exploratory clinical trial evaluating the safety and efficacy of RGN-259 in 72 patients with dry eye syndrome. Patients were randomly assigned to receive either RGN-259 or placebo in this double-masked, placebo-controlled trial. All patients received either RGN-259 (0.1% concentration) or placebo, twice daily for 30 days. Various signs and symptoms of dry eye, such as the degree of ocular surface damage, ocular itching, burning and grittiness, among others, were graded periodically during and following the treatment period. The trial was conducted by Ora Inc., an ophthalmic contract research organization that specializes in dry eye research and clinical trials, and utilized Ora’s Controlled Adverse Environment (CAE ^sm ) chamber, which is a generally accepted model that exacerbates dry eye signs and symptoms in the dry eye patient.

In November 2011, we reported preliminary safety and efficacy results from the trial. RGN-259 was deemed safe and well-tolerated, with no observed drug-related adverse events.

The co-primary outcome measures evaluated in the trial were inferior corneal fluorescein staining and decreased ocular discomfort on day 29. Various secondary outcome measures were also evaluated in the trial. While the study did not meet the co-primary outcome measures, during and after challenge in the CAE chamber, RGN-259 showed statistically significant efficacy results in other measured endpoints, meaning a p-value equal to or less than 0.05, which indicates a 5% or less likelihood that the results were due to chance, as follows:

Patients receiving RGN-259 experienced a 325% greater reduction from baseline in central corneal fluorescein staining compared to placebo at the 24 hour recovery period (p = 0.0075). Reduction of fluorescein staining is indicative of a reduction in ocular surface damage of the central cornea;

Patients receiving RGN-259 experienced a 257% greater reduction from baseline in exacerbation of superior corneal fluorescein staining in the chamber as compared to the placebo (p = 0.0210); and

Patients receiving RGN-259 experienced a 27.3% greater reduction in exacerbation of ocular discomfort at day 28 during a 75-minute challenge in a controlled adverse environment compared to the placebo group (p = 0.0244). Reduction indicates that RGN-259 can slow exacerbation of ocular symptoms in patients with dry eye syndrome.

Other findings, such as superior corneal staining reduction and peripheral (combination of the average of superior and inferior) corneal staining reduction, were observed having statistical significance, while others had positive trends after treatment with RGN-259. These observations are in line with the known biological properties and mechanisms of action of RGN-259 reported in various nonclinical studies.

With respect to inferior corneal fluorescein staining, we did see a trend toward improvement, meaning that we observed reduced staining, at day 28 during exposure to adverse conditions in the CAE chamber in patients receiving RGN-259 compared to placebo, although this improvement was not deemed to be statistically significant (p=0.0968).

The co-primary outcome measures, selected at the outset of this initial exploratory trial, were based on the best available animal data at the time but without the benefit of any actual human clinical experience in dry eye. Therefore, we believe that our not having met the co-primary outcome measures at this stage is not as important as identifying statistically significant outcomes that could potentially serve as approvable endpoints in later stage or in pivotal Phase 3 clinical trials. We believe that the statistically significant observation of reduction in central corneal staining, as well as symptom improvements observed in the trial and described above, reflect actual patient benefits and represent acceptable outcome measures to the FDA for use in follow-up Phase 2 or confirmatory pivotal Phase 3 trials. We are currently preparing a clinical study report for submission to the FDA, which will confirm these results of the exploratory Phase 2 clinical trial.

In June 2012, we reported preliminary results from a double-masked, vehicle-controlled, physician-sponsored Phase 2 clinical trial evaluating RGN-259 for the treatment of severe dry eye. RGN-259 was observed to be safe and well-tolerated and met key efficacy objectives with statistically significant sign and symptom improvements, compared to vehicle control, at various time intervals, including 28 days post-treatment.

Nine patients with severe dry eye (18 eyes) were treated with RGN-259 or vehicle control six times daily over a period of 28 days. They were evaluated upon entering the study after a two week washout period, at weekly intervals during the treatment phase, at the end of the 28-day treatment period, and at a follow-up visit 28 days after treatment. Statistically significant differences in sign and symptom assessments, such as ocular discomfort and corneal fluorescein staining, were seen at various time points throughout the study. Of particular note were the differences between RGN-259 and vehicle control 28 days post-treatment, or the follow-up period. The RGN-259-treated group had a 35.1% reduction of ocular discomfort compared to vehicle control (p=0.0141), and a 59.1% reduction of total corneal fluorescein staining compared to vehicle control (p=0.0108).

Consistent with the reduction of ocular discomfort and fluorescein staining at the 28-day follow-up visit, other improvements seen in the RGN-259-treated patients included tear film breakup time and increased tear volume production. Likewise, these improvements were seen at other time points in the study.

Lee’s Pharmaceuticals . On July 16, 2012, we announced that we had signed a License Agreement with Lee’s Pharmaceutical (HK) Limited, headquartered in Hong Kong, for the license of Thymosin Beta 4 in any pharmaceutical form, including our RGN-259, RGN-352 and RGN-137 product candidates, in China, Hong Kong, Macau and Taiwan. Lee’s paid us $200,000 upon signing of a term sheet in March 2012, and Lee’s paid us an additional $200,000 upon signing of the definitive license agreement. Lee’s is an affiliate of Sigma Tau, which collectively with its affiliates is our largest stockholder.

Future Plans. We are in the process of seeking a financial sponsor to allow for the continued clinical development of RGN-259. Based on the results of our Phase 2a clinical trial in patients with dry eye syndrome conducted in 2011 and, subject to the availability of sufficient financial resources, we are designing a Phase 2b clinical trial that we believe could confirm previous findings and generate important data for future marketing approval. We are also engaged in discussions with ophthalmic specialty companies regarding product licensing to advance clinical development of this product candidate.

RGN-352

During 2009, we completed a Phase 1 clinical trial evaluating the safety, tolerability and pharmacokinetics of the intravenous administration of RGN-352 in 60 healthy subjects. Based on the results of this Phase 1 trial and extensive preclinical efficacy data published in peer-reviewed journals, in the second half of 2010, we began start-up activities for a Phase 2 study to evaluate RGN-352 in patients who had suffered an AMI. We had planned to begin enrolling patients in this clinical trial near the end of the first quarter of 2011. However, in March 2011, we were notified by the FDA that the trial was placed on clinical hold as a result of our contract manufacturer’s alleged failure to comply with current Good Manufacturing Practices, or cGMPs. We have since learned that the manufacturer has closed its manufacturing facility and filed for bankruptcy protection. The FDA has prohibited us from using any of the active drug or placebo formulated by this manufacturer in human trials; consequently, we must have RGN-352 manufactured by a new cGMP-compliant manufacturer in the event we seek to resume this trial.

Significant preparatory time and procedures will be required and expenses would need to be incurred before any new cGMP-compliant manufacturer would be able to manufacture RGN-352 for the AMI trial and for us to resume study start-up activities. Due to these factors, including the time required for revalidation of processes and assays related to production that were already in place with the original manufacturer, we have elected to postpone activities on this trial until the requisite funding is secured.

In addition to the potential application of RGN-352 for the treatment of cardiovascular disease, preclinical research published in the scientific journals Neuroscience and the Journal of Neurosurgery indicates that RGN-352 may also prove useful for patients with multiple sclerosis, or MS, as well as stroke and traumatic brain injury. In these studies, the administration of Tß4 resulted in regeneration of neuronal tissue by promoting remyelination of axons and stimulating oligodendrogenesis, resulting in improvement of neurological functional activity. Based on this preclinical research, depending on our capital resources, and if we are able to separately procure cGMP-compliant clinical trial material, we may also support a proposed physician-sponsored Phase 1/2 clinical trial to be conducted at a major U.S. medical center to evaluate the therapeutic potential of RGN-352 in patients with MS and traumatic brain injury.

RGN-137

Clinical Development — Epidermolysis Bullosa. In 2005, we began enrolling patients in a Phase 2 clinical trial designed to assess the safety and effectiveness of RGN-137 for the treatment of patients with EB. EB is a genetic disease of about 10 gene mutations that results in fragile skin and other epithelial structures (e.g., cornea and GI tract) that can blister spontaneously or separate at the slightest trauma or friction, creating a wound that at times does not heal or heals poorly. In severe cases, recurrent blistering and tissue loss may be life threatening. This randomized, double-blind, placebo-controlled, dose-response trial, nine U.S. clinical sites will evaluate the safety, tolerability, and wound healing effectiveness of three different concentrations of RGN-137 compared to placebo. RGN-137 is being applied topically to the skin, once daily for up to 56 consecutive days. EB has been designated as an “orphan” indication by the FDA’s Office of Orphan Drugs. A portion of this trial was funded by a grant of $681,000 received from the FDA. We have completed enrollment of 30 out of the original target of 36 patients and closed the Phase 2 trial in late 2011 as the availability of eligible patients has been exhausted.

Clinical Development — Pressure Ulcers. In late 2005, we began enrolling patients in a Phase 2 clinical trial designed to assess the safety and effectiveness of RGN-137 for the treatment of patients with chronic pressure ulcers, commonly known as bedsores. In this randomized, double-blind, placebo-controlled, dose-response trial, 15 clinical sites in the United States enrolled a total of 72 patients to evaluate the safety, tolerability, and wound healing effectiveness of three different concentrations of RGN-137 compared to placebo. RGN-137 was applied topically to patients’ ulcers, once daily for up to 84 consecutive days. Patients in the trial were between 19 and 85 years old and had at least one stable Stage III or IV pressure ulcer with a surface area between 5 and 70 cm ² . Stage III and IV pressure ulcers are full thickness wounds that penetrate through the skin and muscle, sometimes completely to the bone.

In January 2009, we reported final data from this trial. RGN-137 was well-tolerated at all three dose levels studied, with no dose-limiting adverse events, which achieved the primary objective of the study. As for efficacy, all Tß4 doses performed similarly compared to placebo, with no statistically significant efficacy results. However, patients treated with the middle dose showed a 17% rate of wound healing, which was the highest rate among the three active doses evaluated. The improvement in ulcer healing in this middle dose group following nine weeks of treatment was equal to the improvement in patients treated with placebo after 12 weeks of treatment. A follow-on evaluation, reported at the 3rd International Symposium on the Thymosins in Health and Disease in March 2012, showed that for those pressure ulcer patients’ wounds that healed, RGN-137 mid dose (0.02% Tβ4 gel product) accelerated wound closure with a median time to healing of 22 days as compared to 57 days for the placebo. Although those results are clinically significant, they were not statistically significant.

Clinical Development — Venous Stasis Ulcers. In mid-2006 we began enrolling patients in a Phase 2 clinical trial designed to assess the safety and effectiveness of RGN-137 for the treatment of patients with venous stasis ulcers. Venous stasis ulcers are a common type of chronic wound that develops on the ankle or lower leg in patients with chronic vascular disease. In these patients blood flow in the lower extremities is impaired leading to venous hypertension, edema (swelling) and mild redness and scaling of the skin that gradually progresses to ulceration. In this double-blind, placebo-controlled, dose-response study, 8 European sites in Italy (N=5) and Poland (N=3) make up the 72 patients randomized to receive three different concentrations of RGN-137 or placebo. RGN-137 or placebo was applied topically to patients’ ulcers once daily for consecutive days. A patient’s ulcer size and ulcer stability for enrollment were between 3 and 30 cm ² and at least 6 weeks in duration, respectively.

In 2009, we reported final data from that trial. All doses of RGN-137 were well tolerated. More patients achieved healing in the RGN-137 mid dose (0.03% Tβ4 gel product) than in any other dose group. The mid dose showed both an increased incidence of wound healing and a faster healing time compared to placebo. The mid dose decreased the median time to healing by 45% among those wounds that completely healed. A follow-on evaluation, reported at the 3rd International Symposium on the Thymosins in Health and Disease in March 2012, showed that for those venous stasis ulcer patients’ wounds greater than 3 cm ² that healed, the RGN-137 mid dose (0.03% Tβ4 gel product) accelerated wound closure with a median time to healing of 49 days as compared to 78 days for the placebo. Those results were both clinically and statistically significant.

Current Financial Circumstances

Due to our current financial condition, beginning in late 2011, we began implementing significant cost-saving measures to conserve capital resources and maintain a minimal level of operations, while seeking to receive additional funding and/or complete a strategic transaction. To that end, we have greatly reduced salaries and work schedules of our employees and have increasingly relied on reimbursements under a grant that we received from the NIH to fund employee salaries. We have also engaged investment bankers to help us explore financing alternatives, including a possible equity financing or licensing transaction, in order to continue the development of our product candidates, as well as the exploration of other strategic alternatives, including a possible asset out-licensing, asset sale or sale of our company.

Financial Operations Overview

We have never generated product revenues, and we do not expect to generate product revenues until the FDA approves one of our product candidates, if ever, and we begin marketing and selling it. Subject to the availability of financing, we expect to invest increasingly significant amounts in the furtherance of our current clinical programs and may add additional nonclinical studies and new clinical trials as we explore the potential of our current product candidates in other indications and explore new formulations of Tß4-based product candidates. As we expand our clinical development initiatives, we expect to incur substantial and increasing losses. Accordingly, we will need to generate significant product revenues in order to ultimately achieve and then maintain profitability. Also, we expect that we will need to raise substantial additional capital in order to meet product development requirements. We cannot assure investors that such capital will be available when needed, on acceptable terms, or at all.

Most of our expenditures to date have been for research and development, or R&D, activities and general and administrative, or 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 Tß4 and peptide fragments, formulation of Tß4 into our product candidates, stability studies for both Tß4, and the various formulations, preclinical 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, five persons in total, who are wholly dedicated either on a full or part-time basis 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. As described below under "Sources of Liquidity," in May 2010 we were awarded a grant from the NIH to support the requisite nonclinical development of RGN-352. These nonclinical activities are being conducted even though our pending Phase 2 clinical trial of RGN-352 is on clinical hold. Subject to our compliance with the terms and conditions of the grant, we are eligible to receive up to $3.0 million over a three-year period in cost reimbursements related to the purposes set forth in the grant. We have used proceeds from the grant for the payment of research and development staff in connection with our grant related research and development activities and, as described above, we have increasingly relied on this grant for purposes of funding our R&D employees’ reduced salaries. Proceeds from the grant have been used for animal studies supporting our clinical work to develop RGN-352 for myocardial infarction, as well as to manufacture additional quantities of Tβ4.

G&A costs include outside professional fees for legal, business development, audit and accounting services. 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. Our G&A expenses also include costs to maintain our intellectual property portfolio. We have expanded our patent prosecution activities and have been reviewing our pending patent applications in the United States, Europe and other countries with the advice of outside legal counsel. In some cases, we have filed patent applications for non-critical strategic purposes intended to prevent others from filing similar patent claims. We continue to closely monitor our patent applications to determine if they will continue to provide strategic benefits. In cases where we believe the benefit has been realized or it becomes unnecessary due to the issuance of other patents, or for other reasons that will not affect the strength of our intellectual property portfolio, we will abandon these patent applications in order to reduce our costs of prosecution.

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, 2011, which was filed with the SEC on April 4, 2012, which we refer to as 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 September 30, 2012 and 2011

Revenues. For the three months ended September 30, 2012, grant revenue was $295,000 compared to $31,000 for the same period in 2011.

R&D Expenses . For the three months ended September 30, 2012, our R&D expenses decreased by $1.1 million, or 83%, to $229,000 from approximately $1.4 million for the same period in 2011. During the three months ended September 30, 2012 our primary R&D focus has been preclinical animal work under our NIH grant. During the comparable period in 2011 the primary R&D activity was a Phase 2 trial in dry eye patients which incurred $940,000 in costs during the quarter. Overall, the shift in 2012 focus coupled with cost reductions implemented in late 2011 resulted in significantly lower 2012 R&D costs versus the comparable 2011 period. Lower 2012 R&D costs were incurred in personnel (decrease of $242,000), clinical trial expense (decrease of $928,000) and drug material (decrease of $112,000). These decreases were offset by an increase of $162,000 in preclinical expense associated with our NIH grant.

G&A Expenses. For the three months ended September 30, 2012, our G&A expenses decreased by $517,000 or 76%, to $161,000, from $678,000 for the same period in 2011. Significantly lower costs were incurred in the 2012 period versus the 2011 period for personnel and related expenses (decrease of $112,000), legal and patent costs (decrease of $215,000), investor relations expenses (decrease of $91,000) and fees paid to members of our board of directors for their service (decrease of $76,000). The reduction in board fees in this quarter reflects the reversal of accrued unpaid board fees of $50,000 that were originally recorded in other periods.

Comparison of the nine months ended September 30, 2012 and 2011

Revenue . We recognized $1.1 million in revenue for the nine months ended September 30, 2012 compared to $1.2 million for the same period in 2011. The 2012 grant revenue recognized was based on the costs incurred during the period related to preclinical animal studies, while the 2011 revenues were based on costs incurred primarily related to API production in addition to a small amount of preclinical work.

R&D Expenses . For the nine months ended September 30, 2012, our R&D expenses decreased by approximately $3.4 million, or 78%, to $974,000 from approximately $4.4 million for the same period in 2011. During the nine months ended September 30, 2012 our primary R&D focus has been preclinical animal work under our NIH grant. During the nine months ended September 30, 2011 we recorded development costs associated with our three clinical stage product candidates of $1.4 million for RGN-259, $830,000 for RGN-352 and $132,000 for RGN-137. The majority of these costs were related to clinical trials and drug material. NIH grant related R&D costs for the nine month periods were $669,000 and $853,000 in 2012 and 2011, respectively. Overall, the shift in 2012 focus coupled with cost reductions implemented in late 2011 resulted in significantly lower 2012 R&D costs versus the comparable 2011 period. Lower 2012 R&D costs were incurred in personnel (decrease of $725,000), clinical trial expense (decrease of $2.1 million), drug material (decrease of $236,000) and preclinical (decrease of $260,000).

G&A Expenses. For the nine months ended September 30, 2012, our G&A expenses decreased by $1.2 million, or 58%, to $837,000 million from approximately $2.0 million for the same period in 2011. Significantly lower costs were incurred in the 2012 period versus the 2011 period for personnel and related expenses (decrease of $377,000), legal and patent costs (decrease of $511,000), investor relations expenses (decrease of $179,000), consulting fees (decrease of $36,000) and board fees (decrease of $121,000). These amounts were partially offset by increased costs of $106,000 in 2012 associated with engaging investment bankers to evaluate our strategic options, including advisory and valuation services.

Liquidity and Capital Resources

Overview

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, although as discussed below we have been awarded government grants and will continue to pursue other governmental funding sources. The report of our independent registered public accounting firm regarding our financial statements for the year ended December 31, 2011 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our history of net losses and dependence on future financing in order to meet our planned operating activities.

We incurred a net loss of $749,000 for the nine-month period ended September 30, 2012. We only had cash and cash equivalents of $32,000 at September 30, 2012. Based on our current operations, we believe our existing cash resources, coupled with the proceeds from the October convertible debt offering, will be adequate to fund our operations into the first quarter 2013, without considering any potential other sources of capital. In any event, we will continue to have a need for financing, which we may not be able to complete either on favorable terms or at all.

Cash Flows for the Nine Months Ended September 30, 2012 and 2011

Net cash used in operating activities was approximately $84,000 for the nine months ended September 30, 2012 as compared to $4.8 million used in operating activities for the same nine months in 2011. In 2011 the net cash used in operating activities was primarily the result of our net loss during the period. For the first nine months of 2012 the limited cash inflow has been from our NIH grant and the receipt of a $400,000 license fee from the Lee’s license agreement. These inflows, coupled with significant cost reductions and increased accounts payable from delayed payment of obligations, resulted in a decrease in operating cash compared to the prior year period. During the nine months ended September 30, 2012, we did not purchase furniture and equipment or engage in any other investing activity, as compared with purchases of furniture and equipment of approximately $1,000 for the same period in 2011. Additionally, we did not sell any equity securities during the nine months ended September 30, 2012 or engage in any other financing activities. During the same period in 2011, we raised net proceeds from the sale of equity securities of approximately $1.6 million, as described in Note 6 to our unaudited financial statements included in this report.

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. We are not currently enrolling patients in any clinical trials. We had intended to commence patient enrollment in a Phase 2 clinical trial of RGN-352 for AMI patients near the end of the first quarter of 2011, but this trial has been placed on clinical hold by the FDA pending resolution of certain manufacturing compliance issues at our original contract manufacturer, which was responsible for formulating, filling and finishing RGN-352. We have put the AMI trial on hold pending access to sufficient capital resources to enable us to retain a cGMP-compliant drug product manufacturer and are focusing our current efforts on the development of RGN-259 for ophthalmic indications.

Even with this change in our clinical development priorities, we currently do not have sufficient capital resources to continue product development beyond the first quarter of 2013 without additional capital. While we received $300,000 from a convertible debt offering in October 2012, we expect that these funds will only allow us to continue our minimal level of operations into the first quarter of 2013, and we will continue to have insufficient resources to initiate any additional trials that we have planned. As described below, we have established a committed equity facility with LPC, but we are currently unable to draw on the facility and our ability to draw on the facility in the future is subject to a number of limitations, including our stock price, as described in “Risk Factors—Risks Related to Our Liquidity and Need for Financing—We are not currently able to access the LPC committed equity facility and, if we are able to do so in the future, we may not be able to access the full amounts available under the LPC committed equity facility.” Therefore, even if we were able to sell shares of our common stock under the LPC facility, based on our recent stock price, the amount of proceeds we would be able to raise would likely not extend our capital resources significantly beyond the first quarter of 2013.

In addition, 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 impact our liquidity and capital needs 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 preclinical 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 preclinical, 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, the duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

the number of patients that ultimately participate in the trial;

the duration of patient follow-up that seems appropriate in view of the results;

the number of clinical sites included in the trials; and

the length of time required to enroll suitable patient subjects.

Also, we test our product candidates in numerous preclinical studies to identify indications for which they may be efficacious. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain product candidates or for certain indications in order to focus our resources on more promising product candidates or indications.

Our proprietary product candidates also have not yet achieved FDA regulatory approval, which is required before we can market them as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that our clinical data establish safety and efficacy. Historically, the results from preclinical studies and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

In addition to our obligations under clinical trials, we are committed under an office space lease through January 2013 that requires average base rental payments of approximately $8,300 per month.

Sources of Liquidity

We have not commercialized any of our product candidates to date and have primarily financed our operations through the issuance of common stock and common stock warrants in private and public financings. Our largest stockholder group, which we refer to as Sigma-Tau, has historically provided significant equity capital to us, including $200,000 pursuant to the convertible debt placement in October 2012, private placements of $950,000 in January 2011 and $1.6 million in October 2009. In January 2011, we also raised $500,000 from a registered direct offering of our securities to LPC and an additional $348,200 in sales of common stock to LPC under an equity line facility discussed below.

Committed Equity Line with LPC

In January 2011, we also entered into an $11 million committed equity facility with LPC. We filed a registration statement for the resale by LPC of 15 million shares of common stock issuable under the facility through October 2013. However, because the registration statement related to those shares has ceased to be effective under the Securities Act, we would need to prepare and file a post-effective amendment to the registration statement and have that post-effective amendment declared effective by the SEC before we can sell any of these shares to LPC. If effective, the facility would provide us with the right but not the obligation to direct LPC to purchase up to 200,000 shares of common stock every two business days at a purchase price calculated by reference to the prevailing market price of our common stock without any fixed discount, subject to the floor price of $0.15 per share.

There are no trading volume requirements or restrictions under the facility, and we will control the timing and amount of any sales of our common stock to LPC. Our ability to sell our shares to LPC is also subject to our obtaining all necessary consents, amendments or waivers as may be required, and subject to the shares to be sold having been registered for resale. LPC has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the facility. We can also accelerate the amount of common stock to be purchased under certain circumstances. There are no limitations on use of proceeds, financial or business covenants, restrictions on future funding, rights of first refusal, participation rights, penalties or liquidated damages. We may terminate the facility at any time, in our discretion, without any penalty or cost to us. To date, we have issued an aggregate of 1,530,336 shares of common stock to LPC under this facility for net proceeds of $348,200. During the nine months ended September 30, 2012 we did not sell any shares to LPC.

Licensing Agreements

We also have a license agreement with Sigma-Tau that provides the opportunity for us to receive milestone payments upon specified events and royalty payments in connection with commercial sales of Tß4 in Europe. However, we have not received any milestone payments to date, and there can be no assurance that we will be able to attain such milestones and generate any such payments under the agreement.

We also have entered into a license agreement with Lee’s Pharmaceuticals that provides for the opportunity for us to receive milestone payments upon specified events and royalty payments in connection with any commercial sales of Tß4-based products in China, Hong Kong, Macau and Taiwan. However, there are no assurances that we will be able to attain any such milestones or generate any such royalty payments under the agreement.

Government Grants

We are also aggressively pursuing government funding. In May 2010, we were awarded a grant from the NIH’s National Heart, Lung and Blood Institute to support the requisite nonclinical development of RGN-352 for patients who have suffered a heart attack. These nonclinical activities are being conducted even though our pending Phase 2 clinical trial of RGN-352 is on clinical hold. Subject to our compliance with the terms and conditions of the grant, we are eligible to receive up to $3.0 million over a three-year period in cost reimbursements for our associated costs incurred for the purposes set forth in the grant. Revenue from the grant will be recorded during the same periods when we incur eligible expenses.

The Patient Protection and Affordable Care Act enacted in 2010 included a new incentive for biotechnology companies like ours, known as the Qualifying Therapeutic Discovery Project grant program. Under this program, small businesses were able to apply for a federal grant in an amount equal to 50% of their eligible investment in qualifying therapeutic discovery projects for 2009 and 2010. Qualifying therapeutic discovery projects included those designed to treat or prevent diseases or conditions by conducting pre-clinical or clinical activities for the purpose of securing FDA approval of a product. We submitted three applications, covering each of our clinical-stage product candidates, and in October 2010 were awarded an aggregate of $733,438 under this program.

Other Financing Sources

Other potential sources of outside capital include entering into strategic business relationships, additional issuances of equity securities or debt financing or other similar financial instruments. If we raise additional capital through a strategic business relationship, we may have to give up valuable rights to our 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.

Our failure to successfully address ongoing liquidity requirements would have a materially negative impact on our business, including the possibility of surrendering our rights to some technologies or product opportunities, delaying our clinical trials, or ceasing operations. There can be no assurance that we will be able to obtain additional capital in sufficient amounts, on acceptable terms, or at all.

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.

Our cash equivalents, which are generally comprised of Federally-insured bank deposits, are subject to default, changes in credit rating and changes in market value. These investments are also subject to interest rate risk and will decrease in value if market interest rates increase. As of September 30, 2012, these cash equivalents were $32,000. Due to the short-term nature of these investments, if market interest rates differed by 10% from their levels as of September 30, 2012, the change in fair value of our financial instruments would not have been material.

Item 4. Controls and Procedures

a) Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our President and Chief Executive Officer, in his capacity as our principal executive officer and our principal 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 September 30, 2012. Based upon this evaluation, management has concluded that, as of September 30, 2012, 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 President and Chief Executive 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 three months ended September 30, 2012 that have materially affected, or which 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 SEC 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 the Annual Report.

Risks Related to Our Liquidity and Need for Financing

Before giving effect to any potential sales of our securities, we estimate that our existing capital resources, coupled with the receipt of the proceeds from the October convertible debt offering, will only be sufficient to fund our operations into the first quarter of 2013.

We are focusing our current efforts on the development of RGN-259 for ophthalmic indications. We recently completed a Phase 2 clinical trial to evaluate RGN-259 in patients suffering from dry eye syndrome, and we intend to pursue partnering opportunities for RGN-259 based on the data from this trial. We have also supported a small physician-sponsored Phase 2 study of RGN-259 in severe dry eye which was concluded in June 2012. We have completed enrolling 30 patients in our Phase 2 trial for RGN-137 in EB patients. We had intended to commence patient enrollment in a Phase 2 clinical trial of RGN-352 for AMI patients near the end of the first quarter of 2011, but this trial was placed on clinical hold by the FDA. The AMI trial remains on hold pending resolution of regulatory issues and our access to sufficient capital resources. Depending on our capital resources, and if regulatory and manufacturing issues with RGN-352 are resolved, we may also continue to support a proposed physician-sponsored Phase 1/2 clinical trial to evaluate the therapeutic potential of RGN-352 in patients with multiple sclerosis.

Even with the change in our clinical development priorities during 2011, we currently do not have sufficient capital resources to fund our ongoing research and development activities, and we will not be able to sponsor any clinical trials in 2012 without additional funding. We project that our existing capital resources, including the $300,000 received from the convertible debt placement in October 2012, will only be adequate to fund our operations into the first quarter of 2013. If our stock price increases from its current level, we may, however, make additional sales of common stock under our committed equity facility with Lincoln Park Capital, as described below, which would extend our resources, but our ability to use the committed equity facility depends upon our share price and trading volume. However, even if we are able to sell shares of our common stock under the LPC facility, based on our current stock price the amount of proceeds we would be able to raise, doing so would not extend our capital resources significantly beyond the first quarter of 2013 and, accordingly, we will also need to seek other sources of capital.

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 this report. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

We are not currently able to access the LPC committed equity facility and, if we are able to do so in the future, we may not be able to access the full amount available under the facility .

In January 2011, we entered into a committed equity facility with Lincoln Park Capital, or LPC, under which we may direct LPC to purchase up to $11,000,000 worth of shares of our common stock through October 2013, generally in amounts of up to 200,000 shares every two business days. The amount we can sell under the facility may be increased to 400,000 shares every two business days, as long as the closing sale price of our common stock is not below $0.35 per share on the purchase date. However, the extent to which we will rely on the facility as a source of funding will depend on a number of factors, including the prevailing market price of our common stock and volume of trading and the extent to which we are able to secure working capital from other sources. Specifically, LPC does not have the obligation to purchase any shares of our common stock on any business day that the price of our common stock is less than $0.15 per share. As of the date of this report, we have sold a total of 1.5 million shares to LPC for gross proceeds of approximately $350,000.

Depending on the prevailing market price of our common stock, we may not be able to sell shares to LPC for the maximum $11,000,000 over the term of the facility. At the minimum price of $0.15 per share, we would be able to sell 200,000 shares for proceeds of $30,000 on each purchase date. Assuming that we sold shares to LPC ten times each month, we would receive $300,000 in proceeds per month, up to the maximum amount available over the remaining term of the facility. In the event that we make less frequent sales to LPC, the aggregate proceeds available to us will be even less.

Currently, we have only registered for resale 12,541,667 additional shares of our common stock that we may sell to LPC. These shares, if and when issued to LPC, would be a combination of shares purchased at the price per share set forth in our purchase agreement with LPC and shares issued as additional pro rata commitment shares for no additional consideration, based on the formula set forth in the agreement. However, because the registration statement related to those shares has ceased to be effective under the Securities Act, we would need to prepare and file a post-effective amendment to the registration statement and have that post-effective amendment declared effective by the SEC before we can sell any of these shares to LPC. Assuming a purchase price of $0.20 per share, we would generate net cash proceeds of approximately $2.5 million. In the event we elect to issue more than the originally registered 15,000,000 shares, we would be required to file a new registration statement and have it declared effective by the SEC before selling such additional shares.

As described elsewhere in this report, we do not currently expect that funding from LPC will be sufficient to extend our operations beyond the first quarter of 2013, and we will need to secure another source of funding in order to satisfy our near term working capital needs. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.

In addition to our current development objectives, we will need substantial additional capital for the continued development of product candidates through marketing approval and for our longer-term future operations.

Beyond our current liquidity needs, we anticipate that substantial new capital resources will be required to continue our longer-term independent product development efforts, including any and all follow-on trials that will result from our current clinical programs beyond those currently contemplated, and to scale up manufacturing processes for our product candidates. We may be able to obtain funding under the committed equity facility with LPC in order to further some of these efforts. However, 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 and contract research organizations chosen to conduct the studies;

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.

Emerging biotechnology companies like us may raise capital through corporate collaborations and 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. There are substantial challenges and risks that will make it difficult to successfully implement any of these alternatives. If we are successful in raising additional capital through such a license or collaboration, we may have to give up valuable rights to our intellectual property. In addition, the business priorities of a strategic partner may change over time, which creates the possibility that the interests of the strategic partner in developing our technology may diminish and could have a potentially material negative impact on the value of our interest in the licensed intellectual property or product candidates.

Further, if we raise additional funds by selling shares of our common stock or securities convertible into our common stock, including under our committed equity facility with LPC, 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 both our short-term and long-term 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.

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

We have not commercialized any product candidates to date and 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 Tß4. As of September 30, 2012, our accumulated deficit totaled approximately $96 million.

As we expand our research and development efforts and seek to obtain regulatory approval of our product candidates to make them commercially viable, we anticipate substantial and increasing operating losses. Our ability to generate 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.

Our common stock is quoted on the over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity of our common stock.

Our common stock is traded over-the-counter on the OTC Bulletin Board. Over-the-counter markets are generally considered to be less efficient than, and not as broad as, a stock exchange. There may be a limited market for our stock now that it is quoted on the OTC Bulletin Board, trading in our stock may become more difficult and our share price could decrease. 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, our ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets. 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 an over-the-counter market would likely be substantially greater than if we were to complete a financing while our common stock is traded on a national securities exchange. Further, we are unable to use short-form registration statements on Form S-3 for the registration of our securities, which could impair our ability to raise additional capital as needed.

Our common stock is also subject to penny stock rules, which impose additional sales practice requirements on broker-dealers who sell our common stock. 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. The ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares in the secondary market will be limited and, as a result, the market liquidity for our common stock will likely be adversely affected. We cannot assure you that trading in our securities will not be subject to these or other regulations in the future.

The report of our independent registered public accounting firm contains explanatory language that substantial doubt exists about our ability to continue as a going concern.

The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2011 contains explanatory language that substantial doubt exists about our ability to continue as a going concern, without raising additional capital. As described in this report, we estimate that our existing capital resources, without giving effect to potential additional sales of common stock under our committed equity facility with LPC, will be adequate to fund our operations into the first quarter of 2013. We continue to seek other sources of capital, but if we are unable to obtain sufficient financing in the near term, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

Risks Related to Our Business and Operations

Our pending Phase 2 clinical trial of RGN-352 was placed on clinical hold by the FDA in March 2011 and we are unsure when, if ever, we will be able to resume this trial.

In the second half of 2010, we implemented the development plans for our phase 2 clinical trial to evaluate RGN-352 in patients who have suffered an acute myocardial infarction, or AMI. We had planned to begin enrolling patients near the end of the first quarter of 2011. However, in March 2011, we were notified by the FDA that the trial was placed on clinical hold as a result of our contract manufacturer’s alleged failure to comply with current Good Manufacturing Practices. The FDA has prohibited us from using any of the active drug or placebo manufactured by this manufacturer in human trials, which will require us to identify a cGMP-compliant manufacturer and to have new material produced in the event that we seek to resume this trial. We have also learned that the contract manufacturer has closed its manufacturing facility and has filed for bankruptcy protection. Significant preparatory time and procedures will be required before any new suitable manufacturer would be able to manufacture RGN-352 for the AMI trial. Since we are unable to estimate the length of time that the trial will be on clinical hold, we have elected to cease activities on this trial until the FDA clinical hold is resolved and the requisite funding might be secured. Consequently, there can be no assurance that we will be able to timely resume or complete this trial, if at all.

All of our drug candidates are based on a single compound.

Our current primary business focus is the development of Tß4, and its analogues, derivatives and fragments, for the regeneration and accelerated repair of damaged tissue from non-healing dermal and corneal wounds, cardiac injury, central/peripheral nervous system diseases and other conditions, as well as an improvement in various functions, such as, but not limited to, cardiac and neurological. Unlike many pharmaceutical companies that have a number of unique chemical entities in development, we are dependent on a single molecule, formulated for different routes of administration and different clinical indications, for our potential commercial success. As a result, any common safety or efficacy concerns for Tß4-based products that cross formulations would have a much greater impact on our business prospects than if our product pipeline were more diversified.

We may never be able to commercialize our product candidates.

Although Tß4 has shown biological activity in in vitro and animal models and we observed some efficacy in our recent RGN-259 phase 2a trial and earlier Phase 2 dermal trials, we cannot assure you that our product candidates will exhibit activity or importance in humans in large-scale trials. 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 preclinical 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 Tß4-based products.

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

Three of our drug candidates are currently in the clinical development stage, and we cannot be certain that we or our collaborators will successfully complete the clinical trials necessary to receive regulatory product approvals. The regulatory approval process is lengthy, unpredictable and expensive. To obtain regulatory approvals in the United States, we or a collaborator must ultimately demonstrate to the satisfaction of the FDA that our product candidates are sufficiently safe and effective for their proposed administration to humans. Many factors, known and unknown, can adversely impact clinical trials and the ability to evaluate a product candidate’s safety and efficacy, including:

the FDA or other health regulatory authorities, or institutional review boards, 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, for reasons such as 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;

clinical trial data is adversely affected by trial conduct or patient withdrawal prior to completion of the trial;

there may be competition with ongoing clinical trials and scheduling conflicts with participating clinicians;

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;

we are unable to obtain a sufficient supply of manufactured clinical trial materials;

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, such as the clinical hold with respect to our Phase 2 clinical trial of RGN-352;

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 clinically relevant or 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.

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.

Clinical trials for product candidates such as ours are often conducted with patients who have more advanced forms of a particular condition or other unrelated conditions. For example, in clinical trials for our product candidate RGN-137, we have studied patients who are not only suffering from chronic epidermal wounds but who 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. Further, and as a consequence that all of our drug candidates are based on Tß4, crossover 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.

These factors, many of which may be outside of our control, 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. As a consequence, we may need to perform more or larger clinical trials than planned. 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. 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.

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 Tß4 into the product candidates used in our clinical trials, develop assays to assess Tß4’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 preclinical 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 preclinical 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 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 our product candidate RGN-259, there are also numerous ophthalmic companies developing drugs for corneal wound healing and other outside-of-the-eye diseases and injuries. Amniotic membranes have been successfully used to treat corneal wounds in certain cases, as have topical steroids and antibacterial agents.

We have initially targeted our product candidate RGN-352 for cardiovascular indications. Most large pharmaceutical companies and many smaller biomedical companies are vigorously pursuing the development of therapeutics to treat patients after heart attacks and for other cardiovascular indications.

With respect to our product candidate RGN-137 for wound healing, Johnson & Johnson has previously marketed Regranex™ for this purpose in patients with diabetic foot ulcers. Other companies, such as Novartis, are developing and marketing artificial skins, which we believe could also compete with RGN-137. 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, hyperbaric oxygen therapy, and low frequency cavitational ultrasound.

We are also developing potential cosmeceutical products, which are loosely defined as products that bridge the gap between cosmetics and pharmaceuticals, for example, by improving skin texture and reducing the appearance of aging. This industry is intensely competitive, with potential competitors ranging from large multinational companies to very small specialty companies. New cosmeceutical products often have a short product life and are frequently replaced with newer products developed to address the latest trends in appearance and fashion. We may not be able to adapt to changes in the industry as quickly as larger and more experienced cosmeceutical companies. Further, larger cosmetics companies have the financial and marketing resources to effectively compete with smaller companies like us in order to sell products aimed at larger markets.

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

Our product candidates, all of which are based on the molecule Tß4, 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. If any of our product candidates are approved by the FDA, our success will depend in part on our ability to demonstrate sufficient clinical benefits, reliability, safety, and cost effectiveness of our product candidates 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 are continually evolving. There can be no assurance that our product candidates will prove superior to products that may currently be available or may become available in the future or that our research and development activities will result in any commercially profitable products.

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.

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.

Governmental and third-party payors 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, if they are approved by the FDA, 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 recently enacted legislation reforming healthcare and proposals to reform 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, and 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.

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 peptide manufacturers to supply us with Tß4 for further formulation into our product candidates. We have historically engaged three separate smaller drug formulation contractors for the formulation of clinical grade product candidates, one for each of our three product candidates in clinical development, although, as described in this report, the contractor we engaged for RGN-352 has filed for bankruptcy and closed its manufacturing facility, and our clinical trials involving RGN-352 have been placed on clinical hold. We currently do not have an alternative source of supply for either Tß4 or the individual drug candidates. If these suppliers, together or individually, are not able to supply us with either Tß4 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 clinical hold on our RGN-352 trial will require us to have new material manufactured by a new manufacturer in the event that we seek to resume this trial. Significant preparatory time and procedures will be required before any new manufacturer would be able to manufacture RGN-352 for the AMI trial, due to the time required for revalidation of processes and assays related to such production that were already in place with the original manufacturer. Since we are unable to estimate the length of time that the trial will be on clinical hold, we have elected to cease activities on this trial until the FDA clinical hold is resolved and the requisite funding might be secured.

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

the possibility that our other manufacturers, and any new manufacturer that we may identify for RGN-352, may not be able 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.

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.

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 Tß4 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 if we gain approval to market any of our product candidates, 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, as well as harm to our reputation and distraction of our management.

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, our chief executive officer, J.J. Finkelstein or David Crockford, our VP of Clinical and Regulatory Affairs, could prevent or significantly delay the achievement of our goals. In December 2011, we terminated our employment agreements with Dr. Goldstein, Mr. Finkelstein and Mr. Crockford, who are currently engaged only as part-time employees. And substantially all of our employees are now working only part-time schedules. We cannot assure you that Dr. Goldstein, Mr. Finkelstein or Mr. Crockford, or any other key employees, will not elect to terminate their employment. We do not currently have a full-time chief financial officer. In addition, we do not maintain a key man life insurance policy with respect to any of our management personnel. In the future, we anticipate that we will also 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.

Mauro Bove, a member of our Board, is also a director and officer of entities affiliated with Sigma-Tau and a director of Lee’s Pharmaceuticals, relationships 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 entities affiliated with Sigma-Tau, which collectively make up our largest stockholder group. Sigma-Tau has provided us with significant funding, may continue doing so in the future, and is also our strategic partner in Europe with respect to the development of certain of our drug candidates. We have issued shares of common stock and common stock warrants to Sigma-Tau in several private placement financing transactions, including as recently as January 2011, but we retained the right to repurchase some of these shares under certain circumstances.

We have licensed certain rights to our product candidates generally for the treatment of dermal and internal wounds to Sigma-Tau. Under the license agreement, upon the completion of a Phase 2 clinical trial of either of these product candidates that yields positive results in terms of clinical efficacy and safety, Sigma-Tau is obligated to either make a $5 million milestone payment to us or to initiate and fund a pivotal Phase 3 clinical trial of the product candidate. In 2009, we completed two Phase 2 clinical trials of RGN-137, but these trials were not sufficient to trigger the milestone obligation. There can be no assurance that we will ever receive this payment or be able to initiate a pivotal Phase 3 clinical trial of RGN-137 that would be funded by Sigma-Tau. As a result of Mr. Bove’s relationship with Sigma-Tau, there could be a conflict of interest between Sigma-Tau and our other stockholders 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.

Additionally, Mr. Bove is a non-executive director of Lee’s Pharmaceuticals, in which affiliates of Sigma-Tau have a significant equity interest. In July 2012, we entered into a license agreement for TB4 in any pharmaceutical form, including our RGN-259, RGN-352 and RGN-137 product candidates for development in China, Hong Kong, Macau and Taiwan. There can be no assurance that we will ever receive any further payments from Lee’s under the agreement. As a result of Mr. Bove’s relationship with Lee’s and Sigma-Tau, Mr. Bove may be subject to a conflict of interest in fulfilling his duties to Lee’s, Sigma-Tau and us, in connection with these and other agreements and circumstances that may require the exercise of the Board’s discretion with respect to Lee’s. These conflicts could potentially result in decisions that may not be in the best interest of our other stockholders.

Risks Related To Our Intellectual Property

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 Tß4 in wound healing and tissue repair. The intellectual property rights from this license form the basis for our current commercial development focus with Tß4. This license terminates upon the last to expire of the patent applications that are filed, or any patents that may issue from such applications, 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. This license may be terminated for a number of reasons, including our 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 Tß4-based product candidates.

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 to use Tß4 in the treatment of non-healing wounds. While patents covering our use of Tß4 have issued in some countries, we cannot guarantee whether or when corresponding patents will be issued, or the scope of any patents that may be 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 Tß4. 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 Tß4 in various medical indications could be substantially limited or eliminated.

In addition, the patent positions of the products 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 any patents will be issued from any pending or future patent applications of ours or our collaborators, that the scope of any patent protection will be sufficient to provide us with competitive advantages, that any patents obtained by us or our collaborators will be held valid if subsequently challenged or that 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 product candidates. 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 U.S. 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 Securities

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

For the period from January 1, 2012 through November 6, 2012, the closing price of our common stock has ranged from $0.11 to $0.22, with an average daily trading volume of approximately 40,000 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 since it is not listed on a national securities exchange, 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, including to LPC under our committed equity facility;

other issuances of our common stock, or securities convertible into or exercisable for 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.

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

Our officers, directors and principal stockholders together control approximately 42% of our outstanding common stock. Included in this group is Sigma-Tau and its affiliates, which together hold outstanding shares representing approximately 37% of our outstanding common stock. A portion of the shares of common stock currently held by Sigma-Tau and its affiliates were previously subject to voting agreements under which our Board controlled the voting power of such stock. However, these voting agreements expired in September 2012. Therefore, we now have no control over the voting of any shares owned by Sigma-Tau, including how such shares are voted 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.

If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our common stock and other securities and their trading volume could decline.

The trading market for our common stock and other securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If securities or industry analysts do not commence or maintain coverage of us, the trading price for our common stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our common stock and other securities and their trading volume 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 September 30, 2012, there were outstanding options to purchase an aggregate of 6,104,599 shares of our common stock at exercise prices ranging from $0.14 per share to $3.82 per share and outstanding warrants to purchase 11,068,901 shares of our common stock at a weighted average exercise price of $0.66 per share. 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, including our committed equity facility with LPC.

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, most of the outstanding warrants to purchase shares of our common stock have an exercise price above the current market price for our common stock. As a result, these warrants may not be exercised prior to their expiration, in which case we would not realize any proceeds from their exercise.

The sale of shares of our common stock to LPC may cause substantial dilution to our existing stockholders and could cause the price of our common stock to decline.

Under our committed equity facility with LPC, we may sell to LPC, under certain circumstances, up to $11,000,000 of our common stock through October 2013. Generally, we have the right, but no obligation, to direct LPC to periodically purchase up to $11,000,000 of our common stock in specific amounts under certain conditions, which periodic purchase amounts can be increased under specified circumstances. Through the date of this report, we have sold approximately 1,500,000 shares to LPC for net proceeds of $348,200.

We have also agreed to issue to LPC up to an aggregate of 1,916,666 shares of common stock as a fee for LPC’s commitment to purchase our shares. Of these commitment shares, we issued one-half, or 958,333 shares, upon entering into the facility with LPC. The remaining commitment shares are issuable to LPC on a pro rata basis as purchases are made under the facility. In connection with the purchases made to date, we have issued 30,336 of the remaining commitment shares.

Depending upon market liquidity at the time, sales of shares of our common stock to LPC may cause the trading price of our common stock to decline. LPC may ultimately purchase all, some or no additional portion of the $11,000,000 of common stock, and after it has acquired shares, LPC may sell all, some or none of those shares. Therefore, sales to LPC by us could result in substantial dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to LPC, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to LPC, and we may terminate the facility at any time, in our discretion, without any cost to us.

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. Our Board has exempted purchases by Sigma-Tau to date and purchases that may be made by LPC under the committed equity facility from the operation of our stockholder rights plan. The stockholder rights plan 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. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description of Exhibit	Reference*

3.1	Restated Certificate of Incorporation	Exhibit 3.1 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

3.2	Certificate of Amendment to Restated Certificate of Incorporation	Exhibit 3.2 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

3.3	Certificate of Amendment to Restated Certificate of Incorporation	Exhibit 3.3 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

3.4	Certificate of Amendment to Restated Certificate of Incorporation	Exhibit 3.4 to Registration Statement on Form S-8 (File No. 333-168252) (filed July 21, 2010)

3.5	Certificate of Designation of Series A Participating Cumulative Preferred Stock	Exhibit 3.4 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

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

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

4.1	Specimen Common Stock Certificate	Exhibit 4.1 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

4.2	Specimen Rights Certificate	Exhibit 4.2 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

4.3		Rights Agreement, dated April 29, 1994, between the Company and American Stock Transfer & Trust Company, as Rights Agent	Exhibit 4.3 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

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 4.4 to Registration Statement on Form S-1 (File No. 333-166146) (filed April 16, 2010)

4.5		Warrant Agreement, dated May 21, 2010, between the Company and American Stock Transfer & Trust Company, as Warrant Agent	Exhibit 4.6 to Current Report on Form 8-K (File No. 001-15070) (filed May 21, 2010)

4.6		Form of Warrant Certificate	Exhibit 4.6 to Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-166146) (filed May 17, 2010)

10.1	+	License Agreement with Lee’s Pharmaceutical (HK) Limited	Filed herewith

10.2		Letter Agreement between the Company and J.J. Finkelstein, dated July 2, 2012	Exhibit 10.2 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

10.3		Letter Agreement between the Company and David Crockford, dated July 2, 2012	Exhibit 10.4 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

10.4		Letter Agreement between the Company and Allan L. Goldstein, dated July 2, 2012	Exhibit 10.6 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

10.5	Amended and Restated Change in Control Agreement between the Company and J.J. Finkelstein, dated July 2, 2012	Exhibit 10.8 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

10.6	Amended and Restated Change in Control Agreement between the Company and David Crockford, dated July 2, 2012	Exhibit 10.10 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

10.7	Amended and Restated Change in Control Agreement between the Company and Allan L. Goldstein, dated July 2, 2012	Exhibit 10.12 to Current Report on Form 10-Q (File No. 001-15070) (filed August 14, 2012)

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

32.1	Certification of Principal Executive Officer and 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**

101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets at September 30, 2012 and December 31, 2011; (ii) Statements of Operations for the three and nine months ended September 30, 2012 and 2011; (iii) Statements of Cash Flows for the nine months ended September 30, 2012 and 2011; and (iv) Notes to Financial Statements.	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.

This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

***

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and have been separately filed with the Securities and Exchange Commission.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RegeneRx Biopharmaceuticals, Inc.
	(Registrant)

Date: November 14, 2012	By:	/s/J.J. Finkelstein
		J.J. Finkelstein
		President and Chief Executive Officer
	(On Behalf of the Registrant and as Principal Financial Officer)

Exhibit 10.1

*** text omitted and filed sperately

confidential treatment requested

under 17 c.f.r. §§ 200.80(b)(4) and 240.24b-2

LICENSE Agreement

This License Agreement (the “ Agreement ” or the “License Agreement”) is effective as of July 12, 2012 (the “ Effective Date ”) by and between RegeneRx Biopharmaceuticals, Inc., a company organized and existing under the laws of the state of Delaware, with offices at 15245 Shady Grove Road, Suite 470, Rockville, Maryland, U.S.A. (hereinafter “ Licensor ”), and Lee’s Pharmaceutical (HK) Limited, a Hong Kong registered company with its principal place of business at Unit 110-111, Bioinformatics Centre, No. 2 Science Park West Avenue, Hong Kong Science Park, Shatin, Hong Kong (hereinafter “ Licensee ”), each a “ Party ” and, collectively, the “ Parties .”

Recitals

WHEREAS, Licensor is engaged in the business of developing biopharmaceutical products, including the clinical development of drug candidates referred to as RGN-137, RGN-259 and RGN-352, which utilize Tβ4 (as defined herein) as the biologically active ingredient;

WHEREAS, Licensee is engaged in the business of developing, marketing, manufacturing, and distributing biopharmaceutical products including in China, Hong Kong, and Macau;

WHEREAS, Licensee wishes to obtain the rights to develop, manufacture and commercialize the Licensed Product in the Field (as each such term is defined herein) in China, Hong Kong, Macau and Taiwan and Licensor wishes to grant such rights, in each case upon the terms and conditions set forth herein; and

WHEREAS, Licensor and Licensee wish to specify certain terms relating to the manufacture of the Licensed Product by Licensee or relating to the supply of the Licensed Product and/or the API (as defined herein) in the event that respectively Licensor elects to supply commercial quantities of the Licensed Product and/or the API to Licensee and Licensee elects to buy commercial quantities of the Licensed Product and/or the API.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

Section 1. Definitions

As used in this Agreement, the following capitalized terms shall have the following meanings:

“ Affiliate ” shall mean, with respect to a Person, any Person that Controls, is Controlled by or is under common Control with such first Person. For purposes of this definition only, “ Control ” means (a) to possess, directly or indirectly, the power to direct the management or policies of a Person, whether through ownership of voting securities, by contract relating to voting rights or corporate governance, or (b) to own, directly or indirectly, at least fifty percent (50%) of the outstanding voting securities or other ownership interest of such Person.

“ Agreement ” shall have the meaning given such term in the preamble.

“ API ” shall mean Tβ4 in the form of an active ingredient to be utilized as a component in the Licensed Product.

“ Challenge ” shall have the meaning given such term in Section 8.8(b).

“ Change of Control ” shall mean, with respect to a Party, the occurrence of any of the following:

(a) any consolidation, merger, recapitalization or reorganization of a Party with or into any Third Party, or any other corporate reorganization involving a Third Party (“ Merger ”), as long as the stockholders of such Party immediately prior to the Merger own less than fifty percent (50%) of the surviving entity’s voting power immediately after the Merger;

(b) a change in the beneficial ownership of more than fifty percent (50%) of the voting securities of any Party (whether in a single transaction or series of related transactions) where, immediately after giving effect to such change, the legal or beneficial owner of more than fifty percent (50%) of the voting securities of such Party is a Third Party, excluding any equity investment by venture capitalists or investment banks or other nonstrategic investors, who alone or with their Affiliates, are not themselves in the business of developing and commercializing pharmaceutical products; or

(c) the sale, transfer, lease, license or other disposition to a Third Party of all or substantially all of a Party’s assets in one or a series of related transactions.

“ Commercialization Plan ” shall have the meaning given such term in Section 4.1.

“ Commercially Diligent Efforts ” shall mean, with respect to the development and commercialization by Licensee of at least one Licensed Product, the level of efforts and resources generally used by similarly situated pharmaceutical companies marketing compounds or products throughout the Territory (including internally developed, acquired and in-licensed compounds or products) with similar commercial potential at a similar stage in their lifecycle (assuming continuing development of such product).

“ Confidential Information ” shall mean any and all information, data, results, Inventions, trade secrets, techniques, material, or compositions of matter of any type or kind, including without limitation all Know-How and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, personnel, financial, legal and commercial information or data, whether communicated in writing, orally or by any other method, that a Party treats or identifies as confidential and, in each case, is disclosed by one Party to the other Party under this Agreement.

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

“ Control ”, “ Controls ” and “ Controlled ” shall mean, with respect to a particular item of information or intellectual property right, that the applicable Party or any Affiliate of such Party owns or has a license to such item or right and has the ability to grant to the other Party access to and a license or sublicense (as applicable) under such item or rights as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing as of the Effective Date or thereafter.

“ Development Plan ” shall have the meaning given such term in Section 3.1.

“ Disclosing Party ” shall have the meaning given such term in Section 9.1.

“ Distributor ” shall mean any Third Party appointed by Licensee to distribute, market and sell Licensed Product purchased from Licensee or any of its Affiliates (regardless of whether such Third Party has the right or obligation to provide packaging or labeling services with respect to such Licensed Product) that: (i) is not required to make royalty or other similar payment to Licensee or any of its Affiliates with respect to any Licensed Patent or Licensed Know-How related to the Licensed Product; and (ii) has no right to market such Licensed Product under its own trademark or trade name.

“ Effective Date ” shall have the meaning given such term in the preamble.

“ Expiry Date ” shall have the meaning given such term in Section 12.1.

“ Extended Term ” shall have the meaning given such term in Section 12.1.

“ FDA ” shall mean the United States Food and Drug Administration or any successor U.S. governmental agency performing similar functions.

“ Field ” shall mean the diagnosis, prevention and treatment of all human and animal diseases and conditions, provided, however, that “Field” shall not include any use of the Licensed Product incorporated into the form of any type of cosmetic or food product.

“ First Commercial Sale ” shall mean the initial sale of Licensed Product by or on behalf of Licensee, its Affiliates or Sublicensees in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales in the Territory following Regulatory Approval of the Licensed Product in the Territory. For clarity, First Commercial Sale shall not include transfers of Licensed Product at or below cost by or on behalf of Licensee, its Affiliates or Sublicensees in connection with compassionate use, emergency use, treatment INDs, or the like authorized by the FDA, the SFDA, or any corresponding Governmental Authorities.

“ GAAP ” shall mean, in the case of the Licensor, Generally Accepted Accounting Principles recognized in the United States, and in the case of the Licensee, Generally Accepted Accounting Principles recognized in Hong Kong.

“ Generic or Branded Generic ” shall mean a drug product containing the same active ingredients as Licensed Products and is subject to the regulations of the governments of countries where they are dispensed and is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use.

“ GCP ” shall mean the then current good clinical practices as defined in U.S. Regulations 21 C.F.R. §§ 50, 54, 56, 312 and 314, the International Conference of Harmonization (ICH) E6 “Good Clinical Practice: Consolidated Guidance,” and in any successor regulation or any official guidance documents issued by a Governmental Authority.

“ GLP ” shall mean the then current good laboratory practice standards as defined by the FDA pursuant to 21 C.F.R. Part 58, and in any successor regulation or any official guidance documents issued by a Governmental Authority.

“ GMP ” shall mean the then current good manufacturing practices as defined by the FDA pursuant to 21 C.F.R. §§ 210 and 211 and in any successor regulation or any official guidance documents issued by a Governmental Authority.

“ Governmental Action ” shall have the meaning given such term in Section 12.2 (c).

“ Governmental Authority ” shall mean: (i) any national, federal, provincial, state, municipal or other governmental body in any jurisdiction in the Territory, the United States or elsewhere, (ii) any international or multi-lateral body, (iii) any subdivision, ministry, department, secretariat, bureau, agency, commission, board, instrumentality or authority of any of the foregoing governments or bodies, (iv) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for any of the foregoing governments or bodies, or (v) any international, multi-lateral, or multi-national judicial, quasi-judicial, arbitration or administrative court, grand jury, tribunal, commission, board or panel, in each case having jurisdiction over the United States or any jurisdiction in the Territory.

“ Hong Kong ” shall mean the Hong Kong Special Administrative Region of the People’s Republic of China.

“ IND ” shall mean an investigational new drug application filed with the FDA, or the equivalent in any jurisdiction in the Territory.

“ Indemnified Party ” shall have the meaning given such term in Section 11.3.

“ Indemnifying Party ” shall have the meaning given such term in Section 11.3.

“ Initial Term ” shall have the meaning given such term in Section 12.1

“ Intellectual Property ” shall mean any Inventions, Patents, patent rights, utility models, copyrights, trade secrets, Trademarks, service marks, Know-How, technical information and all other intellectual property rights.

“ Invention ” shall mean any process, method, use, composition of matter, article of manufacture, discovery, finding, or invention, whether or not patentable.

“ Joint Development Committee ” shall have the meaning given such term in Section 3.4.

“ Joint Inventions ” shall have the meaning given such term in Section 8.2(c).

“ Know-How ” shall mean all tangible and intangible (i) techniques, technology, practices, trade secrets, methods, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms, and (ii) compounds, compositions of matter, and physical, biological or chemical material.

“ Laws ” shall mean (i) all constitutions, treaties, laws, statutes, codes, ordinances, guidance, orders, decrees, rules, regulations, and municipal by-laws, whether domestic or international, anywhere in the Territory or as may otherwise be agreed in writing between the Parties, (ii) all judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of any Governmental Authority, and (iii) all policies, practices and guidelines of any Governmental Authority.

“ Licensed Know-How ” shall mean Know-How owned or Controlled by Licensor that exists as of the Effective Date or at any time thereafter during the Term, in each case that is necessary or useful for the development, registration, manufacture, promotion, marketing, distribution, or sale of the Licensed Product in the Field in the Territory.

“ Licensed Patents ” shall mean the Patents owned or Controlled by Licensor as of the Effective Date (as listed in Exhibit A hereto), to the extent that such Patents disclose or claim the Licensed Product as well as any future Patents owned or Controlled by Licensor or its Affiliates during the Term, to the extent that such future Patents disclose or claim the Licensed Product.

“ Licensed Product ” shall mean any product containing any Licensor’s drug candidates including, without limitation, those referred to as RGN-137, RGN-259 and RGN-352, that utilize Tβ4 as at least one of the biologically active ingredients and/or improvements thereto developed or acquired by or on behalf of Licensor for the Field in the Territory, in each case to the extent such improvements are owned or Controlled by Licensor. The term “Licensed Product” shall include both clinical and commercial applications of any such product.

“ Licensee ” shall have the meaning given such term in the preamble.

“ Licensee Inventions ” shall have the meaning given such term in Section 8.2(a).

“ Licensee Product Data ” shall have the meaning given such term in Section 12.3 (b) (i)

“ Licensor ” shall have the meaning given such term in the preamble.

“ Licensor Inventions ” shall have the meaning given such term in Section 8.2(b).

“ Losses ” shall have the meaning given such term in Section 11.1.

“ Macau ” shall mean the Macau Special Administrative Region of the People’s Republic of China.

“ Marketing Approval ” shall mean all approvals, licenses, registrations, or authorizations of a Regulatory Authority in any jurisdiction of the Territory necessary for the manufacture, use, storage, marketing, importation or sale of the Licensed Product in such jurisdiction.

“ Marketing Year ” shall mean the period commencing on the date that Marketing Approval in the PRC is obtained and ending on December 31 of the same year. Thereafter, and for the duration of this Agreement, each subsequent Marketing Year will correspond to a calendar year period (i.e., from January 1 to December 31).

“ Net Sales ” shall mean the gross receipts for sales made by Licensee and/or its Affiliates and Sublicensees of the Licensed Product to other independent buyer(s), including, without limitation, to Distributors in bona fide arm’s length transactions, less the following deductions with respect to such sale, to the extent applicable to the Licensed Product and to the extent actually allowed and taken: (i) quantity and/or cash discounts actually allowed or taken to the extent customary; (ii) customs, duties, excise taxes, if any, directly related to the sale of the Licensed Product and actually paid; (iii) amounts allowed by reason of rejections and return of goods; (iv) Third-Party rebates related to the sale of the Licensed Product; and (v) import tax, value-added tax and other similar sales taxes related to the sale of the Licensed Product, all to the extent in accordance with GAAP as consistently applied across all products of Licensee. No deductions shall be made for commissions paid to individuals, whether with independent sales agencies or regularly employed by Licensee, its Affiliates or Sublicensees, and on its payroll, or for the cost of collections. On sales made in other than in arm’s length transaction, the value of Net Sales attributed to such a transaction shall be that which would have been received in an arm’s length transaction, based on sales of like quantity and quality products on or about the time of such transaction.

“ Panel ” shall have the meaning given such term in Section 13.8(c)(i).

“ Parties ” and “ Party ” shall have the meanings given such terms in the preamble.

“ Patents ” shall mean any and all patents and/or patent applications, and any patents issuing on such patent applications, as well as any continuations, divisions, reissues and re-examinations of any of the foregoing.

“ Person ” shall mean an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.

“ PHS ” shall mean the National Institutes of Health, the Centers for Disease Control, and/or the FDA, agencies of the United States Public Health Service within the Department of Health and Human Services.

“ PHS License ” shall mean the Patent License Agreement, dated as of February 6, 2001, between PHS and Licensor, attached hereto as Exhibit B.

“ Product Liability Claim ” shall mean any Third Party proceedings involving any actual or alleged death or bodily injury arising out of or resulting from the use of the Licensed Product sold by Licensee or its Sublicensees.

“ Prohibited List ” shall mean (a) the HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://www.oig.hhs.gov ); (b) the General Services Administration’s List of Parties Excluded from Federal Programs (available through the Internet at http://www.epls.gov ); and (c) the FDA Debarment List (available through the Internet at http://www.fda.gov/ora/compliance_ref/debar/ ). -

“ PRC ” shall mean the People’s Republic of China, excluding Hong Kong and Macau.

“ Prosecute ” shall have the meaning given such term in Section 8.5(a).

“ Receiving Party ” shall have the meaning given such term in Section 9.1.

“ Regulatory Approval ” shall mean any and all approvals (including, to the extent necessary, pricing approvals), licenses, registrations or authorizations of any Governmental Authority, necessary for the promotion, development (including without limitation the conduct of clinical trials), marketing, distribution, manufacture, sale or importation of a Licensed Product.

“ Regulatory Authority ” shall mean any applicable Governmental Authority in any jurisdiction in the Territory from which Regulatory Approval is required to be obtained, including the State Food and Drug Administration in the PRC, the Trade and Industry Department and the Department of Health in Hong Kong, and any local counterparts.

“ Regulatory Laws ” shall mean all applicable Laws governing (i) marketing approval or clearance, import, export, testing, investigation, development, manufacture, packaging, labeling, handling, storage, distribution, installation, servicing, marketing, or sale, (ii) recordkeeping and reporting obligations, (iii) recalls, or (iv) similar regulatory matters, with respect to the Licensed Product.

“ Relevant Period ” shall mean, on a Licensed Product by Licensed Product basis, the period starting from the Effective Date and ending on the expiration of the last-to-expire valid and applicable Licensed Patent within the Territory or ten (10) years from the First Commercial Sale of each Licensed Product in the PRC, whichever is later.

“ Renewal Options ” shall have the meaning given such term in Section 12.1

“ Royalty Term ” shall mean the period commencing on the First Commercial Sale and ending at the expiration of or the effective date of termination of this Agreement.

“ Semester ” shall have the meaning January 1 through June 30 and July 1 through December 31 of each calendar year.

“ SFDA ” shall mean the State Food and Drug Administration in the PRC.

“ Sublicensee ” shall mean any Affiliate or Third Party to whom Licensee sublicenses any rights as permitted by Section 2.1(c).

“ Sublicense Participation Fee ” shall mean any non-refundable consideration, including, but not limited to, up-front licensing fees, development, commercial, advance royalty, or other milestone payments received by Licensee from a Sublicensee pursuant to an agreement in connection with the development and commercialization of a Licensed Product in the Territory.

“ Supply Agreement ” shall have the meaning given such term in Section 5.2.

“Taiwan” shall mean the Republic of China.

“ Tβ4 ” shall mean the 43 amino acid peptide commonly referred to as Thymosin Beta 4.

“ Territory ” shall mean the PRC, Hong Kong, Macau and Taiwan.

“ Third Party ” shall mean any Person other than Licensor, Licensee, and Affiliates of either Party.

“ Trademark ” shall mean any trademark, trade dress, brand mark, trade name, brand name, logo, business symbol or other similar indicia of origin.

“ ICC Rules ” shall have the meaning given such term in Section 13.8(c).

“ Valid Claim ” shall mean a claim of an issued and unexpired Licensed Patent, that has not been revoked or held unenforceable or invalid by a decision of a court or other Governmental Authority of competent jurisdiction, and that is not appealable or has not been appealed within the time allowed for appeal, and that has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise.

Section 2. License Grant and Other Rights

2.1 License Grants to Licensee

(a) Non-Exclusive License . Subject to the terms of this Agreement, Licensor hereby grants to Licensee a non-exclusive, irrevocable (except as otherwise provided for in this Agreement and the PHS License), royalty-free license to use the Licensed Patents and the Licensed Know-How to develop the Licensed Product in the Field in the Territory.

(b) Exclusive License . Subject to the terms of this Agreement, Licensor hereby grants to Licensee an exclusive irrevocable (except as otherwise provided for in this Agreement and the PHS License) royalty-bearing license to use the Licensed Patents and the Licensed Know-How to manufacture, offer to sell, sell and import the Licensed Product in the Field in the Territory.

(i) Licensee shall be entitled to sublicense any or all of the rights granted to Licensee pursuant to Section 2.1(a) or 2.1 (b) to any of its Affiliates or Third Party upon thirty (30) days’ prior written notice to Licensor, which notice shall include the identity of such Affiliate or Third Party..

(ii) All sublicenses granted to Affiliates or Third Parties pursuant to Section 2.1(c)

(i) above shall be subject to all terms, conditions, obligations and covenants of this Agreement and all applicable provisions of the PHS License. No sublicense shall relieve Licensee of any of its obligations hereunder.

(d) No Further Licenses . Except for the licenses granted to Licensee pursuant to Sections 2.1(a)

and 2.1 (b), no further rights or licenses are granted to Licensee in or under this Agreement, whether expressly or by implication.

(e) Licensor’s Retained Rights . Notwithstanding the rights granted to Licensee in Sections 2.1(a) and 2.1(b) and without limiting the generality of Section 2.1(f), Licensor retains the rights to:

(i) conduct or have conducted clinical trials and other studies involving the Licensed Product in the Territory for the generation of data in support of regulatory submissions to the Regulatory Authorities outside the Territory; or

(ii) conduct activities in the Territory with respect to the manufacture, formulation and processing of the Licensed Product for use and commercialization outside the Territory, provided that Licensor shall first give Licensee the opportunity to manufacture, formulate and process the Licensed Product for commercialization outside the Territory. If Licensee chooses not to provide such activities to Licensor, or is unable to perform such activities for whatever reason, or the price or timing for such activities is unacceptable to Licensor, Licensor shall be free to choose an alternative source in the Territory for such activities.

(f) Negative Covenant . Licensee covenants that it will not, and it will not permit any of its Affiliates to, use or practice any Licensed Patents and Licensed Know-How outside the scope of the license granted to it under Sections 2.1(a) and 2.1(b) above.

2.2 Transfer of Licensed Know-How . Upon the reasonable request of Licensee and at no cost to Licensee, Licensor shall promptly provide Licensee with such tangible embodiments of the Licensed Know-How as are in Licensor’s possession or control so as to permit Licensee to enjoy the licenses granted to it pursuant to Sections 2.1(a)

and 2.1 (b).

2.3 Use of Affiliates . At Licensor’s option, any of Licensor’s rights under this Agreement may be exercised by any Affiliate of Licensor. Further, at Licensor’s option, any of Licensor’s obligations under this Agreement may be performed by any Affiliate of Licensor, and such obligations will be deemed satisfied upon performance by such Affiliate.

2.4 PHS Reserved Rights . Notwithstanding anything contained in Section 2.1

to the contrary, Licensee:

(a) acknowledges that PHS has retained certain rights and interests in the Licensed Patents pursuant to the PHS License;

(b) agrees that the provisions of the PHS License contained in Exhibit C shall be binding on Licensee and its successors as if Licensee or its successors were the licensee under the PHS License; and

Section 3. Development

3.1 Development Plan .

(a) Initial Development Plan . Licensee shall carry out all development activities with respect to the Licensed Product in the Territory in accordance with a development plan as agreed upon in writing by the Parties (the “ Development Plan”) .

(b) Development Activities . For purposes of this Agreement, development activities shall mean all activities that are reasonably required to obtain Regulatory Approval of the Licensed Product in the Territory, including without limitation toxicology, in vitro testing, in vivo testing, in silico testing, stability testing, statistical analysis and report writing, packaging and regulatory affairs, preclinical studies and clinical trials.

3.2 Content of Development Plans . The Development Plan (as amended after the Effective Date) shall include, to the extent applicable, (i) the identity of the Licensed Product to be developed, (ii) a description of the overall program of development for such Licensed Product through Regulatory Approval in the Territory, (iii) a description of the development activities including preclinical studies, pharmacology, toxicology, formulation, clinical pharmacology studies, clinical studies and regulatory plans and other key elements necessary to obtain Regulatory Approval for the Licensed Product, (iv) specific plans and protocols for clinical studies, including Licensee’s good faith forecast of the quantity of clinical supplies of API that Licensee will require, (v) a schedule for all such activities, and (vi) specific tentative deadlines for meeting specified regulatory milestones.

3.3 Updates and Amendments to the Development Plan . The Parties shall amend the Development Plan at least once every twelve (12) months to expand and refine the description of the activities specified in the initial Development Plan or other then current Development Plan and to add other development activities, and the anticipated schedule and budgets for all such activities. Such amended Development Plan shall become effective only upon the approval of the Joint Development Committee. If the Parties fail to update the Development Plan as required by this Section 3.3 the most recently approved Development Plan shall continue in effect until such time as an amended Development Plan becomes effective.

3.4 Joint Development Committee . Within one hundred eighty days (180) days from the Effective Date, the Parties shall establish a joint development committee (the “ Joint Development Committee ”) to coordinate and oversee the development of the Licensed Product in the Territory.

(a) Composition of the Joint Development Committee . The Joint Development Committee shall be comprised of an equal number of representatives from each Party, initially two persons, each of whom has relevant experience and skill appropriate for service on the Joint Development Committee, such as heads of clinical, manufacturing, and commercial development. The Parties may establish and later change the number of representatives that each Party has on the Joint Development Committee, as long as an equal number of representatives from each Party is maintained (unless such Party desires to have fewer representatives). Each Party may change any of its representatives on the Joint Development Committee at any time upon notice to the other Party.

(b) Decisions of the Joint Development Committee . Except as otherwise provided in this Agreement, in the event that the Joint Development Committee cannot reach a decision in any matter properly before it, Licensee shall have final decision-making authority with respect to such matter, including approval and amendments of the Development Plan; provided, however, that any such matter under dispute shall first be referred to the Parties’ respective Presidents or chief executive officers, for attempted resolution by good faith negotiations within fourteen (14) days; further provided, that any final decision made by Licensee shall (i) be consistent with the terms of this Agreement (including Licensee’s diligence obligations hereunder); (ii) not materially affect the rights and obligations of Licensor under this Agreement without Licensor’s consent; (iii) not materially affect the development, manufacture or commercialization of the Licensed Products outside the Field and/or outside the Territory, as reasonably determined by Licensor.

(c) Activities of the Joint Development Committee . The Joint Development Committee shall be responsible for establishing and approving the Development Plan.

(d) Meetings of the Joint Development Committee . The Joint Development Committee shall hold its first meeting within one hundred eighty days (180) days after the Effective Date and shall meet thereafter on a schedule and at locations mutually determined by the Parties. Ad hoc meetings of the Joint Development Committee may be called by either Party upon reasonable advance notice to the other. Subject to the Parties mutual agreement, regular and ad hoc meetings may be face-to-face or by teleconference or videoconference.

(e) Joint Development Committee Expenses . Each Party shall bear the expense of the participation of its representatives on the Joint Development Committee and in Joint Development Committee meetings.

3.5 Clinical Trials . Licensee shall be responsible for conducting or having conducted all clinical trials of the Licensed Product in the Territory and for paying all fees, costs and other expenses associated therewith.

3.6 Regulatory Approvals . Licensee shall be responsible for obtaining and maintaining all Regulatory Approvals necessary to conduct such clinical trials, including without limitation any Certificate for Clinical Trial and Medicinal Test in Hong Kong, and for paying all fees, costs and other expenses associated therewith.

3.7 Licensor’s Cooperation . As reasonably requested by Licensee, Licensor shall cooperate with and assist Licensee in obtaining any Regulatory Approvals necessary to conduct clinical trials of the Licensed Product in the Territory. In connection therewith, Licensor shall provide Licensee upon request with copies of any regulatory materials and/or data as are reasonably necessary for these purposes.

3.8 Clinical Supply of Licensed Product .

(a) Clinical Supply . Licensor shall supply Licensee with such quantities of the API, as appropriate, as are required by Licensee in order to conduct development activities in accordance with the Development Plan, including clinical trials of the Licensed Product. Licensor shall supply such API on the schedule and subject to such forecasting, pricing, and other ordering and delivery procedures as are mutually agreed upon in writing by the Parties.

(b) Clinical Supply Costs . Subject to the other provisions hereof, Licensor shall supply at its cost sufficient supply of API for a Phase II dry eye clinical trial required by Licensee pursuant to Section 3.8(a)

. Licensee shall reimburse Licensor for Licensor’s fully-allocated manufacturing costs for any API required by Licensee for all other clinical development, including clinical trials. In all cases, Licensee shall be responsible for the cost of formulating, filling and finishing Licensed Product in accordance with applicable Laws in the relevant jurisdiction.

3.9 Diligence . Notwithstanding anything specified in any Development Plan, Licensee shall at all times exert no less than Commercially Diligent Efforts to develop at least one Licensed Product in the Territory, including seeking Regulatory Approval and Marketing Approval of the Licensed Product in the Territory. Licensee shall require any Affiliates, Sublicensees, and/or Third Parties it uses to develop the Licensed Product to use such efforts on Licensee's behalf.

Section 4. Commercialization of Licensed Product

4.1 Commercialization Plan .

(a) Initial Commercialization Plan . Licensee shall carry out all commercialization activities with respect to the Licensed Product in the Territory in accordance with a commercialization plan provided for by Licensor (the “ Commercialization Plan ”). The initial Commercialization Plan shall be provided to Licensor within ninety (90) days from the expected First Commercial Sale date with respect to PRC.

(b) Commercialization Activities . For purposes of this Agreement, commercialization activities shall mean all appropriate activities undertaken before and after Regulatory Approval relating specifically to the marketing, sale and distribution of the Licensed Product in the Territory, including, without limitation, (i) sales force detailing, advertising, education, planning, marketing, sales force training and distribution, (ii) scientific and medical affairs, and (iii) pricing and related terms for the Licensed Product.

4.2 Content of Commercialization Plan .

(a) Description of Activities . The Commercialization Plan (as amended, if needed) shall include a reasonable description of the activities that Licensee shall undertake in order to market the Licensed Product in the Territory, including, but not limited to, (i) media marketing plans, promotional activities and similar matters, including detailed budgets, and (ii) the identity of intended major Distributors and Sublicensees, if any.

(b) Net Sales Targets . The Parties acknowledge that, as of the Effective Date, specific Net Sales targets in any Marketing Year are difficult to determine. The Commercialization Plan shall specific a broad range of Net Sales targets that will be refined and updated in amendments to the Commercialization Plan as the Licensed Product in the Territory approaches Regulatory Approval.

4.3 Amendments to the Commercialization Plan . The Parties shall amend the Commercialization Plan at least once every twelve (12) months after the First Commercial Sale date with respect to the PRC to refine the description of the activities specified in the initial Commercialization Plan and any subsequently amended Commercialization Plan, and to add other commercialization activities, to update the anticipated schedule and budgets for all such activities, and to update the Net Sales targets. Such amended Commercialization Plan shall comply with the provisions of Section 4.2. If the Parties fail to update the Commercialization Plan as required by this Section 4.3, the most recently approved Commercialization Plan shall continue in effect until such time as an amended Commercialization Plan becomes effective pursuant to this Section 4.3.

4.4 Diligence . Licensee shall at all times exert no less than Commercially Diligent Efforts to promote, market and distribute at least one Licensed Product in the Territory. Licensee shall require any Affiliates, Sublicensees, Distributors, and/or other Third Parties it uses to promote, market and distribute the Licensed Product to use such efforts on Licensee's behalf.

4.5 Notification of Benchmarks and Milestones . Licensee shall report in writing to Licensor the date of the First Commercial Sale in each country of the Territory and the achievement of any milestone specified in this Agreement within thirty (30) days of such occurrences.

Section 5. Manufacture and Supply of Licensed Product

5.1 Supply Obligation . Upon Licensee’s written request and subject to the terms of a definitive supply agreement to be negotiated by the Parties, Licensor shall manufacture and supply to Licensee (i) API at no charge for a Phase 2 ophthalmic clinical trial aimed at studying the Licensed Product in patients affected by dry eye in quantities and timeframes to be agreed; and (ii) API at Licensee’s cost for other clinical trials to be conducted by Licensee in the Territory.

5.2 Supply Terms . Licensee shall at all times be entitled to manufacture or source API from suppliers of its choice. Upon Licensee’s written request, Licensee may purchase all or part of its commercial requirements of API from Licensor at a cost plus price to be discussed and agreed upon by the Parties, subject to Licensor’s ability to deliver required amounts of API pursuant to the terms of a commercial supply agreement to be negotiated by the Parties.

5.3 Manufacturing License . Licensor grants to Licensee the rights under the Licensed Patents and Licensed Know-How as may be necessary in order for Licensee to manufacture or have manufactured by an Affiliate or by a Third Party the API and the Licensed Product in the Territory for the sole purpose of exercising the licenses granted to Licensee pursuant to Sections 2.1(a) and (b).

Section 6. Royalties and Payments

6.1 Royalties.

(a) During the Royalty Term, on an annual basis, Licensee shall pay Licensor royalties equal to [***]% of aggregate annual Net Sales up to U.S. $[***] for all Licensed Products, [***]% of aggregate annual Net Sales for all Licensed Products between U.S. $[***] and U.S. $[***], and [***]% of aggregate annual Net Sales for all Licensed Products above U.S. $$[***]. Each such payment shall be due and payable no later than sixty (60) days after the end of the Semester in which the applicable Net Sales were made. In case any Generic/Branded Generic of any Licensed Product by any Third Party enter the market without a direct or indirect agreement with the Licensee, its Affiliates or their Sublicensees or Distributors for the Licensed Product and during the applicable Semester , on a country-by-country basis and product-by-product basis, such Generic/Branded Generic taken in the aggregate have according to IMS or similar data source a market share (measured in US dollars) in such country of at least 30% (thirty percent), then the royalties’ rate applicable in such market will be reduced by fifty percent (50%).

(b) If it is necessary for Licensee to obtain a license from a Third Party under any Patent in a particular country in the Territory in order to use, make, or sell a Licensed Product and Licensee obtains such a license, Licensee may deduct, from the royalty payment that would otherwise have been due pursuant to Section 6.1(a) with respect to Net Sales of the applicable Licensed Product in such country in a particular applicable Semester an amount equal to fifty percent (50%) of the royalties paid by Licensee to such Third Party pursuant to such license on account of the sale of such Licensed Product in such country during such applicable Semester.

(c) If Licensee wishes to pursue the development, promotion, marketing, distribution and sale of the Tβ4 fragment LKKTETQ, which product was licensed for certain uses by Licensee from the National Institute of Health of the United States of America prior to the signing of this Agreement, and if such development, promotion, marketing, distribution and sale would infringe upon any Valid Claim of any issued patents or future patents owned or Controlled by Licensor in the Territory (hereinafter, «Licensor LKKTETQ Patent »), then the license grant and other rights granted from Licensor to Licensee according to Section 2 of this Agreement shall be automatically expanded to include also the Licensee’s right to exploite such Licensor LKKTETQ Patent. In such a case, the Parties will negotiate in good faith an appropriate royalty on the Net Sales obtained by Licensee in the Territory with the LKKTETQ containing product whose sales infringe any Valid Claim as referred to above. In no event such royalty will be greater than seventy percent (70%) of the royalty rates provided for in Section 6.1(a) above. Furthermore, in this case, there will be no License Fees nor Milestone Payments nor Sublicense Participation Fees owed by Licensee to Licensor in connection with the sales of such LKKTETQ containing product.

6.2 Licensee Fee .

(a) On March 28, 2012 Licensee paid Licensor U.S. $200,000 pursuant to the terms set forth in the Binding Term Sheet that was executed between the Parties on March 27.

(b) Licensee shall promptly pay to Licensor U.S. $200,000 upon execution of this License Agreement.

6.3 Milestone Payments .

(a) Licensee shall promptly pay to Licensor a non-refundable sum of U.S. $500,000 upon initiation of First Commercial Sale of the first Licensed Product in the PRC.

(b) Licensee shall promptly pay to Licensor a non-refundable sum of U.S. $1,500,000 upon obtaining U.S. $50,000,000 of aggregate, cumulative commercial Net Sales in the Territory.

(c) Licensee shall promptly pay to Licensor a non-refundable sum of U.S. $1,600,000 upon obtaining U.S. $80,000,000 of aggregate, cumulative commercial Net Sales in the Territory.

6.4 Sublicense Participation Fees . Licensor shall be entitled to an amount equal to thirty percent (30%) of any Sublicense Participation Fees received by Licensee, provided that any amounts already paid to Licensor under Section 6.2 and 6.3 above with respect to such Licensed Product shall be creditable against the amount payable under this Section 6.4.

6.5 Royalty Reports . Licensee shall furnish to Licensor, within sixty (60) days following the end of each Semester during the Royalty Term, a complete, detailed and accurate written report for such Semester showing (i) the gross amount of sales, on a unit-by-unit basis, of Licensed Products by Licensee and Sublicensees to independent buyers (whether an end-user, wholesaler or otherwise) in bona fide arm’s length transactions; (ii) the adjustments resulting from the deductions in the definition of “Net Sales; (iii) total Net Sales and (iv) the conversion into United States Dollars, pursuant to Section 6.7, of any such Net Sales made in another currency; and (v) the calculation of royalties due.

6.6 Manner of Payments . All payments due Licensor under this Agreement shall be payable in United States Dollars by wire transfer of immediately available funds to such bank account(s) as Licensor shall designate, or by such other method as Licensor may reasonably designate.

6.7 Exchange Rate . When converting any amount in another currency into United States Dollars, Licensee shall use an exchange rate equal to New York foreign exchange rate quoted in the Wall Street Journal on the business day prior to the date a payment under this Agreement is due.

6.8 Interest on Late Payments . Any payment not paid within thirty (30) calendar days from the date such payment is due under this Agreement shall be subject to interest from and including the date such payment is due through and including the date such payment is actually made at an annual rate equal to the sum of two percent (2%) plus the annual prime rate of interest quoted in the Money Rates Section of the Wall Street Journal calculated daily on the basis of a 365-day year, or similar reputable data source, or, if lower, the highest rate permitted under applicable law. The payment of such interest shall not limit Licensor from exercising any other rights it may have as a consequence of the lateness of any payment.

6.9 Records; Audit Rights .

(a) Records . Licensee shall maintain, and shall require its Affiliates and Sublicensees to maintain, during the Term of this Agreement and for a period of five (5) years thereafter, complete, detailed and accurate books and records in connection with the sale of Licensed Product as necessary to allow the accurate determination of any and all financial and accounting information relevant to either Party’s payment obligations hereunder, including without limitation as necessary for the calculation of the royalties due to Licensor hereunder and any fees payable pursuant to Section 12.3(d)

(b) Audit Rights .

(i) Licensor or its representative shall have the right to annually audit Licensee’s, its Affiliates’ and its Sublicensees’ records as set forth in this Section 6.9

. Licensee shall permit Licensor or its representative to have access during normal business hours to such records of Licensee, its Affiliates and its Sublicensees as may be reasonably necessary to verify the accuracy of the royalty reports hereunder for any Semester during a Marketing Year ending not more than one (1) year prior to the date of such request, provided that if Licenseee or its Sublicensee as defined herein restates any of its financial statements, or if there are any financial irregularities reported, or if during the audit of Licensee’s records under this Section 6.9(b)(i) material discrepencies are found with regard to royalties owed to Licensor, Licensor shall be able to audit the Licensee’s or Sublicensee’s records for most recently ended Marketing Year and any Marketing Year ending not more than three (3) years prior thereto. Annual audits can take place no more often than once per each calendar year. Notice of Licensor’s intent to conduct an audit must be provided within 30 days of the later of: (i) Licensor’s receipt of the periodic royalty report reflecting full yearly sales of Licensed Product or (ii) Licensee’s filing of its official report in accordance with the Hong Kong Stock Exchange regulations. Except as otherwise provided in Section 6.9(b)(ii), each Party shall be responsible for its own costs and expenses relating to any audit conducted under this Section 6.9(b)(i). Licensee shall cause its Affiliates and Sublicensees to agree to make their records available for audit by Licensor or its representative as set forth in this Section 6.9.

(ii) If any audit conducted by Licensor or its representative shows an underpayment of royalties to Licensor, Licensee shall remit to Licensor the amount of such underpayment within thirty (30) days after its receipt of Licensor’s request therefor. If an underpayment in royalties exceeds five percent (5%) of the total amount owed for the period then being audited, Licensee shall be responsible, and promptly shall reimburse Licensor, for Licensor’s reasonable out-of-pocket costs for conducting the audit. If any audit conducted by Licensor or its representative shows an overpayment of royalties to Licensor, then at Licensor’s option, such overpayment shall either be refunded to Licensee promptly or be credited against amounts payable by Licensee in subsequent Semesters.

(c) Confidentiality . Licensor shall treat all financial information of Licensee, its Affiliates and Sublicensees that Licensor reviews in connection with any audit conducted under this Section 6.9 as Confidential Information of Licensee subject to the provisions of Section 9 of this Agreement.

Section 7. Regulatory Matters

7.1 Regulatory Approvals . Licensee shall have the sole authority and responsibility to obtain in its own name and maintain any Regulatory Approvals and Marketing Approvals with respect to the Licensed Product in the Territory. Licensor shall, promptly after the Effective Date, provide Licensee with a copy of any relevant data related to the Licensed Product owned by Licensor that have been filed with the FDA. Subject to the prevailing applicable Regulatory Law in the Territory, Licensor shall retain the sole right, but not the obligation, to be designated as the sponsor of any and all clinical trials of Licensed Product conducted by Licensee, and Licensor shall have the sole right to decide, to the extent permitted by the applicable Regulatory Law in the Territory, whether any clinical trials shall be conducted under an IND issued by the FDA or under an IND issued by the SFDA. Irrespective of the exercise of such rights, Licensee shall at all times be responsible for ensuring that any and all clinical trials are conducted in compliance with all applicable Regulatory Laws and other requirements of any Regulatory Authority in the Territory, and all Regulatory Laws and other requirements of any Governmental Authority (including any promulgated by the FDA) that would be applicable if such clinical trials were sponsored under Licensor’s IND or otherwise subject to the jurisdiction of the FDA.

7.2 Contact with Governmental Authorities . Subject to the other provisions of this Section 7.2, Licensee shall be solely responsible for responding to all inquiries, notices of violation, warning letters, inspectional observations, and other actions from or by Governmental Authorities in the Territory, in each case to the extent related to the Licensed Product in the Territory. Licensor and Licensee shall immediately forward to each other copies of any material correspondence from any Governmental Authority that it receives in respect of the Licensed Product. Notwithstanding the other provisions of this Section 7.2, Licensee shall not respond to any inquiries or other correspondence from a Governmental Authority with respect to the Licensed Product in the Territory without first providing Licensor with a copy of its proposed response, and incorporating any reasonable comments of Licensor in such response. Licensor shall cooperate with Licensee in responding to any inquiry or other correspondence from a Governmental Authority in a timely manner, including by promptly responding to all inquiries of Licensee relating thereto.

7.3 Regulatory Information . Each Party agrees to provide the other Party with all reasonable assistance and take all actions reasonably requested by the other Party that are necessary or desirable to enable the other Party to comply with any Law or other requirement of any Governmental Authority applicable to the Licensed Product. Such assistance and actions shall include, among other things, (a) informing the other Party, within five (5) business days, of receiving notice of any action by, or notification or other information which it receives (directly or indirectly) from any Governmental Authority that: (i) raises any material concerns regarding the safety or efficacy of the Licensed Product; (ii) indicates or suggests a potential material liability for either Party to Third Parties arising in connection with the Licensed Product; or (iii) is reasonably likely to lead to a field alert report, recall or market withdrawal of the Licensed Product; provided, that neither Party shall be obliged to disclose information in breach of any contractual restriction; and (b) Licensee immediately reporting to Licensor the occurrence of any adverse reaction (including without limitation death) or other incident during any clinical trial or medicinal exam and any other information so as to enable Licensor to fulfil its reporting obligations to any Governmental Authority, as further specified by the Safety Agreement.

7.4 Official Documentation . Licensee shall provide to Licensor one exact copy of any official registration and/or importation documents supplied by the relevant Regulatory Authorities immediately upon issuance. In case of early termination of this Agreement, Licensee shall provide to Licensor any original versions of such registrations and/or documents that are not otherwise in Licensor’s possession as per Section 12.3(a).

7.5 Clinical Trial Reports . Without limiting any of Licensee’s obligations under this Agreement, Licensee shall be responsible for preparing the clinical trial yearly progress reports, clinical trial final report and any other reports as may be required by a Regulatory Authority in connection with clinical trials of the Licensed Product; provided, however that Licensee shall provide drafts of such reports for Licensor’s knowledge prior to submission to the applicable Regulatory Authority and provide all final reports submitted to applicable Regulatory Authorities.

7.6 Unknown Side Effects; Adverse Reactions

(a) Reporting Unknown Side Effects and Adverse Reactions . Each Party shall provide promptly to the other Party any information and data relating to any serious or previously unknown side effects or adverse reactions relating to the Licensed Product that the providing Party receives from any source, as further specified in the Safety Agreement.

(b) Safety Agreement . Promptly after the Effective Date and before the date that Licensee commences any clinical trials of the Licensed Product in the Territory, the Parties shall enter into a separate written safety agreement containing (i) appropriate provisions addressing safety issues relating to the Licensed Products, (ii) a description of the types of side effects and reactions that must be reported pursuant to Section 7.6(a) and any other complaints or information requests that must be reported, and (iii) such cooperative working procedures as are reasonably necessary to ensure that satisfactory systems and processes are in place to ensure the effective exchange of safety and other medical information relating to the Licensed Product (the “ Safety Agreement ”).

Section 8. Intellectual Property

8.1 Trademarks . Licensee shall be free to use Licensee’s Trademarks or any other Trademark(s) owned by the Licensee in the Territory for the Licensed Product.

8.2 Ownership of Inventions .

(a) Licensee Inventions . Subject to any licenses granted to Licensor herein, Licensee shall own all Inventions having as inventors only employees, consultants or contractors of Licensee (“ Licensee Inventions ”). Licensee shall have written agreements in place with its employees, consultants, and contractors giving Licensee all rights and authority necessary to grant the license in Section 8.3(a).

(b) Licensor Inventions . Subject to any licenses granted to Licensee herein, Licensor shall own all Inventions having as inventors only employees, consultants or contractors of Licensor (“ Licensor Inventions ”). Licensor shall have written agreements in place with its employees, consultants, and contractors giving Licensor all rights and authority necessary to grant the license in Section 8.3(b).

(c) Joint Inventions . Licensee and Licensor shall own jointly all Inventions having as inventors employees, consultants or contractors of both Licensee and Licensor (“ Joint Inventions ”). The Parties will agree on a case-by-case basis the appropriate allocation of cost and control concerning matters regarding the prosecution, maintenance, defense and infringement of Patents for such Joint Inventions.

8.3 Licenses to Certain Inventions .

(a) License Grant to Licensor . To the extent that any Licensee Invention or any Joint Invention relates to the development, promotion, marketing, distribution, manufacturing or sale of the Licensed Product, Licensee hereby grants to Licensor, and Licensor hereby accepts, an exclusive, perpetual, transferable, sublicensable (through multiple tiers), royalty-bearing license under Licensee’s rights in such Licensee Invention or Joint Invention, as applicable, to research, develop, promote, market, distribute, manufacture, have manufactured, sell, offer for sale or import the Licensed Product outside the Territory and/or outside the Field. The foregoing license shall include a right of reference (transferable by Licensor to its Affiliates and sublicensees) to all regulatory filings made by Licensee in the Territory and all data from any clinical trials conducted by Licensee pursuant to this Agreement for the development, manufacture and commercialization of any Licensed Product outside the Territory and/or outside the Field. Licensee shall promptly disclose all Licensee Inventions and Joint Inventions in writing to Licensor. If Licensor desires to use any such Licensee Invention and/or Joint Invention for the development, manufacture and commercialization of the Licensed Products outside the Territory and/or outside the Field, Licensor shall notify Licensee in writing. Following Licensee’s receipt of such notice, the Parties shall negotiate in good faith and on a case-by-case basis the terms and conditions of such license, including commercially reasonable royalty rates; provided that such royalty shall in no event exceed 4% on relevant net sales. If the Parties are unable to agree on the terms and conditions for such license within ninety (90) days of commencemcent of negotiations, the matter shall be resolved in accordance with Section 13.8.

(b) License Grant to Licensee . To the extent that any Licensor Invention or any Joint Invention relates to the development, promotion, marketing, distribution, or sale of the Licensed Product, then such Licensor Invention or Licensor’s interest in such Joint Invention, as applicable, shall be deemed a Licensed Patent and shall be subject to the licenses granted to Licensee pursuant to Sections 2.1(a) and 2.1(b).

8.4 Patent Marking . Licensee shall, and shall cause its Affiliates, Sublicensees and Distributors to mark all Licensed Products sold or otherwise distributed pursuant to this Agreement in accordance with the applicable patent statutes and other relevant regulations in the jurisdiction of the Territory in which such Licensed Product is manufactured, sold or otherwise distributed.

8.5 Prosecution and Maintenance of Licensed Patents in the Territory .

(a) Prosecution . As between Licensor and Licensee, Licensor shall have the right, but not the obligation, to prepare, file, prosecute, and maintain the Licensed Patents in the Territory, and to pursue any proceeding (including interferences, re-examinations, examinations, protests, reissues, opposition proceedings and the like) relating to any of the Licensed Patents (collectively “ Prosecute ”) in the Territory, such costs and expenses shall be shared equally by the Parties. The Parties agree to utilize Licensee’s local intellectual property counsel and counsel shall promptly provide Licensor with all information related to such prosecution. In the event that Licensor decides not to Prosecute any Licensed Patent, Licensor shall notify Licensee of its decision and the reason therefor, and subject to Licensor’s consent (which will not be unreasonably withheld or delayed), Licensee shall have the right to Prosecute such Licensed Patent in the Territory at its expense.

(b) Cooperation . In connection with any of Licensor’s activities to Prosecute any of the Licensed Patents, Licensee shall cooperate fully and provide Licensor with any information or assistance that Licensor reasonably requests, including executing such documents as may be necessary with respect to such prosecution activity. If Licensee becomes aware of any patent, information, proceeding or other matter that may affect the preparation, filing, prosecution, or maintenance of any of the Licensed Patents or that may adversely impact the validity, scope, title or enforceability of any of the Licensed Patents, Licensee shall promptly notify Licensor of such patent, information, proceeding, or matter.

8.6 Infringement by Third Parties .

(a) Notice . If Licensee learns of any actual or possible infringement of any Licensed Patent in the Territory, or any actual or possible misappropriation or misuse of Licensed Know-How, Licensee shall promptly notify Licensor of such infringement, misappropriation or misuse.

(b) Right to Bring Suit in the Territory.

(i) As between Licensor and Licensee, Licensor shall have the right but not the obligation, to bring and control any legal action or proceeding with respect to any infringement of Licensed Patents or any misappropriation or misuse of Licensed Know-How by Third Parties in the Territory, at its own expense and using counsel of its own choice.

(ii) In the event that Licensor declines to take legal action with respect to any infringement of the Licensed Patents, Licensee shall have the right, after giving Licensor ten (10) working days’ prior notice of its intent to do so, to take such legal action at its own expense, with the concomitant right to choose legal counsel reasonably acceptable to Licensor and to determine legal strategy. Licensor shall have the right to participate in any such legal action using its own counsel, at its own expense. Licensee may not settle or compromise any such controversy with any Third Party without the prior written approval of Licensor, which shall not be unreasonably withheld or delayed.

(iii) For any action or proceeding brought by Licensor pursuant to this Section 8.6

, if Licensor is unable to initiate or prosecute such action solely in its own name, then Licensee shall join such action voluntarily and shall execute all documents necessary to initiate litigation to prosecute and maintain such action-

(iv) In connection with any action or proceeding brought by Licensor pursuant to this Section 8.6, Licensee shall cooperate fully and will provide Licensor with any information or assistance that Licensor reasonably requests.

8.7 Certifications . Each Party shall inform the other Party of any certification related to the Licensed Product regarding any Licensed Patents it receives pursuant to either 21 U.S.C. §§ 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor provisions, or any equivalent regulations in any jurisdiction of the Territory, and shall provide the other Party with a copy of such certification within five (5) days of receipt by such Party. Licensor’s and Licensee’s rights with respect to the initiation and prosecution of any legal action as a result of such certification or any recovery obtained as a result of such legal action shall be as set forth in this Section 8.

8.8 Defense of Third Party Claims .

(a) Notice . If either Party learns that a Third Party has commenced or plans to commence, either as a claim, a counterclaim, or an action for declaratory judgment, an action or proceeding challenging any of the Licensed Patents in any jurisdiction of the Territory, such Party shall promptly provide the other Party with notice thereof.

(b) Licensor’s Right to Defend . As between Licensor and Licensee, Licensor shall have the right, but not the obligation, to defend and control any claim, counterclaim or other action initiated by a Third Party challenging any of the Licensed Patents in any jurisdiction of the Territory (each a “ Challenge ”), at its own expense and using counsel of its own choice.

(i) For the defense of any Challenge pursuant to this Section 8.8, if Licensor is unable to initiate or prosecute such defense solely in its own name, then Licensee (subject to any necessary approval of the relevant court) shall join such action voluntarily and shall execute all documents necessary to initiate litigation to prosecute and maintain such action. -

(ii) In connection with the defense of any Challenge brought by Licensor pursuant to this Section 8.8, Licensee shall cooperate fully and will provide Licensor with any information or assistance that Licensor reasonably requests.

8.9 Awards and Recovery . Any recovery obtained by Licensor in connection with or as a result of any action contemplated by Section 8.6 or 8.8, whether by settlement of otherwise, shall be shared by the Parties as follows:

(a) such recovery shall first be allocated to Licensor for reimbursement in respect of its respective out-of-pocket costs and expenses incurred in connection with such action; and

(b) any remaining amounts after such reimbursement shall be split equally by the Parties.

Section 9. Confidentiality and Press Releases

9.1 Confidential Information . Except to the extent expressly authorized by this Agreement, or otherwise agreed in writing by the Parties, the Parties agree that the receiving Party (the “ Receiving Party ”) shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any Confidential Information which is disclosed to it by the other Party (or an Affiliate thereof) (each, a “ Disclosing Party ”), except to the extent that the Receiving Party can demonstrate by competent written evidence that such Confidential Information:

(a) was already legally in the possession of the Receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the Disclosing Party;

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

(c) became generally available to the public or was otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party in breach of this Agreement;

(d) was disclosed to the Receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others; or

(e) is independently discovered or developed by the Receiving Party without the use of Confidential Information provided by the Disclosing Party.

9.2 Exceptions . The obligations of this Section 9 shall not apply to Confidential Information that:

(a) is submitted to Governmental Authorities by the Receiving Party to facilitate the issuance of any Regulatory Approval for the Licensed Product, or to obtain, maintain, enforce or defend Patents (in each case only to the extent permitted by this Agreement; provided that (A) such disclosure may be only to the extent reasonably necessary to obtain Regulatory Approvals or Patents, as applicable, and (B) the Receiving Party shall take reasonable measures to assure confidential treatment of such information to the extent applicable;

(b) is provided by the Receiving Party to Third Parties (including, in the case of Licensee, to its Affiliates, Sublicensees or Distributors) under written confidentiality agreements having provisions at least as stringent as those in this Agreement, for consulting, development, external testing, marketing trials and other similar activities to the extent that such Receiving Party is permitted to conduct such activities pursuant to this Agreement; or

(c) is otherwise required to be disclosed by the Receiving Party in compliance with Laws (including, without limitation and for the avoidance of doubt, the requirements of the U.S. Securities and Exchange Commission, the American Stock Exchange, the Hong Kong Stock Exchange, and any other stock exchange on which securities issued by a Party are traded) or order by a court or other Governmental Authority having competent jurisdiction; provided, however, that the Receiving Party shall first give written notice to the Disclosing Party in order to allow the Disclosing Party the opportunity to seek confidential treatment of the Confidential Information. Confidential Information that is disclosed pursuant to Law or an order by a court or other Governmental Authority shall remain otherwise subject to the confidentiality and non-use provisions of this Section 9, and the Party disclosing Confidential Information pursuant to a Law or order by a court or other Governmental Authority shall take all reasonable steps necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of such Confidential Information.

9.3 Disclosure to PHS . Licensor may disclose certain Confidential Information of Licensee to PHS in order to comply with the PHS License. In such event, such Confidential Information shall be subject to the applicable confidentiality provisions of the PHS License.

9.4 Return of Confidential Information Upon Expiration or Termination of Agreement . Within thirty (30) days after any expiration or termination of this Agreement, each Party shall destroy (and certify to the other Party such destruction) or return (as requested by the other Party) all Confidential Information provided by the other Party except as otherwise set forth in this Agreement, and except that each Party may retain a single copy of the Confidential Information in its confidential legal files for the sole purpose of ascertaining its ongoing rights and responsibilities regarding the Confidential Information and for defending or enforcing its legal rights.

9.5 Written Agreements . The Receiving Party shall have in effect or obtain written agreements from each of its employees, consultants and contractors who have access to Confidential Information of the Disclosing Party, which agreements shall obligate such persons to similar obligations of confidentiality, and to assign to the Receiving Party all Know-How, information and Inventions conceived, made or reduced to practice by such persons during the course of performing the Receiving Party’s obligations under this Agreement. Each Party will notify the other Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party.

9.6 Remedies . Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to seek an injunction, without the posting of any bond or other security, enjoining or restraining the other Party from any violation or threatened violation of this Section 9.

9.7 Prior Confidentiality Agreement . The Confidential Disclosure Agreement, dated as of July 2, 2005, between Licensor and Licensee shall remain in effect with respect to disclosures made thereunder prior to the Effective Date.

9.8 Press Releases . Except as required by Law (including, without limitation and for the avoidance of doubt, the requirements of the U.S. Securities and Exchange Commission, the American Stock Exchange, the Hong Kong Stock Exchange, and any other stock exchange on which securities issued by a Party are traded) or any Governmental Authority, neither Party shall make any press release or other public announcement relating to this Agreement or the transactions described herein without the prior written consent of the other Party.

Section 10. Representations, Warranties and Covenants

10.1 Licensor Representations, Warranties and Covenants . Licensor hereby represents, warrants and covenants to Licensee as follows:

(a) the execution, delivery and performance by Licensor of this Agreement and the consummation of the transactions contemplated hereby are within Licensor’s corporate powers and have been duly authorized by all necessary corporate action on the part of Licensor. This Agreement constitutes the legal, valid and binding obligation of Licensor, enforceable against Licensor in accordance with its terms;

(b) the execution, delivery and performance of this Agreement by Licensor will not violate any Law or any order of any Governmental Authority;

(c) except as may be required to permit the sale or exportation of Licensed Product into the Territory from time to time during the Term, the execution, delivery or performance of this Agreement by Licensor will not require Licensor to obtain any permits, authorizations or consents from any Governmental Authority, and such execution, delivery and performance will not result in a material breach of or give rise to any termination of any agreement or contract to which Licensor is a Party;

(d) Licensor has the right and authority to grant the licenses granted in Section 2

of this Agreement; and

(e) Licensor, its Affiliates, and its and their respective employees, agents, contractors and consultants have never been (i) debarred or (ii) convicted of a crime for which a person can be debarred, under Section 306(a) of the Generic Drug Enforcement Act of 1992 (Section 306 (a) or (b)) or similar Laws of any foreign jurisdiction. Licensor, its Affiliates, and its and their respective employees, agents, contractors and consultants have never been (i) threatened to be debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred, under Section 306(a) or (b) of the Generic Drug Enforcement Act of 1992 or similar Laws of any other jurisdiction. Licensor shall promptly notify Licensee upon learning of any such debarment, conviction, threat or indictment.

10.2 Licensee Representations, Warranties and Covenants . Licensee hereby represents, warrants and covenants to Licensor as follows:

(a) the execution, delivery and performance by Licensee of this Agreement and the consummation of the transactions contemplated hereby are within Licensee’s corporate powers and have been duly authorized by all necessary corporate action on the part of Licensee. This Agreement constitutes the legal, valid and binding obligation of Licensee, enforceable against Licensee in accordance with its terms;

(b) Licensee will be at all times properly registered, licensed and qualified, and have all requisite power and authority under its organizational documents and in accordance with the Laws of the Territory to develop (including without limitation the conduct of clinical trials), promote, market, distribute, import, export and sell the Licensed Product in the Territory, and to conduct its business and perform its obligations hereunder and, during the Term, it shall take all action as may be required and necessary to obtain and keep current any governmental licenses, permits, registrations and approvals (including without limitation Regulatory Approvals) that are necessary or advisable for it to carry out its activities hereunder;

(c) the execution, delivery and performance of this Agreement by Licensee will not violate any Law or any order of any Governmental Authority;

(d) except for Regulatory Approvals and as may be required to permit the sale or importation of Licensed Product from time to time into the Territory during the Term, the execution, delivery or performance of this Agreement by Licensee will not require Licensee to obtain any permits, authorizations or consents from any Governmental Authority, and such execution, delivery and performance will not result in a material breach of or give rise to any termination of any agreement or contract to which Licensee is a Party;

(e) Licensee, its Affiliates, and its and their respective employees, agents, contractors and consultants have never been (i) debarred or (ii) convicted of a crime for which a person can be debarred, under Section 306(a) of the Generic Drug Enforcement Act of 1992 (Section 306 (a) or (b)) or similar Laws of any foreign jurisdiction. Licensee, its Affiliates, and its and their respective employees, agents, contractors and consultants have never been (i) threatened to be debarred or (ii) indicted for a crime or otherwise engaged in conduct for which a person can be debarred, under Section 306(a) or (b) of the Generic Drug Enforcement Act of 1992 or similar Laws of any other jurisdiction. Licensee shall promptly notify Licensor upon learning of any such debarment, conviction, threat or indictment;

(f) Licensee and its Affiliates and its and their respective employees, agents, contractors and consultants shall not use any Person on a Prohibited List in connection with the performance of any of its obligations or activities under this Agreement;

(g) Licensee shall carry out its obligations and activities under this Agreement, including the development, promotion, marketing, distribution and sale of Licensed Products, in accordance with: (i) the terms hereof, (ii) all applicable Laws and Regulatory Laws, including without limitation the Pharmacy and Poisons Ordinance (Chapter 138 of the Laws of Hong Kong), the Dangerous Drugs Ordinance (Chapter 134 of the Laws of Hong Kong) and any subsidiary legislation thereunder; and (iii) GCP, GLP, and, to the extent Licensee manufactures or has manufactured any Licensed Products pursuant to Section 5.2

, GMP;

(h) As of the Effective Date, Licensee believes in good faith that it will have sufficient financial resources available to carry out, or to have carried out, all of its obligations and activities contemplated under this Agreement;

(i) Licensee and its Affiliates shall not develop, promote, market, distribute, or sell during the Initial Term and the Extended Term any product in the Field that utilizes or otherwise contains Tβ4 or any derivatives, analogs or fragments thereof without Licensor’s prior written approval, with the exception of peptide LKKTETQ that Licensee has licensed from the National Institute of Health of the United States of America prior to the signing of this Agreement. The development, promotion, marketing, distribution and sale of such peptide LKKTETQ by Licensee is subject to the provisions of 6.1(c); and

(j) Licensee shall not reverse engineer or otherwise deconstruct any API or component part of finished Licensed Product for the purpose of developing a product that would compete with the Licensed Product in the Field.

10.3 Disclaimer of Warranties . EXCEPT AS SET FORTH IN THIS AGREEMENT, NEITHER PARTY GIVES ANY OTHER WARRANTY, EXPRESS OR IMPLIED REGARDING THE LICENSED PRODUCTS, THE LICENSED KNOW-HOW, THE LICENSED PATENTS, OR THE SCOPE OR VALIDITY THEREOF. ALL OTHER WARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT ARE EXPRESSLY DISCLAIMED.

Section 11. Indemnification

11.1 Indemnification by Licensor . Licensor shall defend, indemnify and hold harmless Licensee, its Affiliates, and its and their respective officers, directors, employees and agents from and against any and all losses, liabilities, claims, damages, penalties, fines, costs and expenses (including reasonable legal fees and other litigation costs, regardless of outcome) (collectively “ Losses ”) arising as a result of any Product Liability Claims or mandatory or voluntary recall of the Licensed Product in any jurisdiction of the Territory, in each case solely if and to the extent that such Losses are caused by (i) failure of any Licensed Product provided by Licensor to conform to the relevant specifications therefor as specified with any clinical supplies provided to Licensee; or (ii) any willful act or negligence of Licensor and/or its manufacturer of clinical supplies in relation to the Licensed Product; provided, however, that Licensor shall have no obligation under this Section 11.1 if Licensee or any of its Affiliates, Sublicensees or Distributors has been negligent, whether in testing, storing, handling or otherwise dealing with the Licensed Product, or in case such Losses arise out of or are attributable to any breach of this Agreement by Licensee.

11.2 Indemnification by Licensee . Licensee shall defend, indemnify and hold harmless Licensor, its Affiliates, and its and their respective officers, directors, employees and agents from and against any and all Losses arising as a result of any and all Third Party claims if and to the extent that such Losses are caused by Licensee’s and/or any Affiliate’s, Sublicensee’s or Distributor’s manufacture, storage, development, use, promotion, marketing, distribution, and sale of the Licensed Product, provided, however, that Licensee shall have no obligation under this Section 11.2 if Licensor and/or its manufacturer have been negligent, whether in manufacturing, testing, storing, handling or otherwise dealing with the Licensed Product, or in the case said claims arise out of or are attributable to any breach of this Agreement by Licensor.

11.3 Procedures . The Party seeking indemnification under this Section 11 (the “ Indemnified Party ”) shall give prompt notice to the Party against whom indemnity is sought (the “ Indemnifying Party ”) of the assertion or commencement of any claim for indemnification pursuant to this Section 11, and shall provide the Indemnifying Party such information with respect thereto that the Indemnifying Party may reasonably request. The failure to give such notice will relieve the Indemnifying Party of its indemnification obligations hereunder only to the extent that the Indemnifying Party has suffered actual prejudice thereby. The Indemnifying Party shall assume and control the defense and settlement of any such action, suit or proceeding at its own expense. The Indemnified Party shall, if requested by the Indemnifying Party, cooperate in all reasonable respects in such defense, at the Indemnifying Party’s expense, subject to the following. The Indemnified Party will be entitled at its own expense to participate in such defense and to employ separate counsel for such purpose. For so long as the Indemnifying Party is diligently defending any action, suit or proceeding pursuant to this Section 11, the Indemnifying Party will not be liable under this Section 11

for any settlement effected without its consent. No Party shall enter into any compromise or settlement which commits the other Party to take, or to forbear to take, any action without the other Party’s prior written consent.

11.4 Consequential Damages . NEITHER PARTY SHALL BE LIABLE TO OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY HERETO FOR ANY LOSS OF PROFITS, DIMINUTION IN VALUE, OR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES THAT ARISE OUT OF OR RELATE TO THIS AGREEMENT OR THE PERFORMANCE OR BREACH HEREOF OR OTHERWISE AND WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE; PROVIDED, THAT, THE FOREGOING LIMITATION SHALL NOT APPLY: (I) TO A PARTY’S INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTIONS 11.1 AND 11.2 ABOVE; (II) TO ANY GROSSLY NEGLIGENT ACT OR WILLFUL MISCONDUCT OF A PARTY; OR (III) TO A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS PURSUANT TO SECTION 9 HEREOF.

11.5 Insurance .

(a) General Liability . Each Party shall maintain as and when available comprehensive general liability insurance, including blanket contractual liability insurance through the Term and for five (5) years thereafter, which insurance shall afford limits of not less than $5,000,000 for each occurrence for bodily injury liability, personal injury liability, products liability, property damage liability, contractual liability and completed operations liability. Each Party shall ensure that such insurance will include coverage for defense costs.

(b) Product Liability . Each Party shall maintain as and when available and thereafter throughout the Term product liability insurance on commercially standard terms for the pharmaceutical manufacturing industry, with a reputable insurer, in an amount not less than $5,000,000 per occurrence and $5,000,000 in the annual aggregate.

(c) Certificate of Insurance . Each Party will provide, upon request and as and when available, the other with certificate(s) of insurance evidencing the above and showing the name of the issuing company, the policy number, the effective date, the expiration date and the limits of liability. Each Party shall cause its insurance policy to name the other Party hereto as an additional insured. Each Party’s general liability insurance policy shall contain a waiver of subrogation rights which that Party’s insurer(s) may have against the other Party.

Section 12. Term and Termination

12.1 Term and Rules Post Expiration:

(a) This Agreement shall enter into full force and effect at the Effective Date and subject to the renewal options (the “ Renewal Options ”) as provided under this Section 12, the initial term of this Agreement shall be three (3) years from the Effective Date (the “ Initial Term ”). Licensor hereby irrevocably grants the Renewal Options to the Licensee, which shall be solely exercisable by the Licensee at its own discretion, to renew this Agreement on the same terms and conditions under this Agreement for another extended term of three (3) years (the “ Extended Term ”), and such Renewal Options can be exercised by the Licensee for not more than six (6) times on each of the date falling immediately before the expiry date of the Initial Term (for the first time of the exercise of the Renewal Option) or the expiry date of each of the Extended Term (for the second time of the exercise of the Renewal Option and onward). The Parties hereto acknowledge and agree that the exercise of the Renewal Option by the Licensee shall, where applicable, be subject to further independent shareholder approval and any other requirements under the Listing Rules at each time when the Renewal Option is exercised. This Agreement shall remain in force on a country-by-country basis and on a Licensed Product-by-Licensed Product basis until the expiration of the Initial Term (if the Renewal Options are not exercised by the Licensee) or the expiration of the Extended Term (if the Renewal Options are exercised by the Company) (the “ Expiry Date ”). For the avoidance of doubt and subject to the provisions of Section 12.3 below, Licensor shall have no right to refuse to renew this Agreement if the Licensee chooses to exercise the Renewal Options. The Parties hereto hereby confirm that if the Licensee exercises its Renewal Options no renewal agreement is required to be entered into, and the terms of this Agreement shall remain in full force and effect during the Extended Term(s).

(b) If the Initial Term and the Extended Term cover the entire Relevant Period with respect to any given Licensed Product, the Licensee shall, upon the expiration of the Relevant Period, have, with respect to such Licensed Product, a royalty-free, fully paid up, perpetual and irrevocable license, with the right to sublicense and/or assign, for the use of the Licensed Patents and the Licensed Know-How. For the avoidance of doubt, on a Licensed Product-by-Licensed Product basis, the Licensee shall be entitled to retain in full all profits generated from the Licensed Patents and the Licensed Know-How after expiration of the Relevant Period.

12.2 Termination and Rules Post Termination:

(a) In the event either Party is in breach of any material obligation hereunder (the “ Breaching Party ”), the non breaching Party may give written notice to the Breaching Party specifying the claimed particulars of such breach, and in the event such material breach is not cured, within sixty (60) days following the date of such written notification, without prejudice to any other rights and remedies available at any time to the non breaching Party, the non breaching Party shall have the right thereafter to terminate this Agreement by giving thirty (30) days prior written notice to the Breaching Party to such effect.

(b) Termination for Governmental Action . Either Party may terminate this Agreement upon ten (10) days’ prior written notice in the event that any Governmental Authority takes any action or raises any objection (“ Governmental Action ”) that prevents Licensee, for a period of not less than one hundred eighty (180) days, from importing, exporting, purchasing or selling the Licensed Product in the Territory, or that has the effect of making Licensor’s manufacture of the Licensed Product unlawful.

(c) Termination by Licensor for Patent Challenge . Licensor may terminate this Agreement in its entirety immediately upon written notice to Licensee if Licensee or its Affiliates or Sublicensees (directly or indirectly, individually or in association with any person or entity) challenges the validity, enforceability or scope of any Licensed Patents anywhere in the world.

(d) Termination or Conversion Pursuant to the PHS License . In the event that PHS terminates the PHS License under Article 13 therein or rescinds a Licensed Field of Use (as that term is defined in the PHS License) that includes any portion of the Field in which Licensee is licensed hereunder, Licensee may, at its option:

(i) terminate this Agreement; or

(ii) convert this Agreement to a license between Licensee, on the one hand, and Licensor and PHS, on the other hand, with such conversion subject to the approval of PHS, which shall not be unreasonably withheld, and contingent upon Licensee’s acceptance of all of the provisions of the PHS License.

(e) Termination for Bankruptcy . To the extent permitted under applicable Law, if at any time during the term of this Agreement, an Event of Bankruptcy (as defined below) relating to either Party (the “Bankrupt Party”) occurs, the other Party (the “Other Party”) shall have, in addition to all other legal and equitable rights and remedies available hereunder, the option to terminate this Agreement upon sixty (60) days written notice to the Bankrupt Party. It is agreed and understood that if the Other Party does not elect to terminate this Agreement upon the occurrence of an Event of Bankruptcy, except as may otherwise be agreed with the trustee or receiver appointed to manage the affairs of the Bankrupt Party, the Other Party shall continue to make all payments required of it under this Agreement as if the Event of Bankruptcy had not occurred, the Bankrupt Party shall not have the right to terminate any license granted herein. The term “Event of Bankruptcy” means: (i) filing in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of the Bankrupt Party or of its assets; (ii) proposing a written agreement of composition or extension of a Bankrupt Party’s debts; (iii) being served with an involuntary petition against the Bankrupt Party, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof; (iv) proposing or being a party to any dissolution or liquidation when insolvent; or (v) making an assignment for the benefit of creditors. Without limitation, the Bankrupt Party’s rights under this Agreement shall include those rights afforded by 11 U.S.C. § 365(n) of the United States Bankruptcy Code (the “Bankruptcy Code”) and any successor thereto. If the bankruptcy trustee of a Bankrupt Party as a debtor or debtor-in-possession rejects this Agreement under 11 U.S.C. § 365(o) of the Bankruptcy Code, the Other Party may elect to retain its rights licensed from the Bankrupt Party hereunder (and any other supplementary agreements hereto) for the duration of this Agreement and avail itself of all rights and remedies to the full extent contemplated by this Agreement and 11 U.S.C. § 365(n) of the Bankruptcy Code, and any other relevant laws.

12.3 Effects of Termination .

(a) Return of Material . In the event of early termination of this Agreement for any reason: (i) all rights and licenses granted to Licensee under this Agreement shall terminate (including all rights and licenses with respect to Licensed Patents and Licensed Know-How), and (ii) Licensee shall transfer to Licensor all data, files, records, information and other materials (including clinical supplies of Licensed Product and including the originals of any registrations and/or importation documents as specified in Section 7.4) in its possession or control relating to, containing or comprising the Licensed Product, including Licensor’s Confidential Information .

(b) Transfer of Materials . In the event of early termination of this Agreement in accordance with Section 12.2 ( c ) above:

(i) to the extent not transferred pursuant to Section 12.3(a), Licensee shall provide to Licensor a copy of any and all documentation and data owned by Licensee and in tangible form at the time of termination of the Agreement that has been generated with respect to the Licensed Product and is necessary to enable Licensor to continue development of a Licensed Product and the commercialization thereof in the Territory (collectively, the “ Licensee Product Data ”), and Licensor may use such Licensee Product Data at its discretion on an exclusive basis, to the extent necessary to enable Licensor, its Affiliates and Third Parties on behalf of Licensor or its Affiliates to continue to develop and commercialize a Licensed Product in the Territory; and

(ii) if such termination occurs after a Licensed Product has received Regulatory Approval, Licensee shall, if permitted under applicable Law, promptly transfer and deliver to Licensor original copies of any and all Regulatory Approvals obtained in connection with the Licensed Product in the Territory (including any and all official registrations, licenses, permits, certificates, and/or importation documents issued by Regulatory Authorities in the Territory), as well as any and all regulatory documentation and applications for Regulatory Approval submitted to Regulatory Authorities in the Territory in connection with the Licensed Product; Licensor shall pay Licensee’s direct, out-of-pocket costs for compliance with this Section 12.3(b)(ii); and

(iii) to the extent that any Regulatory Approval is issued in the name of Licensee, its Affiliates, Sublicensees or other designee, Licensee shall, to the extent permitted by applicable Law, promptly assign or procure the assignment to Licensor (or its designee) such Regulatory Approvals, and in the event assignment is not permitted under applicable Law or cannot be carried out for any other reason, the Licensee shall take all steps that are necessary and/or desirable to assist Licensor to obtain such Regulatory Approvals in the name of Licensor (or its designee) in the Territory, with such actions including without limitation coordinating with the applicable Regulatory Authority, furnishing all necessary information and documents in respect thereof, and promptly cancelling and terminating (as necessary) all Regulatory Approvals held by the Licensee, its Affiliate(s), Sublicensee(s) and/or other designee(s) which are not otherwise assignable or transferable to the Licensor (or its designee); Licensor shall pay Licensee’s direct, out-of-pocket costs for compliance with this Section 12.3(b)(iii); and

(iv) Licensee shall assign (or cause its Affiliates to assign) to Licensor all agreements with any Third Party with respect to the conduct of clinical trials for the Licensed Product, including agreements with contract research organizations, clinical sites and investigators, unless expressly prohibited by any such agreement or unless such agreement covers clinical trials for products in addition to the Licensed Products (in which case Licensee shall cooperate with Licensor in all reasonable respects to secure the consent of such Third Party to such assignment or to the conclusion of a new agreement between the Licensor and the Third Party on terms substantially similar to the agreement between Licensee and the Third Party), and Licensor shall assume all obligations under all such agreements.

(c) Survival of Sublicenses . All sublicenses granted by Licensee to Sublicensees shall survive termination of this Agreement, and Licensor shall assume all such sublicenses as the Licensor thereunder in accordance with the terms of such sublicenses; provided, however, that Licensor may elect to terminate any such sublicenses, and Licensor shall not be required under this Section 12 to assume obligations under any such sublicense that are greater in scope than those set forth in this Agreement.

(d) Remedies for Termination . Expiration or termination of this Agreement by either Party shall not affect any claim, demand, liability or right of a Party arising pursuant to this Agreement prior to such termination or expiration hereof.

12.4 Survival . The following provisions shall survive the termination or expiration of this Agreement: Sections 6 (with respect to Net Sales made prior to expiration or termination of this Agreement), 7.3, 7.6(a), 9, 11, 12.3, 12.4, 13, and all provisions of the PHS License that are binding on Licensee and are specified in the PHS License as surviving the expiration or termination thereof.

Section 13. Miscellaneous

13.1 Waiver . The waiver by any Party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach.

13.2 Modification . No change, modification, or waiver of any term of this Agreement shall be valid unless it is in writing and signed by both Parties.

13.3 Entire Agreement . This Agreement (including all exhibits and attachments hereto, all of which are incorporated herein by reference) constitutes the entire agreement between the Parties (and their Affiliates) with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, whether oral or written, between the Parties, except for the Confidential Disclosure Agreement described in Section 9.7.

13.4 English Language . This Agreement is written and executed in the English language. Any translation into any other language shall not be an official version of this Agreement and in the event of any conflict in interpretation between the English version and such translation, the English version shall prevail.

13.5 Assignment . Licensor and Licensee shall be entitled to assign its rights or delegate its obligations hereunder to any of its Affiliates or to a Third Party upon (30) thirty days’ prior written notice to Licensor. All sublicenses granted to Affiliates or Third Parties pursuant to this Section 13.5 shall be subject to all terms, conditions, obligations and covenants of this Agreement and all applicable provisions of the PHS License. In addition, each Party hereby consents to the other Party’s assignment of its rights and obligations under this Agreement in connection with a Change of Control of such Party. No such assignment shall remove or mitigate the obligations or liability of the assigning Party unless otherwise agreed in writing by the non-assigning Party. For clarity, if Licensor is involved in a Change of Control with a Third Party: (a) the intellectual property rights of such Third Party existing as of the date of closing of such Change of Control or developed outside of any activities under this Agreement (if such Third Party becomes the assignee of this Agreement); or (b) the intellectual property rights of such Third Party (if such Third Party remains an Affiliate of Licensor), shall be automatically excluded from the definitions of Licensed Patents and Licensed Know-How licensed to Licensee under this Agreement.

13.6 Independent Contractor . This Agreement shall not be construed as constituting a partnership, joint venture or any other form of legal association that would impose liability upon one Party for the act or failure to act of the other Party, or as providing either Party with the right, power or authority (express or implied) to create any duty or obligation of the other Party.

13.7 Third Party Beneficiaries . Any sublicense granted by Licensee to an Affiliate or Third Party pursuant to Section 2.1(c) is intended by the Parties to be a third party beneficiary of this Agreement; provided that such Sublicense is in compliance with all of its obligations under any such sublicense to the extent that such obligations are required under this Agreement. Except as expressly provided in this Section 13.7, the Parties do not intend, nor will any Section of this Agreement be interpreted, to create for any person any third party beneficiary rights.

13.8 Disputes . Disputes regarding the scope, validity or enforceability of Patents are excluded from this Section 13.8.

(a) Good Faith Negotiations by Officers . In the event of disputes between the Parties arising out of or relating to this Agreement, or the breach, termination (other than termination for convenience in accordance with Sections 12.2(a) and 12.3(d)) or invalidity thereof, a Party seeking to resolve such dispute will, by written notice to the other, have such dispute referred to their respective chief executive officers, for attempted resolution by good faith negotiations within fourteen (14) days after such notice is received.

(b) Mediation . In the event that the Parties are unable to resolve a dispute through good faith negotiations pursuant to Section 13.8(a)

, the Parties agree to submit such dispute to non-binding mediation using an industry expert mutually acceptable to the Parties. The costs of any such mediation shall be shared by the Parties equally.

(c) Arbitration . If all good faith attempts to resolve a dispute through negotiations and mediation pursuant to Sections 13.8(a) and (b) have failed after sixty (60) days from notice provided pursuant to Section 13.8(a), then upon the request of either Party, the dispute shall be finally resolved by binding arbitration administered by I.C.C. Arbitration (the “ICC Rules”).

(i) The arbitration shall be conducted by a panel of three neutral arbitrators (the “ Panel ”) appointed in accordance with the ICC Rules.

(ii) The arbitration proceedings shall take place in Geneva, Switzerland. The arbitral proceedings and all pleadings shall be in the English language. Any written evidence originally in a language other than English shall be submitted in English translation accompanied by the original or true copy thereof.

(iii) The Panel shall have the power to decide all questions of arbitrability.

(iv) At the request of either Party, the Panel will enter an appropriate protective order to maintain the confidentiality of information produced or exchanged in the course of the arbitration proceedings.

(v) The Panel is empowered to award any remedy allowed by law, including monetary damages, prejudgment interest and punitive damages, and to grant final, complete, interim or interlocutory relief, including injunctive relief.

(vi) The Parties may apply to a court of competent jurisdiction within the Hong Kong, or the United States for a temporary restraining order, preliminary injunction, or other interim or conservatory relief, as necessary, without breach of this arbitration agreement and without any abridgment of the powers of the arbitrators. Judgment on the award rendered by the Panel may be entered in any court having jurisdiction thereof. Each Party hereby waives any defenses it may have to the personal jurisdiction and venue of such courts to resolve such disputes, including without limitation the defense of forum non conveniens , and each Party agrees not to file any motion to seek any relief under any forum non conveniens defense.

(vii) Each Party shall bear its own legal fees arising in connection with the dispute. The Panel may assess costs, fees and expenses of the ICC and the Panel to the Parties in the manner the Panel deems appropriate under the circumstances.

13.9 Notices . Except as otherwise provided herein, all notices or other communications hereunder shall be deemed sufficient if given in writing, via registered mail (return receipt requested), postage paid, or by reputable high speed delivery service ( e.g. , FedEx) or by courier addressed to the appropriate Party at the address set forth below, or at such other place as such Party may designate in writing to the other Party.

If to Licensor:	RegeneRx Biopharmaceuticals, Inc. 15245 Shady Grove Road Suite 470 Rockville, Maryland 20850 U.S.A. Attn: President and CEO Phone: 301.208.9191 Fax: (301) 208-9191

With a copy to:	Ken Krisko, Esq. Cooley LLP One Freedom Square Reston Town Center 11951 Freedom Drive Reston, VA 20190-5656 Direct: (703) 456-8187 Fax: (703) 456-8100

If to Licensee:	Lee’s Pharmaceutical (HK) Limited Unit 110-111, Bioinformatics Center No. 2 Science Park West Avenue Hong Kong Science Park Shatin, Hong Kong Attn: Benjamin Li Fax.: 00852 23141708

All such notices shall be effective upon receipt.

13.10 Governing Law . This Agreement shall be governed and construed in accordance with the laws of New York, USA without regard to its principles of conflict of laws. The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.

13.11 Severability . The provisions of this Agreement are severable. If any item or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. The Parties will use diligent good faith efforts to revise this Agreement as and to the extent reasonably necessary to effectuate their original intent and purpose under this Agreement.

13.12 Jurisdiction and Venue . In connection with any dispute arising hereunder or in connection with the subject matter hereof that is not settled in accordance with Section 13.8

, each of the Parties hereby consents to the exclusive jurisdiction and venue of the courts of Geneva, Switzerland. Each Party hereby irrevocably waives any right that it may have to assert that any such court lacks jurisdiction or that such forum is not convenient.

end of page
[ signatures appear on following page]

IN WITNESS WHEREOF, this Agreement has been executed by a duly authorized officer of each Party as of the Effective Date.

		Lee’s Pharmaceutical (HK) Limited


		By: /s/ Benjamin Li
		Name: Benjamin Li
		Title: Chief Executive Officer




		RegeneRx Biopharmaceuticals, Inc.


		By: /s/J.J. Finkelstein
		Name: J.J. Finkelstein
		Title: President & CEO

Exhibits

Exhibit A - Licensed Patents: to be filled by Regenerx

Exhibit B - PHS License: to be filled by Regenerx

Exhibit C - PHS License Terms Applicable to Licensee

Exhibit A

LICENSED PATENTS

A- 1

Exhibit B

PHS LICENSE

Previously filed as Exhibit 10.1 to Annual Report on Form 10-KSB for the year ended December 31, 2000 (File No. 001-15070) (Filed April 2, 2001)

B- 2

Exhibit C

PHS LICENSE TERMS

APPLICABLE TO LICENSEE

For the purposes of this Exhibit C only, terms in bold have the meanings given such terms in the PHS License.

5.01

PHS reserves on behalf of the Government an irrevocable, nonexclusive, non-transferable, royalty-free license for the practice of all inventions licensed under the Licensed Patent Rights throughout the world by or on behalf of the Government and on behalf of any foreign government or international organization pursuant to any existing or future treaty or agreement to which the Government is a signatory. Prior to the First Commercial Sale , Licensee agrees to provide PHS reasonable quantities of Licensed Products or materials made through the Licensed Processes solely for PHS research use and not for purposes of commercial development, manufacture or distribution, at a price equal to Licensee’s cost of such.

5.02

Licensee agrees that products used or sold in the United States embodying Licensed Products or produced through use of Licensed Processes shall be manufactured substantially in the United States, unless a written waiver is obtained in advance from PHS .

5.03

Licensee acknowledges that PHS may enter into future Cooperative Research and Development Agreements (CRADAs) under the Federal Technology Transfer Act of 1986 that relate to the subject matter of this Agreement . PHS agrees to notify Licensee , as soon as is practical of any proposed CRADA that relates to the subject matter of this Agreement . Licensee agrees not to unreasonably deny requests for a Research License from such future collaborators with PHS when acquiring such rights is necessary in order to make a Cooperative Research and Development Agreement (CRADA) project feasible. As of the effective date of this Agreement , Licensee requests that Licensee have an opportunity to join as a party to any proposed Cooperative Research and Development Agreement (CRADA).

5.04

In addition to the reserved license of Paragraph 5.01 above, PHS reserves the right to grant such nonexclusive Research Licenses directly or to require Licensee to grant nonexclusive Research Licenses on commercially reasonable terms. The purpose of this Research License is to encourage basic research, whether conducted at an academic or corporate facility. In order to safeguard the Licensed Patent Rights , however, PHS shall consult with Licensee before granting to commercial entities a Research License or providing to them research samples of Licensed Products or materials made through the Licensed Processes , provided however that PHS will not provide materials obtained from Licensee under Paragraph 5.01 above to third parties, except with Licensee’s prior written consent, which shall not be unreasonably withheld.

C- 3

8.01

Licensee agrees to keep accurate and correct records of Licensed Products made, used, sold, or imported and Licensed Processes practiced under this Agreement appropriate to determine the amount of royalties due PHS . Such records shall be retained for at least five (5) years following a given reporting period and shall be available during normal business hours upon five (5) business days prior written notice from PHS to Licensee for inspection at the expense of PHS by an accountant or other designated auditor selected by PHS for the sole purpose of verifying reports and payments hereunder. The accountant or auditor shall only disclose to PHS information relating to the accuracy of reports and payments made under this Agreement. If an inspection shows an under reporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then Licensee shall reimburse PHS for the cost of the inspection at the time Licensee pays the unreported royalties, including any late charges as required by Paragraph 9.08 of this Agreement . All payments required under this Paragraph shall be due within thirty (30) days of the date PHS provides Licensee notice of the payment due.

10.01

Licensee shall use its reasonable best efforts to bring the Licensed Products and Licensed Processes to Practical Application . “Reasonable best efforts” for the purposes of this provision shall include substantial adherence to the Commercial Development Plan at Appendix F and substantial performance of the Benchmarks at Appendix E as may be amended from time to time by mutual written consent. The efforts of sublicensees and Affiliates shall be considered the efforts of Licensee . To the extent that the Benchmarks or development obligations set forth in Appendix E differ from or conflict with those set forth in the Commercial Development Plan in Appendix F, Appendix E shall be considered to supersede Appendix F and the Commercial Development Plan in Appendix F shall be amended to be consistent with Appendix E.

10.02

Upon the First Commercial Sale , until the expiration of this Agreement , Licensee shall use its reasonable best efforts to make Licensed Products and Licensed Processes reasonably accessible to the United States public.

12.05

Licensee shall indemnify and hold PHS , its employees, students, fellows, agents, and consultants (the “Indemnified Parties” ) harmless from and against all liability, demands, damages, expenses, and losses, including but not limited to death, personal injury, illness, or property damage (the “Indemnified Losses” ) suffered by an Indemnified Party in connection with or arising out of a) the use by or on behalf of Licensee , its sublicensees, directors, employees, or third parties of any Licensed Patent Rights , or b) the design, manufacture, distribution, or use of any Licensed Products , Licensed Processes or materials by Licensee , or other products or processes developed in connection with or arising out of the Licensed Patent Rights . Licensee agrees to maintain a liability insurance program consistent with sound business practice. Notwithstanding any other provision to the contrary, Licensee shall have no obligation to indemnify an Indemnified Party from an Indemnified Loss in connection with or arising out of the design, manufacture, distribution or use of any Licensed Product or Licensed Process by or on behalf of the Indemnified Party .

C- 4

13.05

PHS shall specifically have the right to terminate or, with Licensee’s consent, modify, at its option, this Agreement , if PHS determines that the Licensee : 1) is not using its reasonable best efforts to effectuate the Commercial Development Plan submitted with its request for a license and the Licensee cannot otherwise demonstrate to PHS’s satisfaction that the Licensee has taken, or can be expected to take within a reasonable time, effective steps to achieve Practical Application of the Licensed Products or Licensed Processes ; 2) has not used its reasonable best efforts to achieve the Benchmarks as my be modified under Paragraph 9.02; 3) has wilfully made a false statement of, or wilfully omitted, a material fact in the license application or in any report required by this Agreement ; 4) has committed a material breach of a covenant or agreement contained in the license; 5) is not keeping Licensed Products or Licensed Processes reasonably available to the public after commercial use commences; 6) cannot reasonably satisfy unmet health and safety needs; or 7) cannot reasonably justify a failure to comply with the domestic production requirement of Paragraph 5.02 unless waived. In making this determination, PHS will take into account the normal course of commercial development programs conduct with sound and reasonable business practices and judgment and the annual reports submitted by Licensee under Paragraph 9.02. Prior to invoking this right, PHS shall give written notice to Licensee providing Licensee specific notice of, and a ninety (90) day opportunity to respond to, PHS’s concerns as to the previous items 1) to 7). If Licensee fails to alleviate PHS’s concerns as to the previous items 1) to 7) or fails to initiate corrective action to PHS’s reasonable satisfaction, PHS may terminate this Agreement .

13.07

PHS reserves the right according to 35 U.S.C. § 209(1)(4) to terminate or modify this Agreement if it is determined that such action is necessary to meet requirements for public use specified by federal regulations issued after the date of the license and such requirements are not reasonably satisfied by Licensee .

13.08

Within thirty (30) days of receipt of written notice of PHS’s unilateral decision to modify or terminate this Agreement , Licensee may, consistent with the provisions of 37 C.F.R. 404.11, appeal the decision by written submission to the designated PHS official. The decision of the designated PHS official shall be the final agency decision. Licensee may thereafter exercise any and all administrative or judicial remedies that may be available.

13.09

Within ninety (90) days of expiration or termination of this Agreement under this Article 13, a final report shall be submitted by Licensee . Any royalty payments, including those incurred but not yet paid (such as the full minimum annual royalty), and those related to patent expense, due to PHS shall become immediately due and payable upon termination or expiration. If terminated under this Article 13, sublicensees may elect to convert their sublicenses to direct licenses with PHS and Licensee pursuant to Paragraph 4.03.

C- 5

EXHIBIT 31.1

CERTIFICATION

I, J.J. Finkelstein certify that:

1. I have reviewed this quarterly report on Form 10-Q of RegeneRx Biopharmaceuticals, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2012
	/s/J.J. Finkelstein
	J.J. Finkelstein
	President and Chief Executive Officer
	(Principal Executive Officer and Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RegeneRx Biopharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 (the “Report”), I, J.J. Finkelstein, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of and for the periods presented in the Report.

This certification accompanies this Report to which it relates, shall not be deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

Date: November 14, 2012
	/s/J.J. Finkelstein
	J.J. Finkelstein
	President and Chief Executive Officer
	(Principal Executive Officer and Principal Financial Officer)