Regenerx Biopharmaceuticals Inc.
Annual Report 2010

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KREGENERX BIOPHARMACEUTICALS INC - RGRXFiled: March 31, 2011 (period: December 31, 2010)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from to Commission file number: 001-15070RegeneRx Biopharmaceuticals, Inc.(Exact name of registrant as specified in its charter) Delaware 52-1253406State or other jurisdiction of (I.R.S. Employerincorporation or organization Identification No.) 15245 Shady Grove Road, Rockville, MD 20850(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: 301-280-1992Securities registered pursuant to Section 12(b) of the Act: None.Securities registered pursuant to section 12(g) of the Act:Common Stock, $0.001 par value, including associated Series A Participating Cumulative Preferred Stock Purchase RightsWarrants to Purchase Common Stock, $0.001 par valueIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ NoIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the SecuritiesExchange 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. þ Yes o NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (orfor such shorter period that the registrant was required to submit and post such files). o Yes o NoIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is notcontained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smallerreporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 ofthe Securities Exchange Act of 1934. (Check one): Large accelerated filero Accelerated filer o Non-accelerated filer o 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 Act). o Yes þ NoAs of June 30, 2010, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately$11.5 million. Such aggregate market value was computed by reference to the closing price of the Common Stock as reported on theSource: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NYSE Amex on June 30, 2010.The number of shares outstanding of the registrant’s common stock, as of March 30, 2011, was 79,860,282.DOCUMENTS INCORPORATED BY REFERENCENone. Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. TABLE OF CONTENTS PART I 3 Item 1. Business 3 Item 1A. Risk Factors 11 Item 1B. Unresolved Staff Comments 23 Item 2. Properties 23 Item 3. Legal Proceedings 23 Item 4. Reserved 23 PART II 24 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Securities 24 Item 6. Selected Financial Data 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 30 Item 8. Financial Statements and Supplementary Data 30 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 30 Item 9A. Controls and Procedures 30 Item 9B. Other Information 31 PART III 32 Item 10. Directors, Executive Officers and Corporate Governance 32 Item 11. Executive Compensation 34 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 39 Item 13. Certain Relationships and Related Transactions, and Director Independence 40 Item 14. Principal Accounting Fees and Services 41 PART IV 42 Item 15. Exhibits, Financial Statement Schedules 42 SIGNATURES 47 INDEX TO FINANCIAL STATEMENTS 49 EXHIBIT INDEX 65 Exhibit 23.1 Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 Exhibit 32.2 2Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IThis Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of FinancialCondition 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-lookingstatements 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 futurefinancial performance or capital resources, our clinical development programs and schedules, our anticipated growth and trends inour business, and other characterizations of future events or circumstances are forward-looking statements. We cannot guaranteethat we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are anumber of important factors that could cause actual results, levels of activity, performance or events to differ materially from thoseexpressed or implied in the forward-looking statements we make, including those described under “Risk Factors” set forth below. Inaddition, any forward-looking statements we make in this report speak only as of the date of this report, and we do not intend toupdate any such forward-looking statements to reflect events or circumstances that occur after that date.Item 1. Business.GeneralWe are a biopharmaceutical company focused on the development of a novel therapeutic peptide, Tß4, for tissue andorgan protection, repair, and regeneration. We have formulated Tß4 into three distinct product candidates currently in clinicaldevelopment: • RGN-352, an injectable product candidate to treat cardiovascular diseases, central nervous system diseases, and othermedical indications that may be treated by systemic administration, for which we began a Phase 2 clinical trial in thesecond half of 2010; • RGN-259, a topical eye drop for ophthalmic indications for which we are supporting a physician-sponsored clinical trial inpatients with dry eye; and • RGN-137, a topically applied gel for chronic dermal wounds and reduction of scar tissue that is currently in a Phase 2clinical trial for the treatment of the skin defect epidermolysis bullosa, or EB.We have a fourth product candidate, RGN-457, in preclinical development. RGN-457 is an inhaled formulation of Tß4targeting cystic fibrosis and other pulmonary diseases.In addition to our four pharmaceutical product candidates, we are also pursuing the commercial development of peptidefragments and derivatives of Tß4 for cosmeceutical use. Cosmeceuticals are cosmetic products with biologically active ingredients.We believe the biological activities of these fragments may be useful, for example, in developing novel cosmeceutical products forthe anti-aging market.Overview of Tß4Tß4 is a naturally occurring 43-amino acid peptide that was originally isolated from bovine thymus glands. It plays a vitalrole in cell structure and motility and in the protection, regeneration, remodeling and healing of tissues.Although it is recognized that wound healing is a complex process, most companies working to develop new drugs in thisarea have focused primarily on the development of growth factors to stimulate healing and have, to date, failed to demonstratedramatic improvements in the healing process. Unlike growth factors, numerous preclinical animal studies, published by independentresearchers, have identified several important biological activities involving Tß4 that we believe make it potentially useful as awound healing, repair and tissue regenerating agent. These activities include: • Progenitor (Stem) Cell Differentiation. Research published in the journal Nature in November 2006 featured thediscovery that Tß4 is the key signaling molecule that triggers adult epicardial progenitor cells, or EPCs, to differentiateinto coronary blood vessels. EPCs are partially differentiated stem cells that can further differentiate into specific cell typeswhen needed. Confirmatory research published in 2009 in the Journal of Molecular and Cellular Cardiology concludedthat Tß4 is responsible for the initiation of the embryonic coronary developmental program and EPC differentiation inadult mice. These publications confirm that Tß4’s interaction with EPCs is necessary for the maintenance of a healthyadult animal heart, as well as normal fetal animal heart development. 3Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe 2006 Nature publication also concluded that Tß4’s interaction with EPCs resulted in the formation of cardiomyocytesthat repaired damaged myocardium, or heart tissue, in mice after an induced acute myocardial infarction, or AMI, commonly knownas a heart attack. Research published in the journal Circulation in April 2008 showed Tß4’s cardioprotective effects in a pigischemic-reperfusion model. This pig model is accepted as an important model upon which to base human clinical research, as pigsare larger mammals, the anatomy of the pig heart is similar to the human heart, and vascular response processes are completed five tosix times faster in pigs than in humans, so that long-term results can be obtained in a relatively short period of time. This research alsoidentified Tß4’s interaction with EPCs as the underlying basis of cardioprotection through the differentiation of EPCs intocardiomyocytes, yielding statistically significant cardiac functional recovery results when compared to the administration ofplacebo.Similar research in the area of brain tissue was published in the journal Neuroscience in September 2009. This publicationconcluded that Tß4 triggered the differentiation of oligodendrocyte progenitor cells to form myelin-producing oligodendrocytes,which led to the remyelination of axons in the brain of mice with experimental autoimmune encephalomyelitis, or EAE. This mousemodel is an accepted small animal model for the study of multiple sclerosis. • Actin Regulation. Tß4 regulates actin, which comprises up to 10% of the protein of non-muscle cells in the body and playsa central role in cell structure and in the movement of cells. Research studies have indicated that Tß4 stimulates themigration of human keratinocytes, or skin cells, human endothelial cells, and progenitor cells. Endothelial cells are themajor cell type responsible for the formation of new blood vessels, a process known as angiogenesis. Certain of thesestudies conducted at the National Institutes of Health, or NIH were the first to suggest the role of Tß4 in wound healing.The data from these studies encouraged us to license the rights to Tß4 from the NIH in 2001 and to launch an initialclinical development program that targeted the use Tß4 for chronic dermal wounds. • Reduction of Inflammation. Uncontrolled inflammation is the underlying basis of many pathologies and injuries.Research has shown that Tß4 is a potent anti-inflammatory agent in skin cells and in corneal epithelial cells in the eye.Tß4 has also been shown to decrease the levels of inflammatory mediators and to significantly reduce the influx ofinflammatory cells in the reperfused heart of animals. More recent preclinical research suggests that Tß4 blocks activationof the NFκB pathway, which is involved in DNA activation of inflammatory mediators, thereby modulating inflammationin the body. This anti-inflammatory activity may explain, in part, the mechanism by which Tß4 appeared to improvefunctional outcome in the mouse multiple sclerosis model described above, as well as promoting repair in the heart andskin. Identifying a factor such as Tß4 that blocks activation of NFκB suggests that Tß4 could have additional importanttherapeutic applications for inflammation-related diseases, such as cancer, osteoarthritis, rheumatic diseases, autoimmunediseases, inflammatory pulmonary disease and pancreatitis. • Collagen and Laminin-5 Stimulation. Tß4 has a number of additional biological activities shown to reduce inflammation,stimulate the formation of collagen, and up-regulate the expression of laminin-5, a subepithelial basement membraneprotein. Both collagen and laminin-5 are central to healthy tissue and the prevention of disease. • Apoptosis. Tß4 has been shown to prevent apoptosis, or programmed cell death, in two animal models and in two tissuetypes. In the rodent model, corneal apoptosis, or loss of corneal epithelial cells leading to corneal epithelial thinning, wasprevented through topical administration of Tß4, and in the heart muscle of ischemic animal models, such as in mice andpigs, cell death was prevented by the systemic administration of Tß4.In combination, we believe that these various biological activities work together to play a vital role in the healing andrepair of injured or damaged tissue and suggest that Tß4 is an essential component of the tissue protection and regeneration processthat may lead to many potential medical applications. All of our product candidates are based on Tß4, manufactured as a syntheticcopy of the naturally occurring peptide and formulated for various routes of administration and applications. 4Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur Product CandidatesRGN-352Our product candidate RGN-352 is an injectable formulation of Tß4 for systemic administration. We have initiallytargeted RGN-352 for patients who have suffered an AMI. Preclinical research published in the scientific journal Nature hasindicated that Tß4 can guide specific types of stem cells from the outer layer of the heart to generate new myocardial blood vesselsand tissue at injured sites.Clinical Development. In 2009, we completed a Phase 1 clinical trial evaluating the safety, tolerability and thepharmacokinetics of the intravenous administration of RGN-352. We also designed this trial to explore the use of RGN-352 in otherindications in which acute administration of Tß4 may be warranted. We conducted the Phase 1 trial in two consecutive parts, referredto as Phase 1A and Phase 1B, both of which were double-blind, placebo-controlled, and dose-escalating over four doses. We enrolleda total of 60 healthy subjects in the trial, consisting of 40 subjects in each phase, of which 20 subjects participated in both phases. InPhase 1A, we evaluated a single administration of RGN-352, and in Phase 1B we evaluated once daily administration for 14consecutive days.In September 2008, we reported the results of Phase 1A. The single intravenous injection of RGN-352 was well-tolerated atall four dose levels. In December 2009, we reported the results of Phase 1B. A daily intravenous injection of RGN-352 for 14consecutive days was also observed to be well-tolerated at all four dose levels. There were no reported dose-limiting adverse eventsin either Phase 1A or Phase 1B.In May 2010, we were awarded a $3 million grant from the NIH’s Heart, Lung and Blood Institute to support the furtherdevelopment of RGN-352.Future Plans. Based on data from animals treated with RGN-352 post-myocardial infarction and the results of our Phase 1trial, we began a Phase 2 clinical trial in the second half of 2010 to evaluate RGN-352 in patients who have suffered an AMI and werescheduled to begin enrolling patients near the end of the first quarter of 2011. We designed this trial to evaluate RGN-352’scardioprotective effects and its ability to salvage and regenerate damaged cardiac tissue and improve cardiac function after a heartattack. However, in March 2011, we were notified by the U.S. Food and Drug Administration, or FDA that the trial had been placedon clinical hold pending the resolution of compliance issues at one of our contract manufacturers. Based on available information,we are unable to estimate how long the trial will be on clinical hold. The clinical hold is limited to Good Manufacturing Practicecompliance issues at our contract manufacturer and is not related to the manufacture of Tß4 peptide, safety of RGN-352, the trialprotocol or our clinical development plan, nor does it affect any of our other clinical trials or drug candidates.Of significance, our Phase 2 AMI trial allows for an interim review of patient data from an initial group of evaluatedpatients. Because of our limited capital resources, we will need to raise additional capital to complete this trial. Depending on ourcapital resources, we may conduct the AMI trial while continuing strategic partnership discussions with biotechnology andpharmaceutical companies to further clinical development of RGN-352.Recent preclinical research published in the scientific journals Neuroscience and Journal of Neurosurgery also indicatesthat RGN-352 may prove beneficial for patients with multiple sclerosis, or MS, as well as stroke and traumatic brain injury. In thesestudies, the administration of Tß4 resulted in regeneration of neuronal tissue and improvement of neurological function. Based onthis research, we intend to support a proposed Phase 1/2 clinical trial to be conducted at a major U.S. medical center under aphysician-sponsored investigational new drug application, or IND, in order to evaluate the therapeutic potential of RGN-352 inpatients with MS. This trial is estimated to commence in early 2012.RGN-259Our product candidate RGN-259 is a sterile topical eye drop formulation of Tß4 for ophthalmic indications.Clinical Development. Emerging human clinical data from two compassionate use studies have demonstrated the ability ofRGN-259 to repair and regenerate corneal tissue. In the first compassionate study, a middle-aged diabetic woman had undergonecorneal epithelial debridement during surgery. The resultant corneal defect had not healed for 23 days prior to treatment with RGN-259. Typically, these wounds heal within a few days after surgery. Following treatment with RGN-259, the patient experiencedreduced ocular irritation and the wound fully healed within 11 days.In the second compassionate use study, a corneal specialist treated nine patients divided into two groups. The first groupconsisted of six patients with a single non-healing eye ulcer resulting from neurotrophic keratitis, or NK, a rare degenerative cornealdisease commonly caused by the herpes zoster virus and induced by a nerve impairment resulting in painful corneal lesions that canlead to blindness. The NK patients evaluated had defects that had not healed for at least six weeks and in some cases for several years.The second group consisted of three patients with diffuse punctate erosions, corneal defects that appear as numerous small pinhole-sized lesions. 5Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAll nine patients were treated with RGN-259 for periods of up to 49 days. The six NK patients with single non-healingulcers showed clinically significant improvement during the treatment with RGN-259 and the follow-up period, with four of the sixpatients healing completely. The completely healed ulcers remained healed during the follow-up period, and those that haddemonstrated significant improvement continued to improve after completion of treatment with RGN-259. The three patients withdiffuse punctate erosions demonstrated no significant improvement, although they did report reduced ocular irritation.We had previously initiated a Phase 2 clinical trial to evaluate RGN-259 in diabetic patients undergoing corneal epithelialdebridement, or removal of the outer transparent tissue layer of the front part of the eye, during vitrectomy surgery. In thisrandomized, double-blind, placebo-controlled, dose-response trial conducted at several U.S. clinical sites, we originally intended toevaluate the safety, tolerability, and healing efficacy of three different concentrations of RGN-259 compared to placebo, applied aseye drops, four times daily for up to 14 consecutive days.While we did not view this particular ophthalmic indication as a significant commercial opportunity, we believed that itrepresented a “proof-of-concept” clinical model to evaluate the safety and efficacy of RGN-259 for the treatment of cornealindications. We intended to obtain initial data that could be used to address other ophthalmic indications with larger marketpotential. Patient enrollment in the trial was significantly slower than anticipated due to newer surgical techniques and equipmentthat reduced the need for corneal epithelial debridement required for the trial. We closed the trial in January 2009, after completion ofthe first low-dose cohort of 12 patients, in order to focus our research on other commercial opportunities. The encouragingcompassionate use data described above, which we received during the course of the trial, also influenced our decision to close thetrial earlier than originally intended.In the 12 patients evaluated in the trial, there were no reported drug-related adverse events associated with RGN-259. Weobserved increased corneal epithelial thickening and reduced cell flare and inflammation in the low-dose patients treated with RGN-259 as compared to patients receiving placebo, which we believe to be indicative of corneal re-epithelialization and healing. None ofthe results from the trial are considered to be statistically significant.In all patients treated to date, RGN-259 has been well-tolerated, and there have been no drug-related adverse events. Basedon these preliminary findings, we believe that RGN-259 may provide a novel approach to the treatment of patients with cornealdefects.Future Plans. We are supporting a physician-sponsored clinical trial in patients with dry eye in order to gain furtherinsight into RGN-259’s ability to repair and regenerate ophthalmic tissues. Our support includes manufacturing and supplying RGN-259 for the trial and providing regulatory and clinical guidance. We are continuing to collaborate with the U.S. military to evaluatethe potential of RGN-259 to prevent or reduce eye damage caused by chemical warfare agents. We are also engaged in discussionswith potential partners regarding the clinical development of this product candidate. Once enough human data is generated, weintend to seek strategic partnerships with one or more ophthalmic specialty companies.RGN-137Our product candidate RGN-137 is a topical gel formulation of Tß4 intended to promote dermal wound healing and tissueregeneration. Preclinical research has demonstrated that Tß4 can accelerate dermal regeneration after a wound, while more recentresearch indicates that Tß4 can reduce scarring after injury in the skin and heart. Based on research conducted at the NIH, we initiateda series of Phase 2 clinical trials to evaluate RGN-137 for the treatment of three different types of skin wounds.Clinical Development — Epidermolysis Bullosa. In 2005, we began enrolling patients in a Phase 2 trial designed to assessthe safety and effectiveness of RGN-137 for the treatment of patients with EB. EB is a genetic defect that results in fragile skin andother epidermal tissues that can blister at the slightest trauma or friction, creating a wound that at times does not heal or heals poorly.In this randomized, double-blind, placebo-controlled, dose-response trial, nine U.S. clinical sites are enrolling a total of 36 patients toevaluate 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. We estimate the prevalence of EB in the United States to bebetween 20,000 and 30,000 patients, with a subpopulation of approximately 5,000 patients in the group eligible for inclusion in ourPhase 2 clinical trial. We received a grant of $681,000 from the FDA’s Office of Orphan Products Development to partially fund thistrial. While enrollment has been difficult due to the small addressable patient population, we currently expect to complete this trial in2011.Clinical Development — Pressure Ulcers. In late 2005, we began enrolling patients in a Phase 2 clinical trial designed toassess the safety and effectiveness of RGN-137 for the treatment of patients with chronic pressure ulcers, commonly known asbedsores. In this randomized, double-blind, placebo-controlled, dose-response trial, 15 clinical sites in the United States enrolled atotal of 72 patients to evaluate the safety, tolerability, and wound healing effectiveness of three different concentrations of RGN-137compared to placebo. RGN-137 was applied topically to the ulcers, once daily for up to 84 consecutive days. Patients in the trial werebetween 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 cm2. StageIII and IV pressure ulcers are full thickness wounds that penetrate through the skin and muscle, sometimes completely to the bone. 6Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn January 2009, we reported final data from this trial. RGN-137 was well-tolerated at all three dose levels studied, with nodose-limiting adverse events, which achieved the primary objective of the study. As for efficacy, all Tß4 doses performed similarlycompared to placebo, with no statistically significant efficacy results. Patients treated with the middle dose showed a 17% rate ofwound healing, which was the highest rate among the three active doses evaluated. The improvement in ulcer healing in this middledose group following nine weeks of treatment was equal to the improvement in patients treated with placebo after 12 weeks oftreatment.Clinical Development — Venous Stasis Ulcers. In 2006, we began enrolling patients in a Phase 2 trial designed to assessthe safety and effectiveness of RGN-137 for the treatment of patients with venous stasis ulcers. In this randomized, double-blinddose-response trial, eight clinical sites in Italy and Poland enrolled a total of 73 patients to evaluate the safety, tolerability, andwound healing effectiveness of three different concentrations of RGN-137 compared to placebo. RGN-137 was applied topically tothe ulcers, once daily for up to 84 consecutive days. Patients in the trial were between 18 to 79 years old and had at least one venousstasis ulcer with a surface area between 3 and 30 cm 2 . We were the sponsor of the trial, and it was conducted and funded by Sigma-Tau.In March 2009, we reported final data from the trial. RGN-137 was well-tolerated at all three dose levels, with no dose-limiting adverse events, which achieved the primary objective of the study. Thirty-three percent (33%) of the patients who receivedthe middle dose of RGN-137 had their ulcers heal completely after the 12 weeks of treatment, compared to 24% of patients receivingthe placebo, 16% of the patients receiving the lowest drug dose and 17% of patients receiving the highest drug dose. Of the patientsreceiving the middle dose whose ulcers healed completely, the median time to complete healing decreased by approximately 45%, ascompared to a 37% decrease in the time to healing for patients in the placebo-treated group. None of the differences observedbetween RGN-137 and placebo were statistically significant.Future Plans. Once we complete our Phase 2 EB trial, we will analyze the data in conjunction with our two othercompleted Phase 2 trials of RGN-137, along with preclinical data indicating Tß4’s ability to reduce scarring, at which time we willfurther evaluate our strategy for the clinical development of RGN-137.RGN-457Our preclinical product candidate RGN-457 is based on Tß4 formulated as an inhaled therapeutic agent. We havecompleted a substantial amount of preclinical work necessary for an IND application, and we are currently seeking a strategic partnerto assist in the development of RGN-457 for the treatment of cystic fibrosis, or CF. CF is a life-threatening, hereditary disease thatimpairs the patient’s ability to breathe due to the accumulation of mucus secretions in the airways of the lungs. The predicted medianage of survival for patients with cystic fibrosis is 37 years. There are estimated to be approximately 30,000 CF patients in the UnitedStates and approximately 40,000 CF patients in Europe. It is therefore considered to be an orphan disease in both territories. Whilewe believe RGN-457 may prove beneficial in the treatment of CF, we remain focused primarily on development of our other productcandidates while we continue strategic partnership discussions with respect to RGN-457.Peptide Fragments for Cosmeceutical ApplicationsWe are also seeking to identify and evaluate Tß4 peptide fragments and derivatives that may be useful as novelcomponents in cosmeceutical and consumer products. We have identified several amino acid sequences, and variations thereof,within the Tß4 molecule that have demonstrated in vitro activity in preclinical research studies that we have sponsored, and we havefiled a number of patent applications related to this research. We believe the biological activities of these fragments may be useful,for example, in developing novel cosmeceutical products for the anti-aging market. To date, research has suggested that thesefragments suppress inflammation, accelerate the deposition of certain types of collagen, promote the production of elastin, andinhibit programmed cell death, among other activities. Our development and commercialization strategy is to identify suitablecommercial partners to license these novel fragments for various cosmeceutical applications. We have held discussions with severalmultinational cosmetics and consumer products companies focused on potential collaborations to further develop and commercializethese fragments.Our StrategyWe seek to maximize the value of our product candidates by advancing their clinical development and then identifyingsuitable partners for further development, regulatory approval, and marketing. We intend to engage in strategic partnerships withcompanies with clinical development and commercialization strengths in desired pharmaceutical therapeutic fields. We are activelyseeking partners with suitable infrastructure, expertise and a long-term initiative in our medical fields of interest.For example, in 2004, we entered into a strategic partnership with Defiante Farmaceutica S.A., or Defiante, a subsidiary andone of several entities affiliated with Sigma-Tau Group, a leading international pharmaceutical company which collectively compriseour largest shareholder, or Sigma-Tau, for development and marketing of RGN-137 and RGN-352 for specified indications in Europeand other contiguous countries. Sigma-Tau also funded and co-managed our Phase 2 clinical trial of RGN-137 in Europe for thetreatment of venous stasis ulcers. 7Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsManufacturingWe use a contract manufacturer to produce bulk Tß4 by an established and proven manufacturing process known as solid-phase peptide synthesis, and we are in the early stages of qualifying backup manufacturers. While we do not currently have long-termsupply agreements in place, we intend to establish a long-term supply arrangement with at least one manufacturer once practicable.No assurance can be given, however, that such agreements will be negotiated on favorable terms, or at all. Contractors are selected onthe basis of their supply capability, ability to produce a drug substance in accordance with current Good Manufacturing Practicerequirements of the FDA, and ability to meet our established specifications.We also use a number of outside contract manufacturers to formulate bulk Tß4 into our product candidates. All of theseformulations may require modifications along with additional studies as we move through our clinical development programs. Asdescribed elsewhere in this report, our contract manufacturer for RGN-352 recently underwent a manufacturing inspection by theFDA and was alleged not to be in compliance with the FDA’s Good Manufacturing Practices. In March 2011, we were notified of thismatter by the FDA, and our Phase 2 AMI clinical trial was placed on clinical hold pending resolution of the issues with themanufacturer. If we are unable to use the RGN-352 previously produced by this manufacturer in our clinical trial, in order to continuethe trial we would need to have new material prepared by the current manufacturer if it has remediated the compliance issues to theFDA’s satisfaction or we would need to obtain an alternate manufacturer of RGN-352 for the trial.CompetitionWe are engaged in a business that is highly competitive, and our target medical indications are ones with significantunmet needs. Moreover, the cosmetic and cosmeceutical industries are rapidly developing new products based on new scientificresearch. Consequently, there are many enterprises, both domestic and foreign, pursuing therapies and products that could competewith ours. Most of these entities have financial and human resources that are substantially greater than ours, specifically with regardto the conduct of clinical research and development activities, clinical testing and in obtaining the regulatory approvals necessary tomarket pharmaceutical products. Brief descriptions of some of these competitive products follow: • RGN-352. Currently, there are no approved pharmaceutical products for regenerating cardiac tissue following a heartattack, nor are there approved pharmaceutical products for the remyelination of axons for patients with multiple sclerosis.However, many pharmaceutical companies and research organizations are developing products and technologies that areintended to prevent cardiac damage, improve cardiac function, and regenerate cardiac muscle after a heart attack. There arealso companies developing products that remyelinate neurons and provide functional improvement for multiple sclerosispatients. If we were to successfully develop RGN-352 for other cardiovascular indications, such as acute or chronic heartfailure, such a product would have to compete with other drugs or therapies currently marketed by large pharmaceuticalcompanies for similar indications, as would products for the treatment of multiple sclerosis. • RGN-259. Most specialty ophthalmic companies have a number of products on the market that could compete with RGN-259. There are numerous antibiotics to treat eye infections that cause corneal wounds and many eye lubrication products tohelp eye healing and function, many of which are sold without prescriptions. Companies also market steroids to treatcertain severe conditions within our area of interest. Allergan, Inc. has marketed Restasis TM, a relatively new approved eyedrop to treat dry eye. Dry eye is a condition related to a number of diseases and one that we believe could benefit from theuse of RGN-259. • RGN-137. Johnson & Johnson has marketed RegranexTM for patients with diabetic foot ulcers. Companies such asNovartis are developing and marketing artificial skins, which would compete with RGN-137 in the treatment of dermalwound healing. There are other companies developing new pharmaceutical products for wound healing. Products andtherapies such as antibiotics, honey-based ointments and low frequency cavitational ultrasound are also used to treatcertain types of dermal wounds. Moreover, dermal wound healing is a large and highly fragmented marketplace thatincludes numerous therapeutic products and medical devices for treating acute and chronic dermal wounds. • RGN-457. CF is a genetic defect for which there is no cure. There are mucolytic agents and antibiotic drugs on the market,such as Genentech’s pulmozyme and Novartis’ TOBI®, an inhaled version of tobramycin, that relieve the symptoms posedby CF and could potentially compete with RGN-457. • Cosmeceuticals. The cosmetics industry is highly competitive and dependent on effective marketing and distribution.There are multiple products currently launched by major international cosmetic enterprises that claim the same or similarbenefits that may be claimed with our product candidates. 8Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGovernment RegulationIn the United States, the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder,and other federal and state statutes and regulations govern, among other things, the testing, manufacturing, labeling, storing,recordkeeping, distribution, advertising and promotion of our product candidates. Regulation by governmental authorities in theUnited States and foreign countries will be a significant factor in the manufacturing and marketing of our product candidates and inour ongoing research and product development activities. Any product candidate we develop will require regulatory approval bygovernmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous preclinicalstudies, clinical trials and other approval procedures by the FDA and similar health authorities in foreign countries. The process ofobtaining these approvals and subsequent compliance with appropriate federal and state statutes and regulations requires theexpenditure of substantial resources.Preclinical studies must ordinarily be conducted to evaluate an investigational new drug’s potential safety by toxicologystudies and potential efficacy by pharmacology studies. The results of these studies, among other things, are submitted to the FDA aspart of an Investigational New Drug Application, or IND, which must be reviewed by the FDA before clinical trials can begin.Typically, clinical evaluation involves a three-stage process. Phase 1 clinical trials are conducted with a small number of healthyvolunteers to determine the safety profile and the pattern of drug absorption, distribution, metabolism and excretion, and to assess thedrug’s effect on the patient. Phase 2, or therapeutic exploratory, trials are conducted with somewhat larger groups of patients, who areselected by relatively narrow criteria yielding a more homogenous population that is afflicted with the target disease, in order todetermine preliminary efficacy, optimal dosages and expanded evidence of safety. Phase 2 trials should allow for the determinationof the dose to be used in Phase 3 clinical trials. Phase 3, or therapeutic confirmatory, large scale, multi-center, comparative trials areconducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of safety and efficacyrequired by the FDA and other regulatory authorities. The primary objective of Phase 3 clinical trials is to show that the drug conferstherapeutic benefit that outweighs any safety risks. All clinical trials must be registered with a central public database, such aswww.clinicaltrials.gov, and once completed, results of the clinical trials must be entered in the database.The results of all of these preclinical studies and clinical trials, along with detailed information on manufacturing, aresubmitted to the FDA in the form of a New Drug Application, or NDA, for approval to commence commercial sales. The FDA’s reviewof an NDA requires the payment of a user fee currently in excess of $1 million, which may be waived for the first NDA submitted by aqualifying small business. In responding to an NDA, the FDA may refuse to file the application if the FDA determines that theapplication does not satisfy its regulatory approval criteria, request additional information or grant marketing approval. Therefore,even if we complete Phase 3 clinical trials for our product candidates and submit an NDA to the FDA, there can be no assurance thatthe FDA will grant marketing approval, or if granted, that it will be granted on a timely basis. If the FDA does approve a productcandidate, it may require, among other things, post-marketing testing, including potentially expensive Phase 4 trials, which monitorthe safety of the drug. In addition, the FDA may in some circumstances impose risk evaluation and mitigation strategies that may bedifficult and expensive to administer. Product approvals may be withdrawn if compliance with regulatory requirements is notmaintained or if problems occur after the product reaches the market.Among the conditions for NDA approval is the requirement that the applicable clinical, pharmacovigilance, qualitycontrol and manufacturing procedures conform on an ongoing basis with current Good Clinical Practices, Good Laboratory Practices,current Good Manufacturing Practices, and computer information system validation standards. During the review of an NDA, the FDAwill perform a pre-licensing inspection of select clinical sites, manufacturing facilities and the related quality control records todetermine the applicant’s compliance with these requirements. To assure compliance, applicants must continue to expend time,money and effort in the area of training, production and quality control. After approval of any product, manufacturers are subject toperiodic inspections by the FDA. If a company fails to comply with FDA regulatory requirements, FDA may pursue a wide range ofremedial actions, including seizure of products, corrective actions, warning letters and fines. As described in this report, one of ourcontract manufacturers has recently been alleged by the FDA to have not complied with current Good Manufacturing Practices,which could impair our ability to timely conduct our pending Phase 2 AMI trial with RGN-352.In June 2004, we received orphan drug designation from the FDA for Tß4 for the treatment of EB. The FDA may designatea product or products as having orphan drug status to treat a disease or condition that affects less than 200,000 individuals in theUnited States, or, if patients of a disease number more than 200,000, the sponsor can establish that it does not realistically anticipateits product sales will be sufficient to recover its costs. If a product candidate is designated as an orphan drug, then the sponsor mayreceive incentives to undertake the development and marketing of the product, including grants for clinical trials, as well as a waiverof the user fees for submission of an NDA application. For example, as described above, we received a grant of approximately$681,000 in the aggregate for our ongoing Phase 2 clinical trial of RGN-137 to treat patients with EB. 9Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGenerally, if a product with an orphan drug designation subsequently receives the first marketing approval for theindication for which it has such designation, the product is entitled to marketing exclusivity for a period of seven years in the UnitedStates. There may be multiple designations of orphan drug status for a given drug and for different indications. Orphan drugdesignation does not guarantee that a product candidate will be approved by the FDA for marketing for the designation, and even if asponsor of a product candidate for an indication for use with an orphan drug designation is the first to obtain FDA approval of anNDA for that designation and obtains marketing exclusivity, another sponsor’s application for the same drug product may beapproved by the FDA during the period of exclusivity if the FDA concludes that the competing product is clinically superior. In thisinstance, the orphan designation and marketing exclusivity originally granted would be lost in favor of the clinically superiorproduct.Intellectual PropertyWe hold worldwide patents and patent applications covering peptide compositions, uses and formulations related todermal and ophthalmic indications and other organ and tissue repair activities, as well as for cosmetic and consumer productapplications. In 2001, we entered into a license agreement with the NIH under which we received an exclusive worldwide licensefrom the NIH for all claims within the scope of the NIH’s patent application, and any issued patents, covering the use of Tß4 as atissue repair and regeneration factor. During 2007, a patent was issued in Europe and the U.S. related to the original NIH patentapplication, which patent expires in July 2019. Corresponding patents have been granted in Hong Kong, Australia and China andcertain other territories. The issued European patent was opposed by a third party at the European Patent Office and inDecember 2009, we argued the case before the Opposition Division of the European Patent Office in Munich, Germany and prevailedwith certain amendments to the claims. In exchange for the exclusive license, we agreed to make certain minimum royalty andmilestone payments to the NIH. Through December 31, 2010, we have complied with all minimum royalty requirements, and nomilestone payments have been required under the agreement.We hold a U.S. patent relating to the use of Tß4 for treatment of alopecia, an autoimmune skin disease that results in hairloss, which expires in 2017, with corresponding patents in Europe and Singapore that expire in 2018. In 2006, we were issued apatent in China for the use of Tß4 to treat EB, which expires in 2022.Under a research agreement with The George Washington University, or GWU, we funded Tß4 research at GWU andreceived a sole and exclusive worldwide license to any resulting patents. While we no longer fund any research under this agreement,we remain obligated to pay GWU a royalty of 4% of the net sales, if any, of specified products covered by patents issued inconnection with the agreement. Pursuant to the research agreement, we have exclusive rights to patent applications filed in theUnited States and in Europe disclosing the use of Tß4 for the treatment of septic shock and associated syndromes, including AdultRespiratory Distress Syndrome. Two U.S. patents covered by this agreement have been issued, which expire in 2013 and 2014.We have also filed numerous additional U.S. and international patent applications covering various compositions, uses,formulations and other components of Tß4, as well as for novel peptides resulting from our research efforts, the latest of which werefiled during 2010. There can be no assurance that these, or any other future patent applications under which we have rights, willresult in the issuance of a patent or that any patent issued will not be subject to challenge or opposition. In the case of a claim ofpatent infringement by or against us, there can be no assurance that we will be able to afford the expense of any litigation that may benecessary to enforce our proprietary rights.Material AgreementsNational Institutes of HealthWe have entered into a license agreement with NIH under which we are obligated to pay an annual minimum royalty of$25,000. Additionally, we are obligated to pay the NIH a percentage of sales of qualifying product candidates, if any. There havebeen no such sales to date.Defiante/Sigma-TauWe have exclusively licensed certain internal and external wound healing European rights to Tß4 to Defiante. Theselicensed rights to Tß4 include its use to treat indications that are the subject of all of our current dermal clinical trials as well as thetreatment of heart attacks. The license excludes the use of Tß4 in ophthalmic indications and other indications that are disease-basedand not the result of a wound. Under the agreement, Sigma-Tau will develop Tß4 for the treatment of internal and external wounds inEurope and certain other contiguous and geographically relevant countries. The license agreement expires on a country-by-countrybasis upon the later of the expiration of the last to expire of any granted patent in the territory having at least one valid claimcovering the products then on the market, the expiration of any other exclusive or proprietary marketing rights, or January 2016. 10Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUnder the license agreement, Sigma-Tau is obligated to pay us a royalty on commercial sales, if any, and we will supply allrequired Tß4 for development. Upon the completion of a Phase 2 clinical trial for the covered indications that yields positive resultsin terms of efficacy and safety, Sigma-Tau must either pay us a $5 million milestone payment or initiate and fund a pivotal Phase 3clinical trial for the applicable product candidate in order to maintain the license. As described elsewhere in this report, in 2009, wecompleted two Phase 2 clinical trials of RGN-137 for the treatment of pressure ulcers and venous stasis ulcers, which, due to the lackof statistical significance of the reported efficacy results, have not triggered the milestone obligation described above.The license agreement with Defiante also contains future clinical and regulatory milestones in the licensed territory. Ifthose milestones are attained, certain performance criteria regarding commercial registration and minimum annual royalties will bepayable to us in each licensed country. The agreement does not prevent us from sublicensing the technology in countries outside thelicensed territory, and has no impact on any U.S. rights.Development AgreementsWe have entered into agreements with outside service providers for the manufacture and development of Tß4, theformulation of Tß4 into our product candidates, the conduct of nonclinical safety, toxicology and efficacy studies in animal models,and the management and execution of clinical trials in humans. Terms of these agreements vary in that they can last from a fewmonths to more than a year in duration. Certain of these agreements require initial upfront payments ranging from 25% to 50% of thetotal estimated cost. For additional information regarding our research and development expenses over the past two years, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in this report.EmployeesTo balance costs and optimize control, we utilize an outsourcing business strategy, whereby our management oversees theoutsourced activities for many of our research and development and administrative functions. We currently have nine full-timeemployees and one part-time employee, and we retain several independent contractors on an as-needed basis. We believe that wehave good relations with our employees.Corporate InformationWe were incorporated in Delaware in 1982 under the name Alpha 1 Biomedicals, Inc. In 2000, we changed our corporatename to RegeneRx Biopharmaceuticals, Inc. Our principal executive office is located at 15245 Shady Grove Road, Suite 470,Rockville, Maryland 20850. Our telephone number is (301) 208-9191.Available InformationOur corporate website is www.regenerx.com. Our electronic filings with the U.S. Securities and Exchange Commission, orSEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and anyamendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,are available free of charge through our website as soon as reasonably practicable after we have electronically filed such informationwith, or furnished such information to, the SEC.Item 1A. Risk FactorsRisks Related to Our Liquidity and Need for FinancingBefore giving effect to any potential sales of our securities, we estimate that our existing capital resources will only be sufficient tofund our operations into the second half of 2011, or into 2012 if our Phase 2 AMI trial is delayed.We intend to use our existing capital resources to fund our ongoing research and development activities; however, we maynot be able to complete all of our active trials and those we intend to initiate and support in 2011 and 2012 without additionalfunding. We project that our existing capital resources will support our operations into the second half of 2011, without giving effectto any other financing activities, including any purchases under a committed equity facility that we recently entered into withLincoln Park Capital, as described below. Our research initiatives include support for a Phase 1/2 clinical trial of RGN-352 in patientswith multiple sclerosis and a physician-sponsored clinical trial in patients with dry eye using RGN-259, and completing our ongoingPhase 2 trial of RGN-137 in patients with EB. We also intend to conduct a portion of a Phase 2 clinical trial of RGN-352 in patientswho have suffered an acute myocardial infarction or AMI, although, as described elsewhere in this report, this trial is currently onclinical hold pending resolution of issues at our contract manufacturer relating to compliance with FDA good manufacturingpractices. If the Phase 2 AMI trial remains on hold, or if we are required to have new batches of RGN-352 re-manufactured for the trial,we would need to delay patient enrollment in this trial until additional funding is available. If we do not resume the trial, we projectthat our current cash resources would support our operations into 2012. 11Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn January 2011, we entered into a committed equity facility with Lincoln Park Capital, or LPC, under which we maydirect LPC to purchase up to $11,000,000 worth of shares of our common stock over a 30-month period. If we make sales of ourcommon stock under the facility, we would be able to fund our operations for a longer period of time. However, the extent to whichwe will rely on the facility as a source of funding will depend on a number of factors, including the prevailing market price of ourcommon 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 commonstock is less than $0.15 per share.We have registered the resale of 15,000,000 shares by LPC. In the event we elect to issue more than 15,000,000 shares, wewould be required to file a new registration statement and have it declared effective by the SEC. If obtaining sufficient funding fromLPC does not occur or is prohibitively dilutive, we will need to secure another source of funding in order to satisfy our workingcapital needs. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive whenwe require it, the consequences could be a material adverse effect on our business, operating results, financial condition andprospects.Our forecast of the period of time through which our financial resources will be adequate to support our operations is aforward-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 prospectus. 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 may not be able to access the full amounts available under the LPC committed equity facility.Under the facility with LPC, we may direct LPC to purchase up to $11,000,000 worth of shares of our common stock over a30-month period, generally in amounts of up to 200,000 shares every two business days. LPC does not have the right or theobligation to purchase any shares of our common stock on any business day that the market price of our common stock is less than$0.15. The amount we can sell under the facility may be increased to 400,000 shares every two business days as long as the closingsale price of our common stock is not below $0.35 per share on the purchase date.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. If the market price of our common stock is less than $0.35 per share, our sales will belimited to 200,000 shares on each purchase date. At the minimum price of $0.15 per share, we would be able to sell 200,000 shares forproceeds of $30,000 on each purchase date. Assuming that we sold shares to LPC ten times each month, we would receive $300,000in proceeds per month, or $9,000,000 over the term of the facility. In the event that we make less frequent sales to LPC, the aggregateproceeds available to us will be even less.In addition, we have only registered 15,000,000 shares of our common stock for sale to LPC. Assuming a purchase price of$0.22 per share, the closing sale price of our common stock on March 25, 2011, and the issuance to LPC of 15,000,000 shares, whichwould be comprised of 14,717,909 shares purchased at $0.22 per share and 282,091 shares issued as additional pro rata commitmentshares for no additional consideration, the proceeds to us would only be $3.2 million. In the event we elect to issue more than15,000,000 shares, we would be required to file a new registration statement and have it declared effective by the SEC.In addition to our current development objectives, we will need substantial additional capital for the continued development ofproduct 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 ourlonger-term independent product development efforts, including any and all follow-on trials that will result from our current clinicalprograms beyond those currently contemplated, and to scale up manufacturing processes for our product candidates. We may be ableto obtain funding under the committed equity facility with LPC in order to further some of these efforts. However, the actual amountof funds that we will need will be determined by many factors, some of which are beyond our control. These factors include, withoutlimitation: • the scope of our clinical trials, which is significantly influenced by the quality of clinical data achieved as trials arecompleted 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 patientsand the quality of the work performed by our clinical investigators; • the time required to prosecute, enforce and defend our intellectual property rights, which depends on evolving legalregimes 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 receiveregulatory 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 partnerwith an effective commercialization organization and which could be delayed or prevented by the emergence of equal ormore effective therapies. 12Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEmerging biotechnology companies like us may raise capital through corporate collaborations and by licensingintellectual property rights to other biotechnology or pharmaceutical enterprises. We intend to pursue this strategy, but there can beno assurance that we will be able to license our intellectual property or product development programs on commercially reasonableterms, if at all. There are substantial challenges and risks that will make it difficult to successfully implement any of thesealternatives. If we are successful in raising additional capital through such a license or collaboration, we may have to give upvaluable rights to our intellectual property. In addition, the business priorities of a strategic partner may change over time, whichcreates the possibility that the interests of the strategic partner in developing our technology may diminish and could have apotentially 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 commonstock, including under our committed equity facility with LPC, the ownership interest of our existing stockholders may besignificantly diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likelyto have rights, preferences and privileges senior to our common stock and may involve significant fees, interest expense, restrictivecovenants or the granting of security interests in our assets.Our failure to successfully address long-term liquidity requirements would have a material negative impact on ourbusiness, including the possibility of surrendering our rights to some technologies or product opportunities, delaying our clinicaltrials or ceasing our operations.We have incurred losses since inception and expect to incur significant losses in the foreseeable future and may never becomeprofitable.We have not commercialized any product candidates to date and incurred net operating losses every year since ourinception in 1982. We believe these losses will continue for the foreseeable future, and may increase, as we pursue our productdevelopment efforts related to Tß4. As of December 31, 2010, our accumulated deficit totaled approximately $89.5 million.As we expand our research and development efforts and seek to obtain regulatory approval of our product candidates tomake them commercially viable, we anticipate substantial and increasing operating losses. Our ability to generate additionalrevenues and to become profitable will depend largely on our ability, alone or through the efforts of third-party licensees andcollaborators, to efficiently and successfully complete the development of our product candidates, obtain necessary regulatoryapprovals for commercialization, scale-up commercial quantity manufacturing capabilities either internally or through third-partysuppliers, and market our product candidates. There can be no assurance that we will achieve any of these objectives or that we willever become profitable or be able to maintain profitability. Even if we do achieve profitability, we cannot predict the level of suchprofitability. If we sustain losses over an extended period of time and are not otherwise able to raise necessary funds to continue ourdevelopment efforts and maintain our operations, we may be forced to cease operations.Our common stock has been delisted from the NYSE Amex stock exchange, which subjects us to the SEC’s penny stock rules andwill further decrease the liquidity of our common stock.We were previously operating under a compliance plan intended to allow us to regain compliance with the NYSE Amexstock exchange’s, or the Exchange’s stockholders’ equity requirement by October 25, 2010. On October 26, 2010, we were notifiedby the Exchange that we had not timely regained compliance with the Exchange’s continued listing standards. As a result, the noticeindicated that our securities were subject to delisting from the Exchange. We were initially granted a hearing before the Exchange’sListing Qualifications Panel that was scheduled for December 17, 2010. On December 15, 2010, we withdrew our request for ahearing, and our common stock was suspended from trading on the Exchange as of the commencement of trading on December 23,2010 and was delisted.As of December 23, 2010, our common stock began trading over-the-counter on the OTC Bulletin Board. Over-the-countermarkets are generally considered to be less efficient than, and not as broad as, a stock exchange. There may be a limited market forour stock now that it is quoted on the OTC Bulletin Board, trading in our stock may become more difficult and our share price coulddecrease. Specifically, you may not be able to resell your shares of common stock at or above the price you paid for such shares or atall.In addition, our ability to raise additional capital may be impaired because of the less liquid nature of the over-the-countermarkets. While we cannot guarantee that we would be able to complete an equity financing on acceptable terms, or at all, we believethat dilution from any equity financing while our shares are quoted on an over-the-counter market would likely be substantiallygreater than if we were to complete a financing while our common stock is traded on a national securities exchange. Further, now thatour stock is not traded on an exchange, we are no longer eligible to use short-form registration statements on Form S-3 for theregistration of our securities, which could impair our ability to raise additional capital as needed. 13Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur 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 lessthan $5.00 per share, subject to certain exceptions. The ability of broker-dealers to sell our common stock and the ability of ourstockholders to sell their shares in the secondary market will be limited and, as a result, the market liquidity for our common stockwill likely be adversely affected. We cannot assure you that trading in our securities will not be subject to these or other regulationsin the future.The report of our independent registered public accounting firm contains explanatory language that substantial doubt exists aboutour ability to continue as a going concern.The report of our independent registered public accounting firm on our financial statements for the year endedDecember 31, 2010 contains explanatory language that substantial doubt exists about our ability to continue as a going concern,without raising additional capital. We estimate that our existing capital resources, without giving effect to any proceeds that we mayreceive from sales of our shares to LPC, will only be sufficient to fund our operations into the second half of 2011, or into early 2012if our Phase 2 AMI trial is delayed, as described above. 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 beplaced into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.Risks Related to Our Business and OperationsOur pending Phase 2 clinical trial of RGN-352 was recently placed on clinical hold by the FDA and we are unsure when, if ever, wewill be able to resume this trial.In the second half of 2010, we began a phase 2 clinical trial to evaluate RGN-352 in patients who have suffered an acutemyocardial infarction, or AMI. We had planned to begin enrolling patients near the end of the first quarter of 2011. However, inMarch 2011, we were notified by the FDA that the trial has been placed on clinical hold as a result of our contract manufacturer’salleged failure to comply with Good Manufacturing Practices. Ultimately, the FDA could prohibit us from using any of the activedrug or placebo manufactured by our manufacturer, which would require us to either have new material manufactured by themanufacturer, in the event that the FDA’s concerns are addressed, or we would be required to identify a new manufacturer. In theevent a new manufacturer is needed, significant preparatory time and procedures would be required before the new manufacturerwould be able to manufacture RGN-352 for the AMI trial. We are unable to estimate the length of time that the trial will be on clinicalhold, or if a new manufacturer will ultimately be needed. If the FDA clinical hold remains in effect or if we need to re-manufactureRGN-352 we will need to delay the commencement of this trial until additional funding is available. Consequently, there can be noassurance 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 that has yet to be proven effective in human subjects.Our current primary business focus is the development of Tß4, and its analogues, derivatives and fragments, for theimprovement of cardiac function, the acceleration of corneal healing, the treatment of non-healing wounds and other conditions.Unlike many pharmaceutical companies that have a number of unique chemical entities in development, we are dependent on asingle molecule, formulated for different routes of administration and different clinical indications, for our potential commercialsuccess. As a result, any common safety or efficacy concerns for Tß4-based products that cross formulations would have a muchgreater 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, we cannot assure you that our productcandidates will exhibit activity or importance in humans. Our drug candidates are still in research and development, and we do notexpect them to be commercially available for the foreseeable future, if at all. Only a small number of research and developmentprograms ultimately result in commercially successful drugs. Potential products that appear to be promising at early stages ofdevelopment 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; 14Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents • 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 tostringent approval processes, prior to commercial marketing, by the FDA and by comparable agencies in most foreign countries. Theprocess of obtaining FDA and corresponding foreign approvals is costly and time-consuming, and we cannot assure you that suchapprovals will be granted. Also, the regulations we are subject to change frequently and such changes could cause delays in thedevelopment of our product candidatesThree of our drug candidates are currently in the clinical stage, and we cannot be certain that we or our collaborators willsuccessfully complete the clinical trials necessary to receive regulatory product approvals. The regulatory approval process islengthy, unpredictable and expensive. To obtain regulatory approvals in the United States, we or a collaborator must ultimatelydemonstrate to the satisfaction of the FDA that our product candidates are sufficiently safe and effective for their proposedadministration to humans. Many factors, known and unknown, can adversely impact clinical trials and the ability to evaluate aproduct candidate’s safety and efficacy, including: • the FDA or other health regulatory authorities, or institutional review boards, or IRBs, do not approve a clinical trialprotocol 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 ofthe patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the perceptions ofinvestigators 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 reasonsthat may or may not be related to our product candidates, including the advanced stage of their disease and other medicalproblems; • patients in the placebo or untreated control group exhibit greater than expected improvements or fewer than expectedadverse events; • third-party clinical investigators do not perform the clinical trials on the anticipated schedule or consistent with theclinical trial protocol and good clinical practices, or other third-party organizations do not perform data collection andanalysis in a timely or accurate manner; • service providers, collaborators or co-sponsors do not adequately perform their obligations in relation to the clinical trialor 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 undertakecorrective action or suspend the clinical trials, such as the recent clinical hold with respect to our pending Phase 2 clinicaltrial 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 besufficient to demonstrate safety and efficacy; and • changes in governmental regulations or administrative actions affect the conduct of the clinical trial or the interpretationof its results.There can be no assurance that our clinical trials will in fact demonstrate, to the satisfaction of the FDA and others, that ourproduct candidates are sufficiently safe or effective. The FDA or we may also restrict or suspend our clinical trials at any time if eitherbelieves 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 aparticular condition or other unrelated conditions. For example, in clinical trials for our product candidate RGN-137, we have studiedpatients who are not only suffering from chronic epidermal wounds but who are also older and much more likely to have other seriousadverse conditions. During the course of treatment with our product candidates, patients could die or suffer other adverse events forreasons that may or may not be related to the drug candidate being tested. Further, and as a consequence that all of our drugcandidates 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 ourproduct candidates, such adverse events can nevertheless negatively impact our clinical trials, and our business prospects wouldsuffer. Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.15Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThese factors, many of which may be outside of our control, may have a negative impact on our business by making itdifficult to advance product candidates or by reducing or eliminating their potential or perceived value. As a consequence, we mayneed to perform more or larger clinical trials than planned. Further, if we are forced to contribute greater financial and clinicalresources to a study, valuable resources will be diverted from other areas of our business. If we fail to complete or if we experiencematerial delays in completing our clinical trials as currently planned, or we otherwise fail to commence or complete, or experiencedelays in, any of our other present or planned clinical trials, including as a result of the actions of third parties upon which we rely forthese 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 andcollaborators, 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 drugcandidates. As a result, we rely and expect to continue to rely on third-party service providers and collaborators, including corporatepartners, licensors and contract research organizations, or CROs, to perform a number of activities relating to the development of ourdrug candidates, including the design and conduct of clinical trials, and potentially the obtaining of regulatory approvals. Forexample, we currently rely on several third-party contractors to manufacture and formulate Tß4 into the product candidates used inour clinical trials, develop assays to assess Tß4’s effectiveness in complex biological systems, recruit clinical investigators and sitesto 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 relationshipson favorable terms. Our agreements with these third parties may also contain provisions that restrict our ability to develop and testour product candidates or that give third parties rights to control aspects of our product development and clinical programs. Inaddition, conflicts may arise with our collaborators, such as conflicts concerning the interpretation of clinical data, the achievementof 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 bestinterests. Any failure to maintain our collaborative agreements and any conflicts with our collaborators could delay or prevent usfrom developing our product candidates. We and our collaborators may fail to develop products covered by our present and futurecollaborations 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 inour 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 ourother collaborators.We also have less control over the timing and other aspects of our clinical trials than if we conducted the monitoring andsupervision entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated scheduleor consistent with a clinical trial protocol or applicable regulations. We also rely on clinical research organizations to perform muchof our data management and analysis. They may not provide these services as required or in a timely manner. If any of these partiesdo not meet deadlines or follow proper procedures, including procedures required by law, the preclinical studies and clinical trialsmay take longer than expected, may be delayed or may be terminated, which would have a materially negative impact on our productdevelopment efforts. If we were forced to find a replacement entity to perform any of our preclinical studies or clinical trials, we maynot 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 thetests 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 ourcompetitors 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 ofdrugs to treat indications within our focus are being sponsored or conducted by private and public research institutions and by majorpharmaceutical companies located in the United States and a number of foreign countries. Most of these companies and institutionshave financial and human resources that are substantially greater than our own and they have extensive experience in conductingresearch and development activities and clinical trials and in obtaining the regulatory approvals necessary to market pharmaceuticalproducts that we do not have. As a result, they may develop competing products more rapidly that are safer, more effective, or havefewer side effects, or are less expensive, or they may develop and commercialize products that render our product candidates non-competitive or obsolete. 16Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe have initially targeted our product candidate RGN-352 for cardiovascular indications. Most large pharmaceuticalcompanies and many smaller biomedical companies are vigorously pursuing the development of therapeutics to treat patients afterheart attacks and other cardiovascular indications. With respect to our product candidate RGN-259 for corneal defects, there are alsonumerous 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 antibacterialagents. 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 marketplaceattracting 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 gapbetween cosmetics and pharmaceuticals, for example, by improving skin texture and reducing the appearance of aging. This industryis 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 thelatest trends in appearance and fashion. We may not be able to adapt to changes in the industry as quickly as larger and moreexperienced cosmeceutical companies. Further, larger cosmetics companies have the financial and marketing resources to effectivelycompete 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 marketacceptance.Our product candidates, all of which are based on the molecule Tß4, are new and unproven and there is no guarantee thathealth care providers or patients will be interested in our product candidates, even if they are approved for use. If any of our productcandidates 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 continueto develop our product candidates to respond to competitive and technological changes. If the market does not accept our productcandidates, when and if we are able to commercialize them, then we may never become profitable. Factors that could delay, inhibit orprevent 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 candidatesbecause the markets are continually evolving. There can be no assurance that our product candidates will prove superior to productsthat may currently be available or may become available in the future or that our research and development activities will result inany commercially profitable products.We have no marketing experience, sales force or distribution capabilities. If our product candidates are approved, and we areunable 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 ourability to sell our product candidates if and when they are approved by the FDA and other regulatory authorities. We currently haveno experience in marketing or selling pharmaceutical products, and we do not have a marketing and sales staff or distributioncapabilities. Developing a marketing and sales force is also time-consuming and could delay the launch of new products orexpansion 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 intosuccessful 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 thosemarkets, which could adversely affect our business.There are significant regulatory and legal barriers to entering markets outside the United States that we must overcome ifwe seek regulatory approval to market our product candidates in countries other than the United States. We would be subject to theburden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflictinglaws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operationsoutside 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; 17Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents • 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 orrepatriate 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 marketsoutside the United States.Governmental and third-party payors may subject any product candidates we develop to sales and pharmaceutical pricing controlsthat 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 ourability to obtain reimbursement for the cost of the product and treatment. Government authorities, private health insurers and otherorganizations, such as health maintenance organizations, are increasingly seeking to lower the prices charged for medical productsand 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 asignificant influence on the purchase of healthcare services and products, resulting in lower prices and reducing demand for ourproduct candidates. The cost containment measures that healthcare providers are instituting and any healthcare reform could reduceour ability to sell our product candidates and may have a material adverse effect on our operations. We cannot assure you thatreimbursement in the United States or foreign countries will be available for any of our product candidates, and that anyreimbursement granted will be maintained, or that limits on reimbursement available from third-party payors will not reduce thedemand for, or the price of, our product candidates. The lack or inadequacy of third-party reimbursements for our product candidateswould decrease the potential profitability of our operations. We cannot forecast what additional legislation or regulation relating tothe healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect the legislation orregulation would have on our business.We have no manufacturing or formulation capabilities and are dependent upon third-party suppliers to provide us with ourproduct candidates. If these suppliers do not manufacture our product candidates in sufficient quantities, at acceptable qualitylevels and at acceptable cost, or if we are unable to identify suitable replacement suppliers if needed, our clinical developmentefforts 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 formulationinto our product candidates. We have engaged three separate smaller drug formulation contractors for the formulation of clinicalgrade product candidates, one for each of our three product candidates in clinical development. We currently do not have analternative source of supply for either Tß4 or the individual drug candidates. If these suppliers, together or individually, are not ableto supply us with either Tß4 or individual product candidates on a timely basis, in sufficient quantities, at acceptable levels ofquality and at a competitive price, or if we are unable to identify a replacement manufacturer to perform these functions onacceptable terms as needed, our development programs could be seriously jeopardized.The risks of relying solely on single suppliers for each of our product candidates include: • the possibility that they may not be able to ensure quality and compliance with regulations relating to the manufacture ofpharmaceuticals, as illustrated by the FDA’s recent determination that our contract manufacturer for RGN-352 was in non-compliance with current Good Manufacturing Practices; • their manufacturing capacity may not be sufficient or available to produce the required quantities of our productcandidates 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 productcandidates and, in the event we must find a replacement or supplemental supplier, our ability to transfer this know-how tothe 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 foran extended period; • an individual supplier could encounter significant increases in labor, capital or other costs that would make it difficult forthem 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, atacceptable costs or in sufficient time to complete the manufacture, formulation and delivery of our product candidates. 18Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur suppliers may use hazardous and biological materials in their businesses. Any claims relating to improper handling, storage ordisposal 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 certainhazardous and biological materials and waste products. We and our suppliers and other collaborators are subject to federal, state andlocal regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we andthese suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination orinjury from hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable for anydamages that result, and we do not carry insurance for this type of claim. We may also incur significant costs to comply with currentor 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. Productliability may result from harm to patients using our product candidates, such as a complication that was either not communicated as apotential 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 ofprotection, 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, medicalprofessionals and other parties conducting related activities in connection with losses they may incur through their involvement inthe clinical trials.Our ability to reduce our liability exposure for human clinical trials and commercial sales, if any, of Tß4 is dependent inpart 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 productcandidates, we cannot guarantee that product liability insurance will continue to be available to us on acceptable terms, or at all, orthat its coverage will be sufficient to cover all claims against us. A product liability claim, even one without merit or for which wehave substantial coverage, could result in significant legal defense costs, thereby potentially exposing us to expenses significantly inexcess 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 scientificadvisor, Allan Goldstein, or our chief executive officer, J.J. Finkelstein, could prevent or significantly delay the achievement of ourgoals. We have employment agreements with Dr. Goldstein and Mr. Finkelstein. We cannot assure you that they, or other keyemployees, will not elect to terminate their employment. In addition, we do not maintain a key man life insurance policy with respectto Dr. Goldstein or Mr. Finkelstein. In the future, we anticipate that we may need to add additional management and other personnel.Competition for qualified personnel in our industry is intense, and our success will depend in part on our ability to attract and retainhighly 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, a relationship which couldgive 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, whichcollectively make up our largest stockholder group. Sigma-Tau has provided us with significant funding, may continue doing so inthe future, and is also our strategic partner in Europe with respect to the development of certain of our drug candidates. We haveissued 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 toSigma-Tau. Under the license agreement, upon the completion of a Phase 2 clinical trial of either of these product candidates thatyields positive results in terms of clinical efficacy and safety, Sigma-Tau is obligated to either make a $5 million milestone paymentto us or to initiate and fund a pivotal Phase 3 clinical trial of the product candidate. In 2009, we completed two Phase 2 clinical trialsof RGN-137 in the treatment of pressure ulcers and venous stasis ulcers. However, due to the lack of statistical significance of thereported efficacy results, these trials were not sufficient to trigger the milestone obligation described above. There can be noassurance that we will ever receive this payment or be able to initiate a pivotal Phase 3 clinical trial of RGN-137 that would befunded by Sigma-Tau. As a result of Mr. Bove’s relationship with Sigma-Tau, there could be a conflict of interest between Sigma-Tauand our other stockholders with respect to these and other agreements and circumstances that may require the exercise of the Board’sdiscretion with respect to Sigma-Tau. Any decision in the best interests of Sigma-Tau may not be in the best interest of our otherstockholders. 19Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRisks Related To Our Intellectual PropertyWe are heavily reliant on our license from the National Institutes of Health for the rights to Tß4, and any loss of these rights wouldadversely 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 thebasis for our current commercial development focus with Tß4. This license terminates upon the last to expire of the patentapplications that are filed, or any patents that may issue from such applications, in connection with the license. This license requiresus to pay a minimum annual royalty to the NIH, regardless of the success of our product development efforts, plus certain otherroyalties upon the sale of products created by the intellectual property granted under the license. This license may be terminated for anumber of reasons, including our non-payment of the royalty or lack of continued product development, among others. While to datewe believe that we have complied with all requirements to maintain the license, the loss of this license would have a material adverseeffect on our business and business prospects and may require us to cease development of our current line of Tß4-based productcandidates.If we are not able to maintain adequate patent protection for our product candidates, we may be unable to prevent our competitorsfrom 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 andoperate without infringing upon the proprietary rights of others, both in the United States and abroad. Pursuant to an exclusiveworldwide license from the NIH, we have exclusive rights to use Tß4 in the treatment of non-healing wounds. While patents coveringour use of Tß4 have issued in some countries, we cannot guarantee whether or when corresponding patents will be issued, or thescope 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 havealso in-licensed other intellectual property rights from third parties that could be subject to the same risks as our own patents. If anyof these patent applications do not issue, or do not issue in certain countries, or are not enforceable, the ability to commercialize Tß4in 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 andfactual uncertainties. As a result, we cannot assure you that any patent applications filed by us, or by others under which we haverights, will result in patents being issued in the United States or foreign countries. In addition, there can be no assurance that anypatents will be issued from any pending or future patent applications of ours or our collaborators, that the scope of any patentprotection will be sufficient to provide us with competitive advantages, that any patents obtained by us or our collaborators will beheld valid if subsequently challenged or that others will not claim rights in or ownership of the patents and other proprietary rightswe or our collaborators may hold. Unauthorized parties may try to copy aspects of our product candidates and technologies or obtainand use information we consider proprietary. Policing the unauthorized use of our proprietary rights is difficult. We cannot guaranteethat no harm or threat will be made to our or our collaborators’ intellectual property. In addition, changes in, or differentinterpretations of, patent laws in the United States and other countries may also adversely affect the scope of our patent protectionand our competitive situation.Due to the significant time lag between the filing of patent applications and the publication of such patents, we cannot becertain 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 firstto invent, particularly with regards to patent rights in the United States. In addition, a number of pharmaceutical and biotechnologycompanies and research and academic institutions have developed technologies, filed patent applications or received patents onvarious technologies that may be related to our product candidates. Some of these technologies, applications or patents may conflictwith our or our licensors’ technologies or patent applications. A conflict could limit the scope of the patents, if any, that we or ourlicensors may be able to obtain or result in denial of our or our licensors’ patent applications. If patents that cover our activities areissued 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 ofthe United States. Differences in what constitutes patentable subject matter in various countries may limit the protection we canobtain outside of the United States. For example, methods of treating humans are not patentable in many countries outside of theUnited States. These and other issues may prevent us from obtaining patent protection outside of the United States, which wouldhave a material adverse effect on our business, financial condition and results of operations. 20Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsChanges 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 ofour rights under any patents that may be obtained and may decrease revenues derived from its patents. For example, the U.S. patentlaws were previously amended to change the term of patent protection from 17 years following patent issuance to 20 years from theearliest effective filing date of the application. Because the time from filing to issuance of biotechnology applications may be morethan three years depending on the subject matter, a 20-year patent term from the filing date may result in substantially shorter patentprotection. Future changes to patent laws could shorten our period of patent exclusivity and may decrease the revenues that we mightderive 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 competitiveposition.In addition to our patents, we also rely on trade secrets, know-how, continuing technological innovations and licensingopportunities to develop and maintain our competitive position. However, others may independently develop substantiallyequivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. To protectour trade secrets, we may enter into confidentiality agreements with employees, consultants and potential collaborators. However, wemay not have such agreements in place with all such parties and, where we do, these agreements may not provide meaningfulprotection of our trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information. Also, our tradesecrets or know-how may become known through other means or be independently discovered by our competitors. Any of theseevents 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 werepreviously employed at other biotechnology or pharmaceutical companies, including competitors or potential competitors. Althoughthere are no claims currently pending against us, we may be subject to claims that we or certain employees have inadvertently orotherwise used or disclosed trade secrets or other proprietary information of former employers. Litigation may be necessary to defendagainst these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs andwould be a significant distraction to management.Risks Related To Our SecuritiesOur common stock price is volatile, our stock is highly illiquid, and any investment in our securities could decline substantially invalue.For the period from January 1, 2009 through December 31, 2010, the closing price of our common stock has ranged from$0.21 to $1.75, with an average daily trading volume of approximately 117,000 shares. We expect the trading volume of ourcommon stock to decline further in light of our recent delisting from the NYSE Amex exchange. In light of our small size and limitedresources, as well as the uncertainties and risks that can affect our business and industry, our stock price is expected to continue to behighly volatile and can be subject to substantial drops, with or even in the absence of news affecting our business. The followingfactors, in addition to the other risk factors described in this report, and the potentially low volume of trades in our common stock,may have a significant impact on the market price of our common stock, some of which are beyond our control: • the recent delisting of our common stock from the NYSE Amex exchange; • 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 causing dilution; • anticipated or unanticipated changes in our financial performance; 21Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents • 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, themarket prices of securities of smaller biotechnology companies have experienced dramatic fluctuations that often have beenunrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extremevolatility in the price of our common stock, which could cause a decline in its value. You should also be aware that price volatilitymay 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 otherstockholders.Following the investment transactions that were consummated on January 7, 2011, our officers, directors and principalstockholders together controlled approximately 43% of our outstanding common stock. Included in this group is Sigma-Tau and itsaffiliates, which together held outstanding shares representing approximately 38% of our outstanding common stock. A portion ofthe shares of common stock currently held by Sigma-Tau and its affiliates are subject to voting agreements under which our Boardcontrols the voting power of such stock. We cannot assure you that such voting agreements would prevent Sigma-Tau and itsaffiliates from taking actions not in your best interests and effectively exercising control over us. These voting agreements expireperiodically through September 2012. After their expiration, we will have no control over the voting of these shares controlled bySigma-Tau, including with respect to the election of directors and approval of significant corporate transactions. This concentrationof ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of ourcommon 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 ofour 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 securitiesor industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securitiesand industry analysts. If securities or industry analysts do not commence or maintain coverage of us, the trading price for ourcommon stock and other securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if oneor more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more ofthese 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 stockwill dilute your interest.As of the date of this report, there are outstanding options to purchase an aggregate of 5,348,863 shares of our commonstock at exercise prices ranging from $0.27 per share to $3.82 per share and outstanding warrants to purchase 16,136,900 shares ofour common stock at a weighted average exercise price of $0.89 per share. The exercise of options and warrants at prices below themarket price of our common stock could adversely affect the price of shares of our common stock. Additional dilution may resultfrom the issuance of shares of our capital stock in connection with collaborations or manufacturing arrangements or in connectionwith 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 percentageownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase our common stock in the future andthose options or warrants are exercised or we issue restricted stock, stockholders may experience further dilution. Holders of shares ofour common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of shares of any class orseries.In addition, most of the outstanding warrants to purchase shares of our common stock have an exercise price above thecurrent market price for our common stock. As a result, these warrants may not be exercised prior to their expiration, in which case wewould 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 theprice 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 ourcommon stock over approximately 30 months. Generally, we have the right, but no obligation, to direct LPC to periodically purchaseup to $11,000,000 of our common stock in specific amounts under certain conditions, which periodic purchase amounts can beincreased under specified circumstances. 22Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe have also agreed to issue to LPC up to an aggregate of 1,916,666 shares of common stock as a fee for LPC’scommitment to purchase our shares. Of these commitment shares, we issued one-half, or 958,333 shares, upon entering into thefacility with LPC. The remaining commitment shares are issuable to LPC on a pro rata basis as purchases are made under the facility.Depending upon market liquidity at the time, sales of shares of our common stock to LPC may cause the trading price ofour common stock to decline. LPC may ultimately purchase all, some or none of the $11,000,000 of common stock, and after it hasacquired shares, LPC may sell all, some or none of those shares. Therefore, sales to LPC by us could result in substantial dilution tothe interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to LPC, or theanticipation 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 aprice that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of ourshares 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 preventa takeover or other change in control, even if such a transaction would be beneficial to our stockholders, which could affect ourstock 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 stockholderapproval. In addition, under our stockholder rights plan, our Board has the discretion to issue certain rights to purchase our capitalstock when a person acquires in excess of 25% of our outstanding common shares. Our Board has exempted purchases by Sigma-Tauto date and purchases that may be made by LPC under the committed equity facility from the operation of our stockholder rightsplan. The stockholder rights plan may make it more difficult for stockholders to take corporate actions and may have the effect ofdelaying or preventing a change in control, even if such actions or change in control would be in your best interests. In addition, weare 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 inthat statute, during the three-year period following the time that such stockholder becomes an interested stockholder. This provisioncould also have the effect of delaying or preventing a change of control of our company. The foregoing factors could reduce the pricethat 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 andour 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 themarket prices for the common stock of pharmaceutical and biotechnology companies. These broad market fluctuations may cause themarket price of our common stock to decline. In the past, following periods of volatility in the market price of a particular company’ssecurities, securities class action litigation has often been brought against that company. We may become involved in this type oflitigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could hurt ourbusiness, operating results and financial condition.Item 1B. Unresolved Staff Comments.None.Item 2. Properties.Our corporate headquarters are located in Rockville, Maryland where we lease office space with a term through January 31,2013. We believe that our facilities are generally suitable to meet our needs for the foreseeable future; however, we will continue toseek alternate or additional space as needed.Item 3. Legal Proceedings.None.Item 4. Reserved. 23Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Securities.Our common stock is quoted on the OTC Bulletin Board under the symbol “RGRX.” Our common stock last traded at$0.22 on March 25, 2011. Prior to December 23, 2010, our stock traded on the NYSE Amex stock exchange under the symbol“RGN.” The following table provides the high and low closing prices for our common stock for each quarterly period within the twomost recent fiscal years as quoted on the NYSE Amex or reported by the OTC Bulletin Board, as appropriate. The quotation reportedby the OTC Bulletin Board reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not representactual transactions.The following table sets forth the high and low bid prices for our common stock for the periods indicated. 2010 2009 High Low High Low First Quarter $0.65 $0.53 $1.75 $0.42 Second Quarter $0.68 $0.26 $0.85 $0.45 Third Quarter $0.35 $0.24 $1.12 $0.52 Fourth Quarter $0.30 $0.21 $0.83 $0.55 As of December 31, 2010, we had 832 holders of record of our common stock and over 4,100 beneficial holders of ourcommon stock.We have never declared or paid a cash dividend on our common stock and since all of our funds are committed to clinicalresearch we do not anticipate that any cash dividends will be paid on our common stock in the foreseeable future.Item 6. Selected Financial Data.Not Applicable.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.You should read the following discussion and analysis together with our consolidated financial statements and therelated notes included elsewhere in this annual report.OverviewWe are a biopharmaceutical company focused on the development of a novel therapeutic peptide, Thymosin beta 4, orTß4, for tissue and organ protection, repair, and regeneration. We have formulated Tß4 into three distinct product candidatescurrently in clinical development: • RGN-352, an injectable product candidate to treat cardiovascular diseases, central nervous system diseases, andother medical indications that may be treated by systemic administration; • RGN-259, a topical eye drop for regeneration of corneal tissues damaged by injury, disease or other pathology;and • RGN-137, a topically applied gel for dermal wounds and reduction of scar tissue.We have a fourth product candidate, RGN-457, in preclinical development. RGN-457 is an inhaled formulation of Tß4targeting cystic fibrosis and other pulmonary diseases.We are continuing strategic partnership discussions with biotechnology and pharmaceutical companies regarding thefurther clinical development of all of our product candidates.During 2009, we completed a Phase 1 clinical trial evaluating the safety of RGN-352 in 60 healthy subjects. Based on theresults of this Phase 1 trial and extensive preclinical efficacy data published in peer-reviewed journals, we began a Phase 2 clinicaltrial in the second half of 2010 to evaluate RGN-352’s ability to salvage and regenerate damaged cardiac tissue and improve cardiacfunction after an acute myocardial infarction, or AMI, commonly known as a heart attack. We were scheduled to begin enrollingpatients near the end of the first quarter of 2011. However, in March 2011, we were notified by the FDA that the trial was placed onclinical hold pending the resolution of certain compliance issues at the contract manufacturer supplying RGN-352. Based onavailable information, we are unable to estimate the length of time that the trial will be on clinical hold. The clinical hold is limitedto Good Manufacturing Practices at the contract manufacturer and is not related to the manufacture of Tß4 peptide, safety of RGN-352, the trial protocol or our clinical development plan, nor does it affect any of our other clinical trials or drug candidates. 24Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAdditionally, recent preclinical research published in the scientific journals Neuroscience and the Journal ofNeurosurgery indicate that RGN-352 may prove useful for patients with multiple sclerosis, or MS, as well as stroke and traumaticbrain injury. In these studies, the administration of Tß4 resulted in regeneration of neuronal tissue and improvement of neurologicalfunction. Based on this preclinical research, we intend to support a proposed Phase 1/2 clinical trial to be conducted at a major U.S.medical center under a physician-sponsored investigational new drug application, or IND, in order to evaluate the therapeuticpotential of RGN-352 in patients with MS. Depending on the status of our operations and our ability to procure RGN-352, either fromour current contract manufacturer, if it resolves its compliance issues with the FDA, or from an alternate manufacturer, we areplanning to supply RGN-352 and provide clinical and regulatory guidance for the trial, which we currently estimate will commencein early 2012.We are supporting a physician-sponsored clinical trial in patients with dry eye, in order to evaluate RGN-259’s ability torepair and regenerate damaged ophthalmic tissues. Our support includes manufacturing and supplying RGN-259 for the trial andproviding regulatory and clinical guidance. We are continuing to collaborate with the U.S. military to evaluate the potential of RGN-259 to prevent or reduce eye damage caused by chemical warfare agents.We are evaluating the use of RGN-137 in the treatment of patients with epidermolysis bullosa, or EB, which is a geneticdefect that results in fragile skin and other epithelial tissues that can blister at the slightest trauma or friction, creating a wound that attimes does not heal or heals poorly. A portion of this trial was funded by a grant from the U.S. Food and Drug Administration, or FDA.Despite the small patient population with EB, we continue to enroll patients in this Phase 2 trial and expect to complete the trial in2011. Once we complete our Phase 2 EB trial, we will analyze the data in conjunction with our two other completed Phase 2 trials ofRGN-137, along with preclinical data indicating Tß4’s ability to reduce scarring, at which time we will further evaluate our strategyfor the clinical development of RGN-137.In addition to our four pharmaceutical product candidates, we are also pursuing the commercial development of peptidefragments 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. Webelieve the biological activities of these fragments may be useful, for example, in developing novel cosmeceutical products for theanti-aging market. Our strategy is to enter into a collaboration with another company to develop cosmeceutical formulations basedon these peptides.We intend to use our existing capital resources to fund our ongoing research and development activities; however, we maynot be able to complete all of our active trials and those we intend to initiate or support in 2011 and 2012 without additionalfunding. We project that our existing capital resources will be sufficient to support our operations into the second half of 2011,without giving effect to any other financing activities, including any sales of our common stock to LPC under our committed equityfacility described below. Our research initiatives include support for a Phase 1/2 clinical trial of RGN-352 in patients with multiplesclerosis and a physician-sponsored clinical trial in patients with dry eye using RGN-259, and completing our ongoing Phase 2 trialof RGN-137 in patients with EB. We also intend to conduct a portion of a Phase 2 clinical trial of RGN-352 in patients who havesuffered an acute myocardial infarction or AMI, although, as described elsewhere in this report, this trial is currently on clinical holdpending resolution of certain Good Manufacturing Practices by our contract manufacturer for RGN-352. If the Phase 2 AMI trialremains on hold or if new batches of RGN-352 are required to be manufactured, we would need to delay patient enrollment in thistrial until additional funding is available. If we do not resume the trial, we project that our current cash resources would support ouroperations into early 2012. Of significance, the Phase 2 trial design allows for an interim review of patient data, which, if positive, webelieve will facilitate discussions with potential strategic partners when it becomes available. In any event, we will need substantialadditional funds in order to initiate and complete further clinical trials beyond those currently contemplated and to continue to fundour operations.Financial Operations OverviewWe have never generated product revenues, and we do not expect to generate product revenues until the FDA approvesone of our product candidates, if ever, and we begin marketing and selling it. Subject to the availability of financing, we expect toinvest increasingly significant amounts in the furtherance of our current clinical programs and may add additional nonclinicalstudies and new clinical trials as we explore the potential of our current product candidates in other indications and explore newformulations of Tß4-based product candidates. As we expand our clinical development initiatives, we expect to incur substantial andincreasing losses. Accordingly, we will need to generate significant product revenues in order to ultimately achieve and thenmaintain profitability. Also, we expect that we will need to raise substantial additional capital in order to meet product developmentrequirements. We cannot assure investors that such capital will be available when needed, on acceptable terms, or at all. 25Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMost of our expenditures to date have been for research and development, or R&D, activities and general andadministrative, or G&A, activities. R&D costs include all of the wholly-allocable costs associated with our various clinical programspassed through to us by our outsourced vendors. Those costs include manufacturing Tß4 and peptide fragments, formulation of Tß4into our product candidates, stability studies for both Tß4, and the various formulations, preclinical toxicology, safety andpharmacokinetic studies, clinical trial management, medical oversight, laboratory evaluations, statistical data analysis, regulatorycompliance, quality assurance and other related activities. R&D includes cash and non-cash compensation, employee benefits, traveland other miscellaneous costs of our internal R&D personnel, seven 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 andapproval process. As a result, these expenses could exceed our expectations, possibly materially. We are uncertain as to what we willincur 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 internalcompetition for project funding. As described below under “Sources of Liquidity,” in May 2010 we were awarded a grant from theNational Institutes of Health, or NIH, to support the development of RGN-352. Subject to our compliance with the terms andconditions of the grant, we are eligible to receive up to $3.0 million over a three-year period in cost reimbursements related to thepurposes set forth in the grant. G&A costs include outside professional fees for legal, business development, audit and accountingservices. G&A also includes cash and non-cash compensation, employee benefits, travel and other miscellaneous costs of our internalG&A personnel, three in total, who are wholly dedicated to G&A efforts. G&A also includes a proration of our common infrastructurecosts for office space, and communications.Our G&A expenses also include costs to maintain our intellectual property portfolio. We have expanded our patentprosecution activities and have been reviewing our pending patent applications in the United States, Europe and other countries withthe advice of outside legal counsel. In some cases, we have filed patent applications for non-critical strategic purposes intended toprevent others from filing similar patent claims. We continue to closely monitor our patent applications to determine if they willcontinue to provide strategic benefits. In cases where we believe the benefit has been realized or it becomes unnecessary due to theissuance of other patents, or for other reasons that will not affect the strength of our intellectual property portfolio, we will abandonthese patent applications in order to reduce our costs of prosecution.Critical Accounting PoliciesWe prepare our financial statements in conformity with accounting principles generally accepted in the United States.Such accounting principles require that our management make estimates and assumptions that affect the amounts reported in ourfinancial statements and accompanying notes. Our actual results could differ materially from those estimates. The items in ourfinancial statements that have required us to make significant estimates and judgments are as follows:Share-based paymentWe account for share-based compensation based on the estimated grant date fair value of the award using the Black-Scholes option-pricing model. The estimated grant date fair value is recognized over the requisite service period.Determining the appropriate fair value model and calculating the fair value of share-based payment awards require theinput of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility.Since our historical data is limited, the expected life was determined in accordance with SEC Staff Accounting Bulletin No. 107guidance for “plain vanilla” options. Since our historical trading volume is relatively low, we estimated the expected volatility basedon monthly closing prices for a period consistent with the expected life of the option.The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates,but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and weuse different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we arerequired to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiturerate is materially different from our estimate, the stock-based compensation expense could be significantly different from what wehave recorded in the current period. See Notes 2 and 7 to the Financial Statements for a further discussion on stock-basedcompensation and the relative ranges of our historical, underlying assumptions.Costs of pre-clinical studies and clinical trialsWe accrue estimated costs for pre-clinical studies and clinical trials conducted by contract research organizations andparticipating hospitals. These costs are a significant component of research and development expenses. We accrue costs for pre-clinical studies and clinical trials performed by contract research organizations based on estimates of work performed under thecontracts. Costs of setting up hospital sites for participation in trials are accrued immediately. Hospital costs related to patientenrollment are accrued as patients are entered in the trial. 26Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRecent Accounting PronouncementsIn April 2010, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, No. 2010-17,“Revenue Recognition—Milestone Method,” which provides guidance on defining a milestone and determining when it may beappropriate to apply the milestone method of revenue recognition for research or development transactions. Research or developmentarrangements frequently include payment provisions whereby all or a portion of the consideration is contingent upon milestoneevents such as successful completion of phases in a study or achieving a specific result from the research or development efforts. Theamendments in this ASU provide guidance on the criteria that should be met for determining whether the milestone method ofrevenue recognition is appropriate. The ASU is effective for fiscal years and interim periods within those years beginning on or afterJune 15, 2010, with early adoption permitted. The adoption of ASU No. 2010-17 is not expected to have a material impact on ourfinancial position, results of operations or cash flows.In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. This legislationincludes an exemption for companies with less than $75 million in market capitalization from the requirement set forth in Section404(b) of the Sarbanes-Oxley Act of 2002 to include an external auditor’s report on the effectiveness of a registrant’s internal controlover financial reporting. As a result of the new legislation, our independent registered public accounting firm will not be required toissue an attestation report with respect to our internal control over financial reporting. However, we will continue to be subject to therequirement of Section 404 of the Sarbanes-Oxley Act of 2002 for our management to make an annual assessment of the effectivenessof our internal control over financial reporting.Results of OperationsComparison of years ended December 31, 2010 and 2009Revenues. For the year ended December 31, 2010, grant revenue was approximately $850,000 compared to $0 for the yearended December 31, 2009. In May 2010, we were awarded a grant from NIH’s National Heart Lung & Blood Institute (“NHLBI”). Thisgrant was for $1 million per year for three years. During the year ended December 31, 2010, we recognized approximately $117,000based on costs incurred related to this grant. In addition, in October 2010 we were awarded approximately $733,000 under the PatientProtection and Affordable Care Act as part of an incentive for biotechnology companies. There were no revenue-generating grants orother sources of revenue during 2009.Expenses — Research and development. For the year ended December 31, 2010, our R&D expenditures decreased byapproximately $1.0 million, or 27%, to approximately $2.7 million, from approximately $3.7 million in 2009.Our outsourced R&D costs, which are costs paid directly to contract research organizations and outside consultants,decreased by approximately $1.0 million, or 47%, to approximately $1.1 million, from approximately $2.1 million. This net decreaseis directly related to the conclusion of several clinical trials in early 2009.In early 2009 we concluded the data evaluation of our Phase 2 trials of RGN-137 to treat patients with pressure ulcers andvenous stasis ulcers. We also terminated our Phase 2 trial of RGN-259 to treat patients with corneal defects related to vitrectomysurgery, and we concluded the last cohort of healthy volunteers in our Phase 1 trial of RGN-352 evaluating safety. During theremaining portion of 2009 we were actively enrolling patients in our Phase 2 trial of RGN-137 to treat patients with EB. In contrast,during 2010, we continued our efforts to enroll EB patients and commenced work on our Phase 2 trials with RGN-259 to treatpatients with dry eye and our Phase 2 trial to treat AMI patients.Our internal R&D costs remained relatively unchanged at approximately $1.6 million.Expenses — General and administrative. For the year ended December 31, 2010, our G&A expenses increased byapproximately $0.4 million, or 14%, to approximately $3.2 million, from approximately $2.8 million in 2009. This increase is theresult of an increase of approximately $0.4 million in legal fees incurred for the prosecution of our increasing patent portfolio.Interest Income. For the year ended December 31, 2010, our interest income decreased by approximately $4,000, or 33%,to approximately $8,000, from approximately $12,000 in 2009. The decrease was due to lower average interest-bearing cash balancesduring 2010.Liquidity and Capital ResourcesWe 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 publicfinancings, although as discussed below we have recently been awarded government grants and will continue to pursue othergovernmental funding sources. The report of our independent registered public accounting firm regarding our financial statements forthe year ended December 31, 2010 contains an explanatory paragraph regarding our ability to continue as a going concern basedupon our history of net losses and dependence on future financing in order to meet our planned operating activities. 27Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe incurred a net loss of $5.0 million for the year ended December 31, 2010. We had cash and cash equivalents totaling$3.8 million at December 31, 2010. Based on our current operations, we believe our existing cash resources will be adequate to fundour operations into the second half of 2011, without considering any potential sales of our common stock to LPC or any othersources of capital. If our Phase 2 AMI trial remains on hold or if new drug product (RGN-352) requires re-manufacture, as describedelsewhere in this report, we will need to delay the commencement of this trial until additional funding is available. In that event, weproject that our current cash resources would support our operations into 2012. In any event, we will continue to have a need forfinancing, which we may not be able to complete either on favorable terms or at all.Net Cash Used in Operating Activities. Net cash used in operating activities was approximately $5.0 million and$6.2 million for the years ended December 31, 2010 and 2009, respectively. While our reported net loss for the year endedDecember 31, 2010 was approximately $5.0 million, it included approximately $0.5 million in non-cash expenses, primarily non-cash share-based compensation, which was offset by approximately $0.5 million of cash used for working capital purposes during2010. During 2009, approximately $0.7 million in non-cash share based compensation expenses was offset by approximately$0.4 million of cash used for working capital purposes, the net of which reduced the reported net loss for the year of approximately$6.5 million to approximately $6.2 million of cash used in operating activities.Net Cash Used in Investing Activities. Net cash used in investing activities was approximately $26,000 and $0 for theyears ended December 31, 2010 and 2009, respectively. During 2010 we purchased office equipment and furnishings in connectionwith the relocation of our corporate headquarters, which was our only investing activity during the year.Net Cash Provided by Financing Activities. Net cash provided by financing activities totaled approximately $4.5 millionand $4.9 million for the years ended December 31, 2010 and 2009, respectively. In both periods, these net proceeds result from theissuance of common stock and warrants to purchase common stock as more fully described in Note 7 to our financial statementsincluded in this report.Future Funding RequirementsThe expenditures that will be necessary to execute our business plan are subject to numerous uncertainties that mayadversely affect our liquidity and capital resources. During 2009, we completed two Phase 2 clinical trials, closed one additionalPhase 2 clinical trial and completed a Phase 1 clinical trial. Currently, we are actively enrolling patients in only a Phase 2 trial, forRGN-137 in EB patients, and we are supporting a physician-sponsored Phase 2 clinical trial of RGN-259 in patients with dry eye. Wehad intended to commence patient enrollment in a Phase 2 clinical trial of RGN-352 for AMI patients near the end of the first quarterof 2011, but this trial has recently been placed on clinical hold by the FDA pending resolution of certain manufacturing complianceissues at our contract manufacturer. We are unable to estimate when this trial will resume, whether our manufactured RGN-352 will beavailable for use in that trial or whether it will need to be re-manufactured and at an alternate site.We project that we currently have sufficient capital resources to continue clinical development, as originally planned, intothe second half of 2011, without giving effect any sales of our securities. If our Phase 2 AMI trial remains on hold or if new batches ofRGN-352 are required to be manufactured, as described elsewhere in this report, we will need to delay patient enrollment in this trialuntil additional funding is available. In that event, we project that our current cash resources would support our operations into 2012.In any event, we will require substantial capital resources to continue operations beyond that time.The length of time required for clinical trials varies substantially according to the type, complexity, novelty and intendeduse 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 intellectualproperty claims; • the costs related to development and manufacture of preclinical, clinical and validation lots for regulatory purposes andcommercialization 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. 28Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition, the duration and the cost of clinical trials may vary significantly over the life of a project as a result ofdifferences 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 potential product candidates in numerous pre-clinical studies to identify indications for which they maybe product candidates. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As weobtain results from trials, we may elect to discontinue clinical trials for certain product candidates or for certain indications in orderto 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 canmarket them as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatoryapproval, the FDA must conclude that our clinical data establish safety and efficacy. Historically, the results from pre-clinical studiesand early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologicshave shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtainnecessary regulatory approvals.In addition to our obligations under clinical trials, we are committed under an office space lease through January 31, 2013that requires average base rental payments of approximately $7,300 per month.Sources of LiquidityWe have not commercialized any of our product candidates to date and have primarily financed our operations through theissuance of common stock and common stock warrants in private and public financings. Our largest stockholder group, which werefer to as Sigma-Tau, has historically provided significant equity capital to us, including private placements of $950,000 inJanuary 2011 and $1.6 million in October 2009. In January 2011, we also raised $500,000 from a registered direct offering of oursecurities to LPC. During the first half of 2010, we raised approximately $4.5 million from an underwritten public offering of oursecurities, and during 2009, we raised approximately $3.7 million from a registered direct offering of our securities.In January 2011, we also entered into a committed equity facility with LPC. We have an effective registration statement forthe resale by LPC of the common stock issuable under the facility. If and when we being making draws under the facility, overapproximately 30 months thereafter, we will have the right but not the obligation to direct LPC to purchase up to 200,000 shares ofcommon stock every two business days at a purchase price calculated by reference to the prevailing market price of our commonstock without any fixed discount, subject to the floor price of $0.15 per share. We may sell up to $11,000,000 worth of shares underthe facility. There are no trading volume requirements or restrictions under the facility, and we will control the timing and amount ofany 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 torequire any sales by us, but is obligated to make purchases from us as we direct in accordance with the facility. We can also acceleratethe amount of common stock to be purchased under certain circumstances. There are no limitations on use of proceeds, financial orbusiness covenants, restrictions on future funding, rights of first refusal, participation rights, penalties or liquidated damages. We mayterminate the facility at any time, in our discretion, without any penalty or cost to us.We are also party to a license agreement with Sigma-Tau that provides the opportunity for us to receive milestonepayments upon specified events and royalty payments in connection with commercial sales of Tß4 in Europe. However, we have notreceived any milestone payments to date, and there can be no assurance that we will be able to attain such milestones and generateany such payments under the agreement.We are also aggressively pursuing government funding and in May 2010 were awarded a grant from the NIH’s NationalHeart, Lung and Blood Institute to support the requisite nonclinical development of RGN-352 for patients who have suffered a heartattack. These nonclinical activities are being conducted in parallel with our pending Phase 2 clinical trial of RGN-352. Subject to ourcompliance with the terms and conditions of the grant, we are eligible to receive up to $3.0 million over a three-year period in costreimbursements for our associated costs incurred for the purposes set forth in the grant. Revenue from the grant will be recordedduring the same periods when we incur eligible expenses.The Patient Protection and Affordable Care Act enacted in 2010 included a new incentive for biotechnology companieslike ours, known as the Qualifying Therapeutic Discovery Project grant program. Under this program, small businesses were able toapply for a federal grant in an amount equal to 50% of their eligible investment in qualifying therapeutic discovery projects for 2009and 2010. Qualifying therapeutic discovery projects included those designed to treat or prevent diseases or conditions by conductingpre-clinical or clinical activities for the purpose of securing FDA approval of a product. We submitted three applications, coveringeach of our clinical-stage product candidates, and in October 2010 were awarded an aggregate of $733,438 under this program. 29Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAdditionally, the U.S. government is evaluating RGN-259, our sterile eye drop formulation, in animals exposed tochemical warfare agents. We believe our other formulations may also be of interest in healing damaged tissues for indications thatresult from battlefield or homeland security situations. As such, we have engaged a consulting firm to help us identify other sourcesof funding from U.S. government agencies. There can be no assurance, however, that we will be able to secure additional funds fromthe U.S. government or other governmental sources.Other potential sources of outside capital include entering into strategic business relationships, additional issuances ofequity securities or debt financing or other similar financial instruments. If we raise additional capital through a strategic businessrelationship, we may have to give up valuable rights to our intellectual property. If we raise funds by selling additional shares of ourcommon stock or securities convertible into our common stock, the ownership interest of our existing stockholders may besignificantly diluted. In addition, if additional funds are raised through the issuance of preferred stock or debt securities, thesesecurities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interestexpense, 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 ourbusiness, including the possibility of surrendering our rights to some technologies or product opportunities, delaying our clinicaltrials, or ceasing operations. There can be no assurance that we will be able to obtain additional capital in sufficient amounts, onacceptable terms, or at all.Off Balance Sheet ArrangementsWe do not have any off-balance sheet arrangements, as such term is defined in Item 303(a)(4) of Regulation S-K.Item 7A. Quantitative and Qualitative Disclosures About Market Risk.Our cash equivalents, which are generally comprised of Federally-insured bank deposits and short-term U.S. governmentdebt securities, are subject to default, changes in credit rating and changes in market value. These investments are also subject tointerest rate risk and will decrease in value if market interest rates increase. As of December 31, 2010, these cash equivalents were$3.8 million. Due to the short-term nature of these investments, if market interest rates differed by 10% from their levels as ofDecember 31, 2010, the change in fair value of our financial instruments would not have been material.Item 8. Financial Statements and Supplementary Data.The financial statements required by this item are included beginning on page 49 of this report.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A. Controls and Procedures.We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by usin reports that we file or submit under the Exchange Act is recorded, processed, summarized and timely reported as provided in SECrules and forms and that such information is accumulated and communicated to our management, including our Chief ExecutiveOfficer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as appropriate, to allow fortimely decisions regarding required disclosure. We periodically review the design and effectiveness of our disclosure controls andprocedures, including compliance with various laws and regulations that apply to our operations. We make modifications to improvethe design and effectiveness of our disclosure controls and procedures and may take other corrective action, if our reviews identify aneed for such modifications or actions. In designing and evaluating the disclosure controls and procedures, we recognize that anycontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desiredcontrol objectives, and we apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. Inaddition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events,and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; overtime, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or proceduresmay deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not bedetected.We have carried out an evaluation, under the supervision and the participation of our management, including our principalexecutive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of December 31, 2010, the end of the periodcovered by this report. Based upon that evaluation, our principal executive officer and our principal financial officer concluded thatour disclosure controls and procedures were effective as of December 31, 2010 at the reasonable assurance level. 30Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsManagement’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as suchterm is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on our consolidated financial statements.Because of its inherent limitations, including the possibility of human error and the circumvention or overriding ofcontrols, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect allmisstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect tofinancial statement preparation and presentation. Further, because of changes in conditions, effectiveness of internal control overfinancial reporting may vary over time.A significant deficiency is a control deficiency, or combination of control deficiencies, in internal control over financialreporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight ofthe company’s financial reporting. A material weakness is a deficiency, or combination of control deficiencies, in internal controlover financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interimfinancial statements will not be prevented or detected on a timely basis.Under the supervision and with the participation of our management, including our principal executive officer andprincipal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based onthe framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission. Based on our evaluation, management has concluded that our internal control over financial reporting waseffective as of December 31, 2010 to provide reasonable assurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with U.S. generally accepted accounting principles.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during the three months ended December 31, 2010,that have materially affected, or are reasonably likely to materially affect, our internal control over financial reportingItem 9B. Other Information.Not applicable. 31Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate Governance.Executive Officers and DirectorsThe following table sets forth as of March 15, 2011 the name, age and position of each person who serves as an executiveofficer or director of our company. There are no family relationships among any of our executive officers or directors, with theexception that Mr. Finkelstein is the first cousin of Dr. Goldstein’s wife.We seek to assemble a board that, as a whole, possesses the appropriate balance of professional and industry knowledge.financial expertise and high-level management experience necessary to oversee and direct our business. To that end, our boardintends to maintain membership of directors who complement and strengthen the skills of other members and who also exhibitintegrity, collegiality, sound business judgment and other qualities that we view as critical to effective functioning of the board. Thebrief biographies below include information, as of the date of this report, regarding the specific and particular experience,qualifications, attributes or skills of each director or nominee that led the board to believe that the director should serve on the board. Name Age PositionExecutive Officers: Mr. J.J. Finkelstein 59 President, Chief Executive Officer and DirectorMr. C. Neil Lyons 54 Chief Financial OfficerMr. David R. Crockford 65 Vice President, Clinical and Regulatory Affairs Directors: Dr. Allan L. Goldstein 73 Former Chairman, Department of Biochemistry and Molecular Biology, The GeorgeWashington University School of Medicine and Health Sciences; Founder, Chairmanof the Board and Chief Scientific AdvisorMr. R. Don Elsey 57 Senior Vice President Finance & Administration and Chief Financial Officer ofEmergent BioSolutions, Inc.Mr. Joseph C. McNay 77 Chairman, Chief Investment Officer and Managing Principal, Essex InvestmentManagement CompanyMr. Mauro Bove 56 Head of Corporate and Business Development and Director, Sigma-Tau FinanziariaS.p.A and certain of its affiliatesDr. L. Thompson Bowles, M.D. 79 Retired, former thoracic surgeon and former Dean of Medicine and Professor ofSurgery, The George Washington University School of Medicine and Health SciencesMr. Finkelstein has served as our President and Chief Executive Officer and a member of our Board of Directors since2002. Mr. Finkelstein also served as our Chief Executive Officer from 1984 to 1989 and as the Vice Chairman of our Board ofDirectors from 1989 to 1991. Mr. Finkelstein has worked as an executive officer and consultant in the bioscience industry for the past30 years, including serving from 1989 to 1996 as chief executive officer of Cryomedical Sciences, Inc., a publicly-traded medicaldevice company. Mr. Finkelstein has significant experience in developing early-stage companies. He has been responsible for theregulatory approval and marketing of several medical devices in the U.S. and abroad. Mr. Finkelstein has served on the executivecommittee of the Board of Directors of the Technology Council of Maryland since 2006, MdBio, Inc. since 1998 and currently chairsthe MdBio Foundation, all of which are non-profit entities that support bioscience development and education in the State ofMaryland. Mr. Finkelstein received a business degree in finance from the University of Texas. The Board believes thatMr. Finkelstein’s history and long tenure as our Chief Executive Officer positions him to contribute to the Board his extensiveknowledge of our company and to provide Board continuity. In addition, the Board believes that his experience at prior companieshas provided him with operational and industry expertise, as well as leadership skills that are important to the Board.Mr. Lyons has served as our Chief Financial Officer and Treasurer since 2005. With more than 25 years of experience,Mr. Lyons has developed expertise related to operations, finance, SEC compliance, complex transactions, strategy, informationsystems and corporate governance. From 1979 to 1990, Mr. Lyons practiced with Deloitte, providing assurance and advisory servicesto several public companies in the Washington, D.C. metro area. Following that, Mr. Lyons served as a senior financial executivewith HFS, Inc. (a major Department of Defense contractor) from 1990 to 1996, with Bell Atlantic from 1996 to 1998, with SkyBridgeLP (an international satellite broadband start-up affiliated with Alcatel) from 1998 to 2003, and consulted with area businessesregarding financial management, including the initial implementations of the Sarbanes-Oxley Act from 2003 to 2005. Mr. Lyons is acertified public accountant and received a Bachelor of Science degree in accounting, magna cum laude, from Florida SouthernCollege. 32Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsMr. Crockford has served as our Vice President of Clinical and Regulatory Affairs since March 2005 and was a consultantto the Company from 2000 until his appointment as Vice President. He has more than 25 years of experience in the biotechnologyand pharmaceutical industries. During his career as a clinical and regulatory affairs professional, Mr. Crockford has establishedstrategic plans, implemented and obtained marketing approval for 18 drug products, including one of the first human growthhormone preparations sold in the U.S., 17 in vitro diagnostic tests, and an intraoperative medical device to detect and treat cancer.Mr. Crockford’s other clinical and regulatory achievements include the cost-effective and timely development of a number ofinnovative investigational drugs. Mr. Crockford is the author of a number of publications, including Development of Thymosin ß4 forTreatment of Patients with Ischemic Heart Disease, and is an inventor or co-inventor on approximately two dozen patents related todrug development. Mr. Crockford has a B.A. degree in biology and chemistry from Boston University. He also completedbiochemistry and clinical chemistry course studies in Princeton, New Jersey, and seminars in reproductive medicine at medicalschools at Wayne State University and UCLA.Dr. Goldstein has served as the Chairman of our Board of Directors and our Chief Scientific Advisor since he founded ourcompany in 1982. Dr. Goldstein has been a Professor of Biochemistry since 1978 and served as Chairman of the Department ofBiochemistry and Molecular Biology at the George Washington University School of Medicine and Health Sciences until 2009.Dr. Goldstein is a recognized expert in the field of immunology and protein chemistry, having authored over 430 scientific articles inprofessional journals. He is also the inventor on over 25 issued and/or pending patents in biochemistry, immunology, cardiology,cancer and wound healing. Dr. Goldstein discovered several important compounds, including T a 1, which is marketed worldwide,and Tb4, which is the basis for RegeneRx’s clinical program. Dr. Goldstein has served on the Board of Trustees of the Sabin VaccineInstitute since 2000 and on the Board of Directors of the Richard B. and Lynne V. Cheney Cardiovascular Institute since 2006.Dr. Goldstein has also done pioneering work in the area of medical education, developing distance learning programs offered through“Frontiers in Medicine,” a medical education series that Dr. Goldstein developed. The Board believes that Dr. Goldstein’s scientificexpertise, industry background and prior experience as our founder all position him to make an effective contribution to the medicaland scientific understanding of the Board, which the committee believes to be particularly important as we continue our Tb4development efforts.Mr. Elsey has served as a member of our Board of Directors since September 2010. He has served as senior vice presidentand chief financial officer of Emergent BioSolutions Inc., a publicly held biopharmaceutical company, since May 2007, and as itschief financial officer since March 2006 and Treasurer since June 2005. Mr. Elsey previously served as vice president, finance ofEmergent BioSolutions from June 2005 to May 2007. He served as the director of finance and administration at IGEN International,Inc., a publicly held biotechnology company, and its successor BioVeris Corporation, from April 2000 to June 2005. Prior to joiningIGEN, Mr. Elsey served as director of finance at Applera, a genomics and sequencing company, and in several finance positions atInternational Business Machines, Inc. He received an M.B.A. in finance and a B.A. in economics from Michigan State University.Mr. Elsey is a certified management accountant. The Board believes that Mr. Elsey’s experience as chief financial officer of a publiccompany is particularly valuable to our business in that it positions him to contribute to our board’s and audit committee’sunderstanding of financial matters.Mr. McNay has served as a member of our Board of Directors since 2002. He is currently Chairman, Chief InvestmentOfficer and Managing Principal of Essex Investment Management Company, LLC, positions he has held since 1976 when hefounded Essex. He has direct portfolio management responsibilities for a variety of funds and on behalf of private clients. He is also amember of the firm’s Management Board. Prior to founding Essex, Mr. McNay was Executive Vice President and Director ofEndowment Management & Research Corp. from 1967. Prior to that, Mr. McNay was Vice President and Senior Portfolio Manager atthe Massachusetts Company. Currently he is serving as Trustee of National Public Radio, Trustee of the Dana Farber Cancer Institute,and is a Trustee and member of the Children’s Hospital Investment Committee. He received his A.B. degree from Yale University andhis M.B.A. degree in finance from the Wharton School of the University of Pennsylvania. The Board believes that Mr. McNay’sextensive financial experience is valuable to our business and also positions him to contribute to the audit committee’sunderstanding of financial matters.Mr. Bove has served as a member of our Board of Directors since 2004 and has more than 25 years of business andmanagement experience within the pharmaceutical industry. Mr. Bove is currently the Head of Corporate & Business Developmentand serves on the board of Sigma-Tau Finanziaria S.p.A., the holding company of Sigma-Tau Group, a leading internationalpharmaceutical company, and certain Sigma-Tau affiliates, positions he has held since 1993. Sigma-Tau Finanziaria S.p.A. and itsaffiliates are collectively our largest stockholder. Mr. Bove has also held a number of senior positions in business, licensing andcorporate development within Sigma-Tau Group, which has subsidiaries in most European countries and the United States. Mr. Boveobtained his law degree at the University of Parma, Italy, in 1980. In 1985, he attended the Academy of American and InternationalLaws at the International and Comparative Law Center, Dallas, Texas. The Board believes that Mr. Bove’s extensive business andmanagement experience within the pharmaceutical industry allows him to recognize and advise the Board with respect to recentindustry developments. 33Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDr. Bowles has served as a member of our Board of Directors since 2006. He retired from his career as a thoracic surgeon in1988. Dr. Bowles served as Dean of Medicine and Professor of Surgery at The George Washington University (“GWU”) School ofMedicine and Health Sciences from 1976 to 1988 and as Vice President for Medical Affairs and Executive Dean of the GWU MedicalCenter from 1988 to 1992. Dr. Bowles previously served as President of the National Board of Medical Examiners, a medicalaccrediting organization, from 1992 to 2000. He has also been a member of the National Academy of Sciences Institute of Medicinesince 1988 and currently serves as a member of several other national medical societies including: The American College ofSurgeons, The American Association for Thoracic Surgery, The Society of Thoracic Surgeons, The American College of ChestPhysicians, The American Gerontological Society, The Society of Medical Administrators, The College of Physicians ofPhiladelphia, and The Washington Academy of Surgeons. Dr. Bowles has served on the editorial board of a number of medicaljournals, including the Journal of Medical Education and continued on as chairman of its newly revised updated version, AcademicMedicine. Dr. Bowles has been President of the District of Columbia’s medical licensing board called the Healing Arts Commission(1977-1979), and was a member of the National Library of Medicine’s Board of Regents (1982-1986), chairman (1984-1986),member of the Special Medical Advisory Group of Veterans Administration (now Dept. of Veterans Affairs) 1984-1992, chairman1992-1994. Dr. Bowles was also chairman of the National Committee on Foreign Medical Education and Accreditation, 1994-1996.Dr. Bowles received his medical degree from Duke University and his Ph.D. in higher education from New York University. TheBoard believes that Dr. Bowles’ distinguished medical career positions him to brings extensive medical and clinical trial experienceto the Board. The Board expects that this experience will permit Dr. Bowles to provide leadership and insight as we translate ourlaboratory discoveries into human clinical trials and advance our product candidates through clinical development towardcommercialization.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than tenpercent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes inownership of common stock and other equity securities of our company. Officers, directors and greater than ten percent stockholdersare required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations thatno other reports were required, during the fiscal year ended December 31, 2010, all Section 16(a) filing requirements applicable toour officers, directors and greater than ten percent beneficial owners were complied with.Corporate Code of Conduct and EthicsWe have adopted a corporate code of conduct and ethics that applies to all of our employees, officers and directors, as wellas a separate code of ethics that applies specifically to our principal executive officer and principal financial officer. The corporatecode of conduct and ethics and the code of ethics for our principal executive and financial officers are available on our corporatewebsite at www.regenerx.com. If we make any substantive amendments to the corporate code of conduct and ethics or the code ofethics for our principal executive and financial officers, or grant any waivers from a provision of these codes to any executive officeror director, we will promptly disclose the nature of the amendment or waiver on our website.Audit Committee and Audit Committee Financial ExpertWe have a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of theExchange Act. The members of the audit committee are Messrs. McNay and Elsey, and Dr. Bowles. Mr. McNay serves as chairman ofthe audit committee.Our board of directors periodically reviews the independence of our audit committee members and has determined that allcurrent members of our audit committee are independent under NYSE Amex listing standards. Although our common stock is nolonger listed on the NYSE Amex exchange, we have determined the independence of our audit committee members using the NYSEAmex definitions of independence.Our board of directors has also determined that each of Mr. McNay and Mr. Elsey qualifies as an audit committee financialexpert, as defined in applicable SEC rules.Item 11. Executive Compensation.Summary Compensation TableThe following table shows, for the fiscal years ended December 31, 2010 and 2009, compensation awarded to or paid to, orearned by, our chief executive officer and our two other most highly compensated executive officers during 2010 who were servingas executive officers at December 31, 2010. For purposes of this report, we refer to these officers as the named executive officers.Of note, our annual rates of compensation for our named executive officers in effect at December 31, 2010 and 2009remain the same. However, given our limited cash resources during 2009, the named executive officers other than Mr. Crockford hadtheir annual base salaries reduced by 35% for the period from April 1 to September 30, 2009. Consequently, the salary amounts setforth in the following table may differ from the disclosed annual base salaries then in effect. 34Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn return for the 35% salary reduction, Mr. Finkelstein and Mr. Lyons received options to purchase shares of our commonstock at an exercise price of $0.57 per share. Effective October 1, 2009, their salaries were restored to the levels in effect atDecember 31, 2008 and, therefore, the options ceased vesting as of September 30, 2009 but remain exercisable in accordance with theterms of our stock option plan. The number of shares vested and outstanding from these option grants are set forth in the table withinthe “Outstanding Equity Awards at December 31, 2010” section below. Option All Other Salary(1) Bonus(2) Awards(3) Compensation(4) Total Name and Principal Position Year ($) ($) ($) ($) ($) J.J. Finkelstein, President and 2010 299,520 — 19,396 18,425 337,341 Chief Executive Officer 2009 244,608 18,720 116,198 13,005 392,531 C. Neil Lyons, 2010 202,537 2,000 15,284 6,886 226,707 Chief Financial Officer 2009 167,093 11,140 74,395 4,999 257,627 David R. Crockford, 2010 210,223 2,000 15,284 10,321 237,828 Vice President, Clinical and RegulatoryAffairs 2009 210,223 5,781 — 6,818 222,822 (1) Reflects base salary before pretax contributions and therefore includes compensation deferred under our 401(k) plan. (2) Reflects the payment of discretionary bonus. (3) These amounts reflect the aggregate total grant date fair values (computed in accordance with FASB ASC Topic 718) of optionsgranted to executives during the respective fiscal years. (4) Primarily reflects our match of executive compensation deferrals into our 401(k) plan, along with supplemental life anddisability insurance premiums. None of the individual items exceeded $10,000.Employment Agreements; Potential Payments Upon Termination or Change in ControlWe are party to written employment agreements with our named executive officers. These employment agreements containseverance and other provisions that may provide for payments to the named executive officers following termination of employmentwith us in specified circumstances. The following is a summary of the material terms of these employment agreements with our namedexecutive officers.J.J. Finkelstein. We entered into an employment agreement with Mr. Finkelstein in January 2002 for him to serve as ourpresident and chief executive officer. Mr. Finkelstein’s employment agreement had an initial three-year term, which is automaticallyrenewed for additional one-year periods unless either we or Mr. Finkelstein elect not to renew it. This agreement was amended andrestated during 2008 and again in 2009. Mr. Finkelstein’s annual base salary is $299,520. Mr. Finkelstein’s salary may not beadjusted downward without his written consent, except in a circumstance which is part of a general reduction or other concessionaryarrangement affecting all employees or affecting senior executive officers. Mr. Finkelstein is also eligible to receive an annual bonusin an amount established by the board of directors and is entitled to participate in and receive all standard employee benefits and toparticipate in all of our applicable incentive plans, including stock option, stock, bonus, savings and retirement plans. We alsoprovide him with $5 million in life and disability insurance.Mr. Finkelstein is eligible to receive options to purchase common stock under our equity incentive plans. The decision togrant any such options and the terms of such options are within the discretion of our board of directors or the compensationcommittee thereof. All vested options are exercisable for a period of time following any termination of Mr. Finkelstein’s employmentas may be set forth in the applicable benefit plan or in any option agreement between Mr. Finkelstein and us.In the event that Mr. Finkelstein’s employment is terminated by us without “cause” or by Mr. Finkelstein for “goodreason,” each as defined in his employment agreement, or if Mr. Finkelstein voluntarily terminates his employment within 12 monthsfollowing a “change in control,” as defined in his employment agreement, then in each case, subject to Mr. Finkelstein’s enteringinto and not revoking a release of claims in a form acceptable to us, Mr. Finkelstein will be entitled to receive (i) a lump sumseverance payment equal to his annual base salary then in effect (or if his base salary is less than the amount in effect as of March 31,2009, the base salary in effect as of March 31, 2009), plus (ii) any earned bonus, and (iii) if he timely elects and remains eligible forcontinuation of healthcare benefits, that portion of the continued healthcare premiums that we were paying prior to the date oftermination for a period of 12 months, in each case less applicable taxes and withholdings. If Mr. Finkelstein’s employment had beenterminated for any of the reasons described in this paragraph as of December 31, 2010, he would have been entitled to receive a lumpsum payment of $299,520, less taxes and withholdings, plus continuation of healthcare benefits with a value of $9,204. 35Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition, if Mr. Finkelstein’s employment is terminated without “cause,” or if there is a “change in control” event, ineach case as defined in either the applicable benefit plan or in Mr. Finkelstein’s employment agreement, then the unvested portion ofMr. Finkelstein’s options outstanding as of December 31, 2010 would accelerate in full.C. Neil Lyons. We entered into an employment agreement with Mr. Lyons in April 2007 for him to serve as our chieffinancial officer. Mr. Lyons’ employment agreement had an initial one-year term, which is automatically renewed for additional one-year periods unless either we or Mr. Lyons elect not to renew it. The agreement was amended and restated during 2008 and again in2009. Under the employment agreement, as amended to date, Mr. Lyons’ base salary is $202,537. Mr. Lyons is also eligible toreceive an annual bonus in an amount established by the board of directors and chief executive officer and is entitled to participate inand receive all standard employee benefits and to participate in all of our applicable incentive plans, including stock option, stock,bonus, savings and retirement plans. We also reimburse Mr. Lyons for two-thirds of his annual term life insurance premium, for termlife insurance coverage not to exceed two times his annual base salary.Mr. Lyons is eligible to receive options to purchase common stock under our equity incentive plans. The decision to grantany such options and the terms of such options are within the discretion of our board of directors or the compensation committeethereof. All vested options are exercisable for a period of time following any termination of Mr. Lyons’ employment as may be setforth in the applicable benefit plan or in any option agreement between Mr. Lyons and us.In the event that Mr. Lyons’ employment is terminated by us without “cause” as defined in his employment agreement, orif Mr. Lyons voluntarily terminates his employment within 12 months following a “change in control,” as defined in his employmentagreement, then in each case, subject to Mr. Lyons’ entering into and not revoking a release of claims in a form acceptable to us,Mr. Lyons will be entitled to receive (i) severance payments equal to his annual base salary then in effect, plus (ii) any earned bonus,and (iii) if he timely elects and remains eligible for continuation of healthcare benefits, that portion of the continued healthcarepremiums that we were paying prior to the date of termination for a period of 12 months, in each case less applicable taxes andwithholdings. If Mr. Lyons’s employment had been terminated for any of the reasons described in this paragraph as of December 31,2010, he would have been entitled to receive severance payments of $202,537, less taxes and withholdings, plus continuation ofhealthcare benefits with a value of $17,844.In addition, if Mr. Lyons’ employment is terminated without “cause,” or if there is a “change in control” event, in eachcase as defined in either the applicable benefit plan or in Mr. Lyons’ employment agreement, then the unvested portion of Mr. Lyons’options to purchase 350,000 shares of common stock outstanding as of December 31, 2010 would accelerate in full.David R. Crockford. We entered into an employment agreement with Mr. Crockford in March 2005 for him to serve as ourvice president of clinical and regulatory affairs. Mr. Crockford’s employment agreement had an initial one-year term, which isautomatically renewed for additional one-year periods unless either we or Mr. Crockford elect not to renew it. The agreement wasamended and restated during 2008 and again in 2009. Under the employment agreement, as amended to date, Mr. Crockford’s basesalary is $210,223. Mr. Crockford is also eligible to receive an annual bonus in an amount established by the board of directors andchief executive officer and is entitled to participate in and receive all standard employee benefits and to participate in all of ourapplicable incentive plans, including stock option, stock, bonus, savings and retirement plans. We also reimburse Mr. Crockford fortwo-thirds of his annual term life insurance premium, for term life insurance coverage not to exceed two times his annual base salary.Mr. Crockford is eligible to receive options to purchase common stock under our equity incentive plans. The decision togrant any such options and the terms of such options are within the discretion of our board of directors or the compensationcommittee thereof. All vested options are exercisable for a period of time following any termination of Mr. Crockford’s employmentas may be set forth in the applicable benefit plan or in any option agreement between Mr. Crockford and us.In the event that Mr. Crockford’s employment is terminated by us without “cause” as defined in his employmentagreement, or if Mr. Crockford voluntarily terminates his employment within 12 months following a “change in control,” as definedin his employment agreement, then in each case, subject to Mr. Crockford’s entering into and not revoking a release of claims in aform acceptable to us, Mr. Crockford will be entitled to receive (i) severance payments equal to his annual base salary then in effect,plus (ii) any earned bonus, and (iii) if he timely elects and remains eligible for continuation of healthcare benefits, that portion of thecontinued healthcare premiums that we were paying prior to the date of termination for a period of 12 months, in each case lessapplicable taxes and withholdings. If Mr. Crockford’s employment had been terminated for any of the reasons described in thisparagraph as of December 31, 2010, he would have been entitled to receive severance payments of $210,223, less taxes andwithholdings, plus continuation of healthcare benefits with a value of $15,324. In addition, upon a “change in control,” all ofMr. Crockford’s unvested options will accelerate in full, but there is no such acceleration upon a termination without cause. 36Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOutstanding Equity Awards at December 31, 2010The following table shows certain information regarding outstanding equity awards at December 31, 2010 for the namedexecutive officers, all of which were stock options. Number of Shares Number of Shares Underlying Underlying Unexercised Unexercised Option Options (#) Options (#) Exercise Price Option Name Exercisable Unexercisable ($) Expiration Date Note Mr. Finkelstein 500,000 — 0.33 1/1/2012 100,000 — 3.21 4/1/2015 93,750 31,250 2.34 3/15/2014 (1) 62,500 62,500 1.15 4/15/2015 (1) 114,748 — 0.57 4/10/2019 31,250 93,750 0.76 10/11/2016 (1) — 125,000 0.27 07/14/2017 (1)Mr. Lyons 166,667 33,333 3.10 4/7/2015 (2) 56,250 18,750 2.34 3/15/2014 (1) 37,500 37,500 1.50 6/15/2015 (1) 77,728 — 0.57 4/10/2019 18,750 56,250 0.76 10/11/2016 (1) — 98,500 0.27 07/14/2017 (1)Mr. Crockford 15,000 — 1.07 7/1/2013 125,000 — 0.86 1/1/2014 100,000 — 3.21 4/1/2015 25,000 — 3.82 5/25/2015 37,500 12,500 2.15 1/16/2014 (1) 56,250 18,750 2.34 3/15/2014 (1) 37,500 37,500 1.15 4/15/2015 (1) — 98,500 0.27 07/14/2017 (1) (1) This option vests in equal installments on the first four anniversaries of the grant date. In each case these options were grantedseven years prior to the listed expiration dates. (2) This option vests in equal installments on the first six anniversaries of the grant date which was April 7, 2005.Post-Employment CompensationWe do not maintain any plans providing for payment or other benefits at, following, or in connection with retirement otherthan a 401(k) plan made available to all employees. In addition, we do not maintain any non-qualified deferred compensation plans.Director CompensationThe following table sets forth certain information for the fiscal year ended December 31, 2010 with respect to thecompensation of our directors. Mr. Finkelstein’s compensation is disclosed in the Summary Compensation Table above, and he doesnot receive any additional compensation for his service as a director. Dr. Goldstein is an employee of our company and hiscompensation as an employee is set forth in the table below. He does not receive any additional compensation for his service as adirector.Each non-employee director is eligible to receive an annual cash retainer of $13,905. The chairman of each of our auditcommittee and compensation committee is eligible to receive a supplemental annual cash retainer of $10,300. Mr. McNay currentlyserves as the chairman of the audit committee and Dr. Bowles currently serves as the chairman of the Compensation Committee.Directors also receive $1,288 for each board meeting attended in person and $412 for each Board meeting attended bytelephone. Additionally, members of each committee of the board of directors are eligible to receive $515 for each committeemeeting attended, whether in person or by telephone.Additionally, non-employee directors receive a nonqualified stock option under our equity incentive plan to purchase20,000 shares of common stock upon their re-election as a director at each annual meeting of stockholders. Newly elected orappointed non-employee directors receive a nonqualified stock option to purchase 40,000 shares of common stock. All optionsgranted to directors under this policy vest over four years, with 25% of the shares underlying the option vesting on the first throughfourth anniversaries of the date of grant. 37Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe also reimburse directors for expenses incurred in attending meetings of the board and other events attended on ourbehalf and at our request.Director Compensation for Fiscal 2010 Fees Earned or Paid Option All Other in Cash Awards Compensation Total Name ($) ($)(1) ($) ($) Allan Goldstein, Ph.D. — 15,284 187,460(2) 202,744 R. Don Elsey 7,726 6,403 — 14,129 L. Thompson Bowles M.D., Ph.D. 28,017 3,103 — 31,120 Joseph McNay 25,028 3,103 — 28,131 Mauro Bove 17,303 3,103 — 20,406 Richard Hindin (3) 21,836 — — 21,836 (1) These amounts reflect the aggregate total grant date fair values (computed in accordance with FASB ASC Topic 718) of optionsgranted to directors during 2010. Options held by each Board member as of December 31, 2010, are as follows: Allan Goldstein, Ph.D. 795,442 R. Don Elsey 40,000 L. Thompson Bowles M.D., Ph.D. 174,843 Joseph McNay 248,024 Mauro Bove 247,155 (2) In addition to being Chairman of our Board of Directors, Dr. Goldstein also serves as our Chief Scientific Advisor. In thiscapacity, Dr. Goldstein received a base salary of $187,460 for 2010. Under Dr. Goldstein’s employment agreement, in the eventthat his employment is terminated by us without “cause,” as defined in his employment agreement, or if he voluntarilyterminates his employment within 12 months following a “change in control,” as defined in his employment agreement, then ineach case, subject to Dr. Goldstein’s entering into and not revoking a release of claims in a form acceptable to us, Dr. Goldsteinwill be entitled to receive a lump sum severance payment equal to his annual base salary then in effect, plus any earned bonusas of the date of termination, in each case less applicable taxes and withholdings. Dr. Goldstein is not entitled to receive anycontinuing health and welfare benefits as part of our severance obligation to him. If Dr. Goldstein’s employment had beenterminated for any of the reasons described in this paragraph as of December 31, 2010, he would have been entitled to receive alump sum payment of $187,460, less taxes and withholdings. Dr. Goldstein is eligible to receive options to purchase commonstock under our equity incentive plans. The decision to grant any such options and the terms of such options are within thediscretion of our board of directors or the compensation committee. In addition, if Dr. Goldstein’s employment is terminatedwithout “cause,” or if there is a “change in control” event, in each case as defined in either the applicable benefit plan or inDr. Goldstein’s employment agreement, then the unvested portion of Dr. Goldstein’s options would accelerate in full. All vestedoptions are exercisable for a period of time following any termination of Dr. Goldstein’s employment as may be set forth in theapplicable benefit plan or in any option agreement between Dr. Goldstein and us. (3) Mr. Hindin’s term as a director ended in July 2010. 38Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The following table sets forth certain information regarding the ownership of our common stock as of March 15, 2011 by(i) each director; (ii) each of the named executive officers; (iii) all executive officers and directors as a group; and (iv) all those knownby us to be beneficial owners of more than five percent of our common stock. The address for all directors and executive officers isc/o RegeneRx Biopharmaceuticals, Inc., 15245 Shady Grove Road, Suite 470, Rockville, MD 20850. Beneficial Ownership(1) Beneficial Owner Number of Shares Percent of Total 5% Stockholders: Entities affiliated with Sigma-Tau Finanziaria, S.p.A. Via Sudafrica, 20, Rome,Italy 00144 33,997,378(2) 40.5% Named Executive Officers and Other Directors: J.J. Finkelstein 2,393,386(3) 3.0%Allan L. Goldstein 1,958,788(4) 2.4%R. Don Elsey — * Joseph C. McNay 1,548,385(5) 1.9%Mauro Bove 208,405(6) * L. Thompson Bowles 136,093(7) * C. Neil Lyons 438,978(8) * David R. Crockford 446,250(7) * All directors and executive officers as a group (8 persons) 7,130,285(9) 8.6% * Less than one percent. (1) This table is based upon information supplied by officers, directors and principal stockholders. Unless otherwise indicated inthe footnotes to this table and subject to community property laws where applicable, we believes that each of the stockholdersnamed in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicablepercentages are based on 79,860,282 shares of common stock outstanding on March 15, 2010, adjusted as required by rulespromulgated by the Securities and Exchange Commission (the “SEC”). (2) Consists of 984,615 shares of common stock held of record held by Sigma-Tau Finanziaria, S.p.A. (“Sigma-Tau”); 12,937,111shares of common stock held of record and 589,481 shares of common stock issuable upon exercise of warrants held by DefianteFarmaceutica S.A. (“Defiante”), a subsidiary of Sigma-Tau, that are exercisable within 60 days of March 15, 2011; 6,348,878shares of common stock held of record and 1,228,486 shares of common stock issuable upon exercise of warrants held by TaufinInternational S.A. (“Taufin”), an entity wholly owned by Taufin SPA, which is owned directly by Claudio Cavazza, whodirectly and indirectly owns 57% of Sigma-Tau, that are exercisable within 60 days of March 15, 2011; and 9,711,407 shares ofcommon stock held of record and 2,197,400 shares of common stock issuable upon exercise of warrants held by Sinaf S.A.(“Sinaf”), an indirect wholly-owned subsidiary of Aptafin S.p.A., which is owned by Paolo Cavazza and members of his family,that are exercisable within 60 days of March 15, 2011. Paolo Cavazza directly and indirectly owns 38% of Sigma-Tau. (3) Consists of 1,377,638 shares of common stock held of record by Mr. Finkelstein and 51,000 shares of common stock held ofrecord by Mr. Finkelstein’s daughter over which Mr. Finkelstein shares voting and dispositive power. Also includes 964,748shares of common stock issuable upon exercise of options exercisable within 60 days of March 15, 2011. (4) Consists of 1,336,846 shares of common stock held of record by Dr. Goldstein and 621,942 shares of common stock issuableupon exercise of options exercisable within 60 days of March 15, 2011. (5) Consists of 1,339,111 shares of common stock held of record by Mr. McNay and 209,274 shares of common stock issuable uponexercise of options exercisable within 60 days of March 15, 2011. (6) Consists of shares of common stock issuable upon exercise of options exercisable within 60 days of March 15, 2011. Mr. Boveis an officer of Sigma-Tau, but he has no beneficial ownership over the reported securities as he has no voting or dispositivepower with respect to the securities held by Sigma-Tau and its affiliates described in Note 2 above. (7) Consists of shares of common stock issuable upon exercise of options exercisable within 60 days of March 15, 2011. (8) Consists of 30,000 shares of common stock held of record by Mr. Lyons and 408,978 shares of common stock issuable uponexercise of options exercisable within 60 days of March 15, 2011. (9) Consists of 4,134,595 shares of common stock held of record and 2,995,690 shares of common stock issuable upon exercise ofoptions exercisable within 60 days of March 15, 2011. 39Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEquity Compensation Plan InformationThe following table provides information as of December 31, 2010 about the securities authorized for issuance to ouremployees, directors and other eligible participants under our equity compensation plans, consisting of the Amended and Restated2000 Stock Option and Incentive Plan and the 2010 Equity Incentive Plan. Number of securities remaining available for Number of securities to future issuance under be issued upon exercise Weighted-average exercise equity compensation plans of outstanding options, price of outstanding options, (excluding securities warrants and rights warrants and rights reflected in column (a)) Plan Category (a) (b) (c) Equity compensation plans approved bysecurity holders 5,348,863 $1.37 4,327,500 Equity compensation plans not approvedby security holders — — — Total 5,348,863 $1.37 4,327,500 Item 13. Certain Relationships and Related Transactions, and Director Independence.Related Party TransactionsThe following is a summary of transactions, and series of related transactions, since January 1, 2010 to which we have beenor will be a participant, in which the amount involved exceeded or will exceed one percent of the average of our total assets at yearend for the last two completed fiscal years and in which any of our executive officers, directors or beneficial holders of more than fivepercent of our capital stock had or will have a direct or indirect material interest, or any immediate family member of, or personsharing the household with, any of these individuals, had or will have a direct or indirect material interest, other than executive anddirector compensation arrangements, including the employment, termination of employment and change of control arrangements,which are described in the section of this report entitled “Executive Compensation.”Since January 1, 2010, we have entered into three financing transactions in which Sigma-Tau and its affiliates haveparticipated, as described below. Mauro Bove, one of our directors, is an officer of Sigma-Tau. Each of these transactions wasapproved by our Board of Directors and our audit committee, following disclosure of Mr. Bove’s potential interests in thesetransactions.On May 21, 2010, we completed a public offering of units, consisting of shares of our common stock and warrants topurchase common stock. Sinaf S.A. or Sinaf, which participated in the offering, is a direct wholly-owned subsidiary of Aptafin S.p.A.,or Aptafin. Aptafin is owned directly by Paolo Cavazza and members of his family, who directly own 38% of Sigma Tau. Sinafpurchased 240,000 units, consisting of 240,000 shares of common stock and warrants to purchase 96,000 shares of our commonstock, for a purchase price of $0.41 per unit, in the public offering on the same terms and conditions as other investors participatingin the public offering.On June 29, 2010, Inverlochy-Consultadoria e Servicos (S.U.) LDA, or Inverlochy, an entity wholly owned by ClaudioCavazza, who directly and indirectly owns 57% of Sigma-Tau, merged with and into Taufin International S.A., or Taufin. Taufin is adirect wholly-owned subsidiary of Taufin SPA. Taufin SPA is owned directly by Claudio Cavazza. As a result of the merger, Taufinbecame the direct beneficial owner of the warrants and shares of common stock owned by Inverlochy immediately prior to the merger.Also on June 29, 2010, Chaumiere-Consultadoria e Servicos SDC Unipessoal LDA, or Chaumiere, which was an indirect wholly-owned subsidiary of an entity owned by Paolo Cavazza and members of his family, merged with and into Sinaf, and Sinaf therebybecame the direct beneficial owner of the warrants and shares of Common Stock owned by Chaumiere immediately prior to themerger. 40Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOn January 7, 2011, we issued 925,926 shares of common stock to Defiante Farmaceutica S.A., or Defiante, a subsidiary ofSigma Tau, as well as, 1,296,296 shares to Taufin and 1,296,297 shares to Sinaf, all at a purchase price of $0.27 per share in a privateplacement. We also issued warrants to each of Defiante, Taufin and Sinaf to purchase 370,370 shares, 518,518 shares and 518,519shares of our common stock, respectively, at an exercise price of $0.38 per share. The warrants will be exercisable on July 7, 2011 andthereafter until January 7, 2016. We also entered into an agreement with Defiante, Taufin and Sinaf to amend the terms of certainwarrants held by them. Under the warrant amendment, all outstanding warrants held by Defiante, Taufin and Sinaf that were issuedbetween March 2006 and December 2008, exercisable for an aggregate of 3,046,453 shares of common stock and with exercise pricesbetween $1.60 per share and $4.06 per share, were amended to reduce their exercise prices to $0.38 per share and to extend theirexpiration dates to December 31, 2011.Director IndependenceUnder NYSE Amex listing standards, a majority of the members of a listed company’s board of directors must qualify as“independent,” as affirmatively determined by the board. Although our common stock is no longer listed on the NYSE Amexexchange, we have determined the independence of our directors using the NYSE Amex definitions of independence. Our boardconsults with counsel to ensure that its determinations are consistent with relevant securities and other laws and regulationsregarding the definition of “independent,” including those set forth in pertinent listing standards of the NYSE Amex, as in effect fromtime to time.Consistent with these considerations, after review of all relevant identified transactions or relationships between eachdirector, or any of his family members, and our company, our senior management and our independent auditors, our board hasdetermined that the following four directors are independent directors within the meaning of the applicable NYSE Amex listingstandards: Mr. Elsey, Mr. Bove, Mr. McNay and Dr. Bowles. In making this determination, the board found that none of the thesedirectors had a material or other disqualifying relationship with us. Mr. Finkelstein, our President and Chief Executive Officer, andDr. Goldstein our Chief Scientific Advisor, are not independent by virtue of their employment with us.In determining the independence of Mr. Bove, the board of directors took into account the significant ownership of ourcommon stock by Sigma-Tau and its affiliates. The board of directors does not believe that any of the transactions with Sigma-Tauand its affiliates described in this report has interfered or would reasonably be expected to interfere with Mr. Bove’s exercise ofindependent judgment in carrying out his responsibilities as a director of our company.Item 14. Principal Accounting Fees and Services.The following table represents aggregate fees billed to us for the fiscal years ended December 31, 2010 and 2009 byReznick Group, P.C., our independent registered public accounting firm. All such fees described below were approved by the auditcommittee. 2010 2009 Audit fees $77,453 $76,000 Tax fees (1) 22,053 25,000 Total Fees $99,506 $101,000 (1) Tax fees include the preparation of our corporate federal and state income tax returns.Our audit committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered byour independent registered public accounting firm, Reznick Group, P.C. The policy generally pre-approves specified services in thedefined categories of audit services, audit-related services, and tax services up to specified amounts. Pre-approval may also be givenas part of the audit committee’s approval of the scope of the engagement of the independent registered public accounting form or onan individual explicit case-by-case basis before the independent registered public accounting form is engaged to provide eachservice. On a periodic basis, the independent registered public accounting firm reports to the audit committee on the status of actualcosts for approved services against the approved amounts.The audit committee has determined that the rendering of the services other than audit services by Reznick Group P.C. iscompatible with maintaining that firm’s independence. 41Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules. 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 ofIncorporation 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 ofIncorporation Exhibit 3.3 to Registration Statement on Form S-1(File No. 333-166146) (filed April 16, 2010) 3.4 Certificate of Amendment of Restated Certificate ofIncorporation 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 ParticipatingCumulative 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 Quarterly Report on Form 10-Q(File No. 001-15070) for the quarter ended June30, 2006 (filed August 14, 2006) 3.7 Amendment to Amended and Restated Bylaws Exhibit 3.6 to 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 theCompany and American Stock Transfer & TrustCompany, 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 StockTransfer & Trust Company, as Rights Agent Exhibit 4.4 to Registration Statement on Form S-1(File No. 333-166146) (filed April 16, 2010) 42Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 4.5 Warrant Agreement, dated May 21, 2010, between theCompany and American Stock Transfer & TrustCompany, as Warrant Agent Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed May 21, 2010) 4.6 Form of Warrant Certificate Exhibit 4.6 to Amendment No. 1 to RegistrationStatement on Form S-1 (File No. 333-166146)(filed May 17, 2010) 10.1^ Amended and Restated 2000 Stock Option andIncentive Plan, as amended Annex A to the Company’s Proxy Statement onSchedule 14A (File No. 001-15070) (filed May 9,2008) 10.2^ 2010 Equity Incentive Plan Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed July 20, 2010) 10.3 Form of Stock Option Grant Notice and Stock OptionAgreement under the 2010 Equity Incentive Plan Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed July 20, 2010) 10.4 Patent License Agreement — Exclusive, datedJanuary 24, 2001, between the Company and the U.S.Public Health Service Exhibit 10.1 to Annual Report on Form 10-KSBfor the year ended December 31, 2000 (FileNo. 001-15070) (filed April 2, 2001)** 10.5 Thymosin Beta 4 License and Supply Agreement, datedJanuary 21, 2004, between the Company and DefianteFarmaceutica S.A. Exhibit 10.10 to Registration Statement onForm SB-2 (File No. 333-113417) (filed March 9,2004)** 10.6^ Second Amended and Restated Employment Agreement,dated March 11, 2009, between the Company and AllanL. Goldstein, as amended Exhibit 10.4 to Amendment No. 1 to AnnualReport on Form 10-K for the year endedDecember 31, 2008 (File No. 001-15070) (filedApril 30, 2009) 10.7^ Second Amended and Restated Employment Agreement,dated March 12, 2009, between the Company and J.J.Finkelstein, as amended Exhibit 10.5 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 10.8^ Second Amended and Restated Employment Agreement,dated March 31, 2009, between the Company and C.Neil Lyons, as amended Exhibit 10.6 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 10.9^ Second Amended and Restated Employment Agreement,dated March 31, 2009, between the Company and DavidCrockford Exhibit 10.7 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 10.10 Lease, by and between the Company and The RealtyAssociates Fund V, L.P., dated December 10, 2009 Exhibit 10.25 to Annual Report on Form 10-K forthe year ended December 31, 2009 (File No. 001-15070) (filed March 31, 2010) 43Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 10.11 Stock Purchase Agreement, dated June 23, 2005 Exhibit 99.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed June 23, 2005) 10.12 Form of Warrant to Purchase Common Stock, datedMarch 17, 2006 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed March 7, 2006) 10.13 Registration Rights Agreement, dated December 15,2006 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 18, 2006) 10.14 Form of Warrant to Purchase Common Stock, datedDecember 18, 2006 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 18, 2006) 10.15 Form of Securities Purchase Agreement, datedFebruary 27, 2008 Exhibit 99.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed February 27, 2008) 10.16 Form of Warrant to Purchase Common Stock, datedFebruary 29, 2008 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed February 27, 2008) 10.17 Form of Securities Purchase Agreement, datedDecember 10, 2008 Exhibit 99.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 12, 2008) 10.18 Form of Warrant to Purchase Common Stock, datedDecember 10, 2008 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 12, 2008) 10.19 Form of Warrant to Purchase Common Stock datedApril 30, 2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed April 16, 2009) 10.20 Securities Purchase Agreement, dated April 13, 2009 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed April 16, 2009) 10.21 Form of Common Stock Purchase Warrant, datedOctober 5, 2009 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed September 30, 2009) 10.22 Securities Purchase Agreement, dated September 30,2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed September 30, 2009) 10.23 Form of Warrant, dated October 15, 2009 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed October 5, 2009) 44Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 10.24 Securities Purchase Agreement, dated September 30,2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed October 5, 2009) 10.25 Representative’s Warrant to Purchase Common Stock,dated May 21, 2010 Exhibit 4.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed May 21, 2010) 10.26 Purchase Agreement, dated January 4, 2011 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.27 Registration Rights Agreement, dated January 4, 2011 Exhibit 10.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.28 Securities Purchase Agreement, dated January 5, 2011 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.29 Warrant to Purchase Common Stock, dated January 7,2011, issued to Lincoln Park Capital Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.30 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and DefianteFarmaceutica S.A. Exhibit 10.4 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.31 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and Taufin InternationalS.A. Exhibit 10.5 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.32 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and Sinaf S.A. Exhibit 10.6 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.33 Form of Warrant to Purchase Common Stock, datedJanuary 7, 2011, issued to the Sigma-Tau Purchasers Exhibit 4.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.34 Omnibus Warrant Amendment Agreement, datedJanuary 5, 2011 Exhibit 4.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 45Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 23.1 Consent of Reznick Group, P.C. Filed herewith 24.1 Powers of Attorney Included on signature page 31.1 Certification of Principal Executive Officer pursuant toRules 13a-14 and 15d-14 promulgated under theSecurities Exchange Act of 1934 Filed herewith 31.2 Certification of Principal Financial Officer pursuant toRules 13a-14 and 15d-14 promulgated under theSecurities Exchange Act of 1934 Filed herewith 32.1 Certification of Principal Executive Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Filed herewith*** 32.2 Certification of Principal Financial Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Filed herewith*** * Except where noted, the exhibits referred to in this column have heretofore been filed with the Securities and ExchangeCommission as exhibits to the documents indicated and are hereby incorporated by reference thereto. The RegistrationStatements referred to are Registration Statements of the Company. ** The registrant has been granted confidential treatment with respect to certain portions of this exhibit (indicated by asterisks),which have been filed separately with the Securities and Exchange Commission. *** These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are notbeing filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference intoany filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language insuch filing. ^ Compensatory plan, contract or arrangement. 46Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto duly authorized. RegeneRx Biopharmaceuticals, Inc.(Registrant) Date: March 31, 2011 By: /s/ J.J. Finkelstein J.J. Finkelstein President and Chief Executive Officer By: /s/ C. Neil Lyons C. Neil Lyons Chief Financial Officer 47Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPOWER OF ATTORNEYPursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.In addition, each of the following persons hereby constitutes and appoints J.J. Finkelstein and C. Neil Lyons, and each ofthem, as his true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him and in his name, to sign anyand all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, withthe Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authorityto do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intentsand purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or theirsubstitute or substitutes, may lawfully do or cause to be done by virtue hereof. Name Title Date /s/ Allan L. Goldstein Chairman of the Board, March 31, 2011Allan L. Goldstein Chief Scientific Advisor, and Director /s/ J.J. Finkelstein President, Chief Executive Officer, and Director March 31, 2011J.J. Finkelstein (Principal Executive Officer) /s/ C. Neil Lyons Chief Financial Officer and Treasurer March 31, 2011C. Neil Lyons (Principal Financial Officer and Principal Accounting Officer) /s/ R. Don Elsey Director March 31, 2011R. Don Elsey /s/ Joseph C. McNay Director March 31, 2011Joseph C. McNay /s/ Mauro Bove Director March 31, 2011Mauro Bove /s/ L. Thompson Bowles Director March 31, 2011L. Thompson Bowles 48Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegeneRx Biopharmaceuticals, Inc.Index to Financial Statements Page Report of Independent Registered Public Accounting Firm 50 Balance Sheets 51 Statements of Operations 52 Statements of Changes in Stockholders’ Equity 53 Statements of Cash Flows 54 Notes to Financial Statements 55 49Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBoard of Directors and StockholdersRegeneRx Biopharmaceuticals, Inc.We have audited the accompanying balance sheets of RegeneRx Biopharmaceuticals, Inc. (the “Company”) as of December 31, 2010and 2009, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in theperiod ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RegeneRxBiopharmaceuticals, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the twoyears in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States ofAmerica.The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As morefully described in Note 1 to the financial statements, the Company has experienced negative cash flows from operations sinceinception and is dependent upon future financing in order to meet its planned operating activities. These conditions raise substantialdoubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described inNote 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty./s/ REZNICK GROUP, P.C.Vienna, VirginiaMarch 31, 2011 50Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegeneRx Biopharmaceuticals, Inc.Balance Sheets December 31, December 31, 2010 2009 ASSETS Current assets Cash and cash equivalents $3,790,352 $4,355,768 Grant receivable 10,703 — Prepaid expenses and other current assets 384,806 196,546 Total current assets 4,185,861 4,552,314 Property and equipment, net of accumulated depreciation of $107,907 and $98,171 24,940 8,492 Other assets 17,255 22,948 Total assets $4,228,056 $4,583,754 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $185,643 $140,206 Accrued expenses 430,996 740,198 Total current liabilities 616,639 880,404 Commitments — — Stockholders’ equity Preferred stock, $.001 par value per share, 1,000,000 shares authorized; no shares issued — — Common stock, par value $.001 per share, 200,000,000 shares authorized, 73,531,578 sharesissued and outstanding as of December 31, 2010; 100,000,000 shares authorized,60,406,828 shares issued and outstanding as of December 31, 2009 73,532 60,407 Additional paid-in capital 93,063,201 88,144,347 Accumulated deficit (89,525,316) (84,501,404)Total stockholders’ equity 3,611,417 3,703,350 Total liabilities and stockholders’ equity $4,228,056 $4,583,754 The accompanying notes are an integral part of these financial statements. 51Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegeneRx Biopharmaceuticals, Inc.Statements of Operations Years ended December 31, 2010 2009 Sponsored research revenue $849,539 $— Operating expenses Research and development 2,707,909 3,724,514 General and administrative 3,173,729 2,781,790 Total operating expenses 5,881,638 6,506,304 Loss from operations (5,032,099) (6,506,304)Interest income 8,187 12,444 Net loss $(5,023,912) $(6,493,860) Basic and diluted net loss per common share $(0.07) $(0.12)Weighted average number of common shares outstanding 68,444,011 55,680,525 The accompanying notes are an integral part of these financial statements. 52Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegeneRx Biopharmaceuticals, Inc.Statements of Changes in Stockholders’ EquityYears ended December 31, 2010 and 2009 Accumulated other Total Common stock Additional Accumulated comprehensive stockholders’ Shares Amount paid-in capital deficit income/(loss) equity Balance, December 31, 2008 53,622,491 $53,623 $82,550,585 $(78,007,544) $— $4,596,664 Issuance of common stock,net of offering costs of$447,933 6,784,337 6,784 4,845,282 — — 4,852,066 Share-based compensationexpense — — 748,480 — — 748,480 Net loss — — — (6,493,860) — (6,493,860) Balance, December 31, 2009 60,406,828 60,407 88,144,347 (84,501,404) $— $3,703,350 Issuance of common stock,net of offering costs of$923,524 13,124,750 13,125 4,444,499 — — 4,457,624 Share-based compensationexpense — — 474,355 — — 474,355 Net loss — — — (5,023,912) — (5,023,912) Balance, December 31, 2010 73,531,578 $73,532 $93,063,201 $(89,525,316) $— $3,611,417 The accompanying notes are an integral part of these financial statements. 53Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegeneRx Biopharmaceuticals, Inc.Statements of Cash Flows Years ended December 31, 2010 2009 Operating activities: Net loss $(5,023,912) $(6,493,860)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 9,736 16,547 Non-cash share-based compensation 474,355 748,480 Gain on settlement of accrued expenses (141,016) (100,000)Changes in operating assets and liabilities: Grant receivable (10,703) — Prepaid expenses and other current assets (188,260) 39,931 Other assets 5,693 (17,255)Accounts payable 45,437 69,652 Accrued expenses (168,186) (415,160)Net cash used in operating activities (4,996,856) (6,151,665) Investing activities: Purchase of property and equipment (26,184) — Net cash used in investing activities (26,184) — Financing activities: Net proceeds from issuance of common stock 4,457,624 4,852,066 Net cash provided by financing activities 4,457,624 4,852,066 Net decrease in cash and cash equivalents (565,416) (1,299,599) Cash and cash equivalents at beginning of year 4,355,768 5,655,367 Cash and cash equivalents at end of year $3,790,352 $4,355,768 The accompanying notes are an integral part of these financial statements. 54Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents1. ORGANIZATION AND BUSINESSOrganization 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 toaccelerate tissue and organ repair. Our operations are confined to one business segment: the development and marketing of productcandidates based on Thymosin Beta 4 (“Tb4”), an amino acid peptide.Management Plans to Address Operating Conditions. We have incurred net losses of $5.0 million and $6.5 million for the yearsended December 31, 2010 and 2009, respectively. Since inception, and through December 31, 2010, we have an accumulated deficitof $89.5 million and we had cash and cash equivalents of $3.8 million as of December 31, 2010. On January 5, 2011 and January 7,2011, we raised aggregate net proceeds of $1.4 million from the sale of our securities (See Note 10, Subsequent Events). Based on ourcurrent operating plan which includes a Phase 2 trial to evaluate RGN-352 in patients suffering from an acute myocardial infarction(heart attack) or AMI, support of a physician sponsored Phase 2 trial to evaluate RGN-259 in patients suffering from dry eye, and aPhase 2 trial to evaluate RGN-137 in patients suffering from epidermolysis bullosa or EB, we project that our existing capitalresources would fund our operations into the second half of 2011, without giving effect to any other financing activities, includingany purchases under our recent committed equity facility with Lincoln Park Capital (See Note 10, Subsequent Events). However, inMarch 2011, we were notified by the U.S. Food and Drug Administration, or FDA, that the Phase 2 AMI trial had been placed onclinical hold pending the resolution of issues at our contract manufacturer relating to compliance with FDA good manufacturingpractices. Based on the information available as of the date of these financial statements, we are unable to estimate how long the trialwill be on clinical hold. The clinical hold is limited to Good Manufacturing Practice compliance issues at our contract manufacturerand is not related to the manufacture of Tß4 peptide, safety of RGN-352, the trial protocol or our clinical development plan, nor doesit affect any of our other clinical trials or drug candidates. If the Phase 2 AMI trial remains on hold or if we are required to have newbatches of RGN-352 manufactured for the trial, we would need to delay patient enrollment in this trial until additional funding isavailable. If we do not resume the trial, we project that our current cash resources would support our operations into early 2012.We anticipate incurring additional losses in the future as we continue to explore the potential clinical benefits of Tb4-basedproduct candidates over multiple indications. We will need substantial additional funds in order to initiate any further preclinicalstudies or clinical trials, and to fund our operations beyond the second half of 2011. Accordingly, we will have a need for financingand are in the process of exploring various alternatives, including, without limitation, a public or private placement of our securities,debt financing or corporate collaboration and licensing arrangements or the sale of our company or certain of our intellectualproperty rights.These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statementshave been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of ourassets 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 financingor corporate transaction, either on favorable terms or at all. If we are unable to complete a financing or strategic transaction, we maynot be able to continue as a going concern after our funds have been exhausted, and we could be required to significantly curtail orcease operations, file for bankruptcy or liquidate and dissolve. There can be no assurance that we will be able to obtain any sources offunding. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assetamounts 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 plannedproduct development efforts. Additionally, we continually refine our operating strategy and evaluate alternative clinical uses of Tb4.However, substantial additional resources will be needed before we will be able to achieve sustained profitability. Consequently, wecontinually evaluate alternative sources of financing such as the sharing of development costs through strategic collaborationagreements. There can be no assurance that our financing efforts will be successful, and if we are not able to obtain sufficient levels offinancing, we would delay certain clinical and/or research activities, and our financial condition would be materially and adverselyaffected. 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 asignificant impact on us and our operations.To achieve profitability we must successfully conduct pre-clinical studies and clinical trials, obtain required regulatoryapprovals and successfully manufacture and market those pharmaceuticals we wish to commercialize. The time required to reachprofitability is highly uncertain, and there can be no assurance that we will be able to achieve sustained profitability, if at all. 55Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUse of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in theUnited Stated of America (“U.S. GAAP”) requires management to make certain estimates and assumptions that affect the reportedearnings, financial position and various disclosures. Critical accounting policies involved in applying our accounting policies arethose that require management to make assumptions about matters that are highly uncertain at the time the accounting estimate wasmade and those for which different estimates reasonably could have been used for the current period. Critical accounting estimatesare also those which are reasonably likely to change from period to period, and would have a material impact on the presentation ofour financial condition, changes in financial condition or results of operations. Our most critical accounting estimates relate toaccounting policies for clinical trial accruals and share-based arrangements. Management bases its estimates on historical experienceand on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from theseestimates.Cash and Cash Equivalents. Cash and cash equivalents consist of cash and highly-liquid investments with original maturitiesof three months or less when acquired and are stated at cost that approximates their fair market value.Concentration of Credit Risk. Financial instruments, which potentially subject the Company to concentrations of credit risk,consist primarily of cash, and cash equivalents. We limit our exposure to credit loss by placing our cash and cash equivalents withhigh quality financial institutions and, in accordance with our investment policy, in securities that are rated investment grade.Property and Equipment. Property and equipment consists of office furniture and equipment, and is stated at cost anddepreciated over the estimated useful lives of the assets (generally two to five years) using the straight-line method. Expenditures formaintenance and repairs which do not significantly prolong the useful lives of the assets are charged to expense as incurred.Depreciation expense was $9,736 and $16,547 for the years ended December 31, 2010 and 2009, respectively.Impairment of Long-lived Assets. When we record long-lived assets our policy is to regularly perform reviews to determine if andwhen the carrying value of our long-lived assets becomes impaired. During the two years ended December 31, 2010 we did not reportqualifying long-lived assets and therefore no impairment losses were recorded.Sponsored Research Revenues. We account for non-refundable grants as “Sponsored research revenues” in the accompanyingstatements of operations. Revenue from non-refundable grants is recognized when the following criteria are met; persuasive evidenceof an arrangement exists, services have been rendered and the underlying costs incurred, the contract price is fixed or determinable,and collectability is reasonably assured. For the year ended December 31, 2010, all of our revenues were received from multiplegrants.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 Tb4; formulation of Tb4 into the various product candidates; stability for both Tb4 and the various formulations; pre-clinical toxicology; safety and pharmacokinetic studies; clinical trial management; medical oversight; laboratory evaluations;statistical data analysis; regulatory compliance; quality assurance; and other related activities. R&D includes cash and non-cashcompensation, employee benefits, travel and other miscellaneous costs of our internal R&D personnel, six persons in total, who arewholly dedicated to R&D efforts. R&D also includes a pro-ration of our common infrastructure costs for office space andcommunications.Cost of Preclinical Studies and Clinical Trials. We accrue estimated costs for preclinical studies based on estimates of workperformed. We estimate expenses incurred for clinical trials that are in process based on patient enrollment and based on clinical datacollection and management. Costs based on clinical data collection and management are recognized based on estimates of unbilledgoods and services received in the reporting period. We monitor the progress of the trials and their related activities and adjust theaccruals accordingly. Adjustments to accruals are charged to expense in the period in which the facts that give rise to the adjustmentbecome known. In the event of early termination of a clinical trial, we would accrue an amount based on estimates of the remainingnon-cancelable obligations associated with winding down the clinical trial.Patent Costs. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses asincurred since recoverability of such expenditures is uncertain.Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities arerecognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts ofexisting assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differencesare expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions aremore likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50%likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.The Company’s policy for recording interest and penalties associated with audits is that penalties and interest expense are recordedin “Income taxes” in the Company’s statements of operations. 56Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods inwhich those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities,projected future taxable income, and tax planning strategies in making that assessment. We recorded a full valuation allowanceagainst all estimated net deferred tax assets at December 31, 2010 and 2009. We have significant net operating loss carryforwards topotentially reduce future federal and state taxable income, and research and experimentation tax credit carryforwards available topotentially offset future federal and state income taxes. Use of our net operating loss and research and experimentation creditcarryforwards may be limited due to changes in our ownership as defined within Section 382 of the Internal Revenue Code.Net Loss Per Common Share. Net loss per common share for the years ended December 31, 2010 and 2009, respectively, is basedon the weighted-average number of shares of common stock outstanding during the periods. Basic and diluted loss per share areidentical for all periods presented as potentially dilutive securities have been excluded from the calculation of the diluted net lossper common share because the inclusion of such securities would be antidilutive. The potentially dilutive securities include19,337,615 shares and 12,847,964 shares in 2010 and 2009, respectively, reserved for the exercise of outstanding options andwarrants.Share-Based Compensation. We measure share-based compensation expense based on the grant date fair value of the awardswhich is then recognized over the period which service is required to be provided. We estimate the grant date fair value using theBlack-Scholes option-pricing model (“Black-Scholes”). We recognized $474,355 and $748,480 in share-based compensationexpense for the years ended December 31, 2010 and 2009, respectively.Fair Value of Financial Instruments. The carrying amounts of our financial instruments, as reflected in the accompanyingbalance sheets, approximate fair value. Financial instruments consist of cash and cash equivalents, and accounts payable.Recent Accounting Pronouncements. In April 2010, the Financial Accounting Standards Board (“FASB”) issued AccountingStandards Update (“ASU”) 2010-17, “Revenue Recognition—Milestone Method (Topic 605) — Milestone Method of RevenueRecognition — a consensus of the FASB Emerging Issues Task Force.” ASU 2010-17 provides guidance to vendors on the criteriathat should be met for determining whether the milestone method of revenue recognition is appropriate. This guidance is effectiveprospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Earlyadoption is permitted. We have not yet begun to generate revenues that contain milestone payments. ASU 2010-17 will be reviewedand implemented, if applicable to our revenue arrangements, in the fiscal year in which we begin to generate revenues under sucharrangements.In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. This legislation includes anexemption for companies with less than $75 million in market capitalization from the requirement set forth in Section 404(b) of theSarbanes-Oxley Act of 2002 to include an external auditor’s report on the effectiveness of a registrant’s internal control over financialreporting. As a result of the new legislation, our independent registered public accounting firm will not be required to issue anattestation report with respect to our internal control over financial reporting. However, we will continue to be subject to therequirement of Section 404 of the Sarbanes-Oxley Act of 2002 for our management to make an annual assessment of the effectivenessof our internal control over financial reporting.Other new pronouncements issued but not effective until after December 31, 2010 are not expected to have a significant effecton our financial position or results of operations.3. FAIR VALUE MEASUREMENTSThe authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for anasset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in anorderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principalmarket that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fairvalue hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may beused 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 December 31, 2010 and 2009, we held no qualifying liabilities, and our only qualifying assets that required measurementunder the foregoing fair value hierarchy were money market funds and U.S. Treasury Bills included in Cash and Cash Equivalentsvalued at $3.8 million and $4.4 million, respectively, using Level 1 inputs. 57Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents4. LICENSES, INTELLECTUAL PROPERTY, AND RELATED PARTY TRANSACTIONSWe have an exclusive, worldwide licensing agreement with the National Institutes of Health (“NIH”) for all claims to Tb4 withintheir broadly-defined patent application. In exchange for this exclusive worldwide license, we must make certain royalty andmilestone payments to the NIH. Through December 31, 2010 we have complied with these requirements. No assurance can be givenas to whether or when a patent will be issued, or as to any claims that may be included or excluded within the patent. We have alsofiled numerous additional patent applications covering various compositions, uses, formulations and other components of Tb4, aswell as to novel peptides resulting from our research efforts. Some of these patents have issued, while many patent applications arestill pending. Minimum annual maintenance fees for each of the years ended December 31, 2010 and 2009 were $25,000, and areexpected to amount to approximately $25,000 annually in 2011 and thereafter.We have also entered into an agreement with a university under the terms of which we have received an exclusive license totechnology and intellectual property. The agreement, which is generally cancelable by us, provides for the payment of license feesand/or minimum payments, which are generally creditable against future royalties. Fees paid by the Company amounted to $25,000for the year ended December 31, 2010. Future minimum annual fees are expected to amount to approximately $25,000. In addition,the agreements provide for payments upon the achievement of certain milestones in product development. The agreement alsorequires us to fund certain costs associated with the filing and prosecution of patent applications.All license fees are included in Research and Development in the accompanying statements of operations.We have entered into a License and Supply Agreement (the “Agreement”) with Defiante Farmaceutica S.A. (“Defiante”) aPortuguese company that is a wholly owned subsidiary of Sigma-Tau, S.p.A., an international pharmaceutical company and anaffiliate of Sigma-Tau Finanziaria S.p.A., who together with its affiliates comprise our largest stockholder group (the “Sigma-TauGroup”). This Agreement grants to Defiante the exclusive right to use Tb4 to conduct research and development activities in Europe.Under the Agreement, we will receive fees and royalty payments based on a percentage of specified sales of Tb4-related products byDefiante. The term of the Agreement continues until the later of the expiration of any patents developed under the Agreement, theexpiration of marketing rights, or December 31, 2016.In furtherance of the licensed rights, Sigma-Tau Group funded and managed the RegeneRx-sponsored Phase II dermal woundhealing clinical trials in venous stasis ulcers conducted in Italy and Poland that concluded in the first quarter of 2009.5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONSPrepaid expenses and other current assets are comprised of the following: December 31, 2010 2009 Prepaid research and development $245,498 $— Legal retainer 100,000 100,000 Prepaid compensation 24,960 24,960 Prepaid insurance 8,596 55,063 Other 5,753 16,523 $384,806 $196,546 Accrued expenses are comprised of the following: December 31, 2010 2009 Accrued clinical research $208,515 $496,997 Accrued professional fees 128,847 122,590 Accrued vacation 48,096 35,300 Other 43,538 26,316 Accrued compensation 2,000 28,995 Accrued license fees — 30,000 $430,996 $740,198 58Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents6. EMPLOYEE BENEFIT PLANSWe have a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code (the “Code”).All employees of the Company are eligible to participate in the plan. The Company matches 100% of each participant’s voluntarycontributions, subject to a maximum Company contribution of 4% of the participant’s compensation. The Company’s matchingportion totaled $43,280 and $18,269 for the years ended December 31, 2010 and 2009, respectively. In order to conserve cash, theCompany discontinued the matching contribution effective June 5, 2009 and reinstated it on March 1, 2010.7. STOCKHOLDERS’ EQUITYShareholders Rights Plan. Our Board of Directors adopted a Rights Agreement, dated April 29, 1994, as amended, that isintended to discourage an unsolicited change in control of the Company. In general, if an entity acquires more than a 25% ownershipinterest in the Company without the endorsement of our Board of Directors, then our current stockholders (other than the acquiringentity) will be issued a significant number of new shares, the effect of which would dilute the ownership of the acquiring entity andcould delay or prevent the change in control.Registration Rights Agreements. In connection with the sale of certain equity instruments, we have entered into RegistrationRights Agreements. Generally, these Agreements required us to file registration statements with the Securities and ExchangeCommission to register common shares to permit re-sale of common shares previously sold under an exemption from registration or toregister common shares that may be issued on exercise of outstanding warrants.The Registration Rights Agreements usually require us to pay penalties for any failure or time delay in filing or maintaining theeffectiveness of the required registration statements. These penalties are usually expressed as a fixed percentage, per month, of theoriginal amount we received on issuance of the common shares, options or warrants. While to date we have not incurred any penaltiesunder these agreements, if a penalty is determined to be probable we would recognize the amount as a contingent liability and not asa derivative instrument.Common Stock. On April 30, 2009 we issued 1,052,631 shares of common stock at a price of $0.57 per share, and warrants topurchase 263,158 shares of our common stock at $0.91 per share, to Sigma-Tau Group for gross proceeds of $600,000. The warrants,which have a term of three years and an exercise price of $0.91 per share, were valued using the Black-Scholes option-pricing modelas of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date of issuancewas $0.1 million.On October 5, 2009, we issued 4,512,194 shares of common stock and warrants to purchase 2,256,097 shares of our commonstock in a registered direct offering to new institutional investors, for proceeds of approximately $3.3 million, net of approximately$400,000 of offering costs. The warrants, which have a term of five years and an exercise price of $1.12 per share, were valued usingthe Black-Scholes option-pricing model as of the closing date and accounted for in permanent equity. The estimated fair marketvalue of the warrants at the date of issuance was $1.0 million.On October 15, 2009, we issued 1,219,512 shares of common stock and warrants to purchase 609,756 shares of our commonstock to Sigma-Tau Group for gross proceeds of $1.0 million. The warrants, which become exercisable on April 15, 2010 and have aterm through September 30, 2014, and an exercise price of $1.12 per share, were valued using the Black-Scholes option-pricingmodel as of the closing date and accounted for in permanent equity. The estimated fair market value of the warrants at the date ofissuance was $0.2 million.During the quarter ended June 30, 2010, we sold an aggregate of 13,124,750 shares of our common stock and warrants topurchase an additional 5,249,900 shares of our common stock for net proceeds of approximately $4.5 million. These securities weresold as units, with each unit consisting of one share of common stock and a warrant to purchase 0.4 shares of our common stock. Eachunit was sold at a public offering price of $0.41.Each warrant has a term of five years and represents the right to purchase one share of common stock at an exercise price of$0.56 per share. In the event the closing sale price of our common stock is at least $1.78 per share for any 20 trading days within aperiod of 30 consecutive trading days, we may call these warrants for redemption, at a redemption price of $0.01 per warrant, byproviding at least 30 days notice to each warrant holder. The warrants were valued using the Black-Scholes option-pricing model asof the closing date and accounted for in permanent equity. The estimated fair value of the warrants at the date of issuance wasapproximately $725,000.In addition, the representative of the underwriters in the public offering was granted a warrant to purchase 805,000 shares of ourcommon stock at an exercise price of $0.45 per share. This warrant is exercisable beginning on November 17, 2010 and continuinguntil May 17, 2015. The representative’s warrant also provides for one demand registration until May 17, 2015. The representative’swarrant was also valued using the Black-Scholes option-pricing model as of the closing date and accounted for as a cost of theoffering. The estimated fair value of the representative’s warrant at the date of issuance was approximately $112,000.The public offering was made pursuant to a registration statement on Form S-1 (Registration No. 333-166146), which wasdeclared effective by the SEC on May 17, 2010, and a final prospectus filed with the SEC on May 18, 2010.Share-Based Compensation. We recognized $474,355 and $748,480 in stock-based compensation expense for the years endedDecember 31, 2010 and 2009, respectively. Given our current estimates of future forfeitures, we expect to recognize thecompensation cost related to non-vested options as of December 31, 2010 of $334,000 over the weighted average remainingrecognition period of 1.25 years. 59Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStock Option and Incentive Plans. On July 14, 2010, at our Annual Meeting of Stockholders, our stockholders approved the2010 Equity Incentive Plan (the “2010 Plan”). The terms of the 2010 Plan provide for the discretionary grant of incentive stockoptions, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stockawards, other stock awards and performance cash awards to our employees, directors and consultants. At inception of the 2010 Plan,5,000,000 shares of our common stock were reserved for future issuance.We previously adopted an equity incentive plan, known as the Amended and Restated 2000 Stock Option and Incentive Plan(the “2000 Plan”). The 2000 Plan has a term of ten years that expired in December 2010. All outstanding option awards granted underthe 2000 Plan will continue to be subject to the terms and conditions as set forth in the agreements evidencing such option awardsand the terms of the 2000 Plan. Shares remaining available for issuance under the share reserve of the 2000 Plan will not be subject tofuture awards under the 2010 Plan, and shares subject to outstanding awards under the 2000 Plan that are terminated or forfeited inthe future will not be subject to future awards under the 2010 Plan.The following summarizes share-based compensation expense for the years ended December 31, 2010 and 2009, which wasallocated as follows: December 31, 2010 2009 Research and development $206,427 $369,814 General and administrative 267,928 378,666 $474,355 $748,480 The following summarizes stock option activity for the years ended December 31, 2010 and 2009: Options outstanding Weighted Shares average available for Number of Exercise price exercise grant shares range price December 31, 2008 2,347,500 4,117,500 $0.27 – 3.82 $1.72 Grants (1,192,939) 1,192,939 0.57 – 0.76 0.64 Exercises — — — — Cancellations 396,327 (396,327) 0.57 – 2.59 0.82 December 31, 2009 1,550,888 4,914,112 0.28 – 3.82 1.53 Grants (672,500) 672,500 0.27 – 0.28 0.27 Exercises — — — — Newly authorized 5,000,000 — — — Cancellations (1,550,888) (237,749) 0.46 – 3.21 1.52 December 31, 2010 4,327,500 5,348,863 $0.27 – $3.82 $1.37 Vested and expected to vest at December 31, 2010 5,075,220 Exercisable at December 31, 2010 3,716,153 60Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following summarizes information about stock options outstanding at December 31, 2010: Outstanding options Exercisable options Weighted- Weighted- average Weighted- average Weighted- Number of remaining average Number of remaining average shares contractual exercise shares contractual exercise Range of exercise prices outstanding life (in years) price exercisable life (in years) price $0.27 – $0.86 2,691,363 4.3 $0.44 1,709,488 3.2 $0.45 $1.07 – $1.93 812,500 4.0 $1.32 558,750 3.8 $1.36 $2.02 – $2.68 845,000 3.3 $2.26 481,250 3.4 $2.30 $3.00 – $3.82 1,000,000 4.4 $3.19 966,665 4.4 $3.19 5,348,863 4.1 $1.37 3,716,153 3.6 $1.54 Intrinsic value of in-the-moneyoptions, using theDecember 31, 2010 closingprice of $0.22 $— $— Determining the Fair Value of Options. We use the Black-Scholes valuation model to estimate the fair value of options granted.Black-Scholes considers a number of factors, including the market price and volatility of our common stock. We used the followingforward-looking range of assumptions to value each stock option granted to employees, directors and consultants during the yearsended December 31, 2010 and 2009: 2010 2009 Dividend yield 0.0% 0.0%Risk free rate of return 1.47 – 1.76% 1.9 – 2.3%Expected life in years 4.75 4.75 – 5.38Volatility 70% 71 – 72%Forfeitures 2.61% 2.61%Our dividend yield assumption is based on the fact that we have never paid cash dividends and do not anticipate paying cashdividends in the foreseeable future. Our risk-free interest rate assumption is based on yields of U.S. Treasury notes in effect at the dateof grant. Our expected life represents the period of time that options granted are expected to be outstanding and is calculated inaccordance with the Securities and Exchange Commission (“SEC”) guidance provided in the SEC’s Staff Accounting Bulletin 107(“SAB 107”), using a “simplified” method. The Company has used the simplified method and will continue to use the simplifiedmethod as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate an expected term.Our volatility assumption is based on reviews of the historical volatility of our common stock. We estimate forfeiture rates at the timeof grant and adjust these estimates, if necessary, periodically based on the extent to which future actual forfeitures differ, or areexpected to differ, from such estimates. Accordingly, we have estimated forfeiture percentages for the unvested portion of previouslygranted awards that remain outstanding at the date of adoption and for awards granted subsequent to the date of adoption. Forfeituresare estimated based on the demographics of current option holders and standard probabilities of employee turnover. Using Black-Scholes and these factors, the weighted average fair value of stock options granted to employees and directors was $0.16 for the yearended December 31, 2010 and $0.39 for the year ended December 31, 2009.We do not record tax-related effects on stock-based compensation given our historical and anticipated operating experience andoffsetting changes in our valuation allowance which fully reserves against potential deferred tax assets.Warrants to Purchase Common StockThe following table summarizes our warrant activity for 2010 and 2009: Warrants outstanding Weighted average Number of Exercise price exercise shares range price December 31, 2008 5,249,091 $1.60 – $4.06 $2.80 Grants 3,129,011 0.91 – 1.12 1.10 Exercises — — — Cancellations (444,250) 4.06 4.06 December 31, 2009 7,933,852 0.91 – 4.06 2.01 Grants 6,054,900 0.45 – 0.56 0.55 Exercises — — — Cancellations — — — December 31, 2010 13,988,752 $0.45 – $4.06 $1.38 Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.61Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents8. INCOME TAXESSignificant components of the Company’s deferred tax assets at December 31, 2010 and 2009 and related valuation reserves arepresented below: December 31, 2010 2009 Deferred tax assets: Net operating loss carryforwards $15,890,000 $16,988,000 Research and development tax credit carryforward 1,836,000 1,710,000 Charitable contribution carryforward 37.000 37,000 Accrued vacation 17,000 8,000 Accrued expenses 83.000 163,000 Amortization 4,000 5,000 Depreciation — 1,000 Non-cash share based compensation 980,000 975,000 18,847,000 19,887,000 Less — valuation allowance (18,847,000) (19,887,000)Net deferred tax asset $— $— A full valuation allowance has been provided at December 31, 2010 and 2009 to reserve for deferred tax assets, as it appearsmore likely than not that net deferred tax assets will not be realized.At December 31, 2010, we had net operating loss carryforwards for income tax purposes of approximately $40.3 million, whichare available to offset future federal and state taxable income, if any, and, research and development tax credit carryforwards ofapproximately $1.8 million. The carryforwards, if not utilized, will expire in increments through 2030.The Code imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of acorporation’s ownership change, as defined in Section 382 of the Code. During 2009, the Company completed a preliminary study tocompute any limits on the net operating losses and credit carryforwards for purposes of Section 382. It was determined that theCompany experienced a cumulative change in ownership, as defined by the regulations, in 2002. This change in ownership triggersan annual limitation on the Company’s ability to utilize certain U.S. federal and state net operating loss carryforwards and researchtax credit carryforwards, resulting in the potential loss of approximately $9.8 million of net operating loss carryforwards and$0.2 million in research credit carryforwards. The Company has reduced the deferred tax assets associated with these carryforwards inits balance sheet at December 31, 2010 and 2009. While the Company has not formally updated the study conducted during 2009, ithas less formally reviewed the equity transactions executed during 2009 and 2010 and believes that the future utilization of netoperating losses and tax credits presented above may be further compromised under the provisions of Section 382.The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2010and 2009, due to the following: December 31, 2010 2009 Tax benefit at statutory rate $(1,700,000) $(2,213,000)State taxes (274,000) (354,000)Permanent M-1s 259,000 339,000 Limited/expired net operating loss carryforwards 2,881,000 3,546,000 Limited/expired research and development tax credit carryforward 59,000 120,000 Research and development tax credit carryforward (185,000) (202,000)Change in valuation allowance (1,040,000) (1,236,000) $— $— As discussed in Note 2, we recognize the effect of income tax positions only if those positions more likely than not of beingsustained. At December 31, 2010 and 2009, we had no gross unrecognized tax benefits. We do not expect any significant changes inunrecognized tax benefits over the next 12 months. In addition, we did not recognize any interest or penalties related to uncertain taxpositions at December 31, 2010 and 2009.The 2001 through 2010 tax years generally remain subject to examination by federal and most state tax authorities. In addition,we would remain open to examination for earlier years if we were to utilize net operating losses or tax credit carryforwards thatoriginated prior to 2007. 62Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents9. COMMITMENTSLease. Our rent expense, related solely to office space, for 2010 and 2009 was $102,838 and $91,183, respectively. We arecommitted under an office space lease that expires on January 31, 2013 that requires the following approximate annual leasepayments: $94,000, $98,000 and $8,000 for the years ending December 31, 2011 through 2013, respectively.Employment Continuity Agreements. We have entered into employment contracts with our executive officers which provide forseverance if the executive is dismissed without cause or under certain circumstances after a change of control in our ownership. AtDecember 31, 2010 these obligations, if triggered, could amount to a maximum of approximately $900,000 in the aggregate.10. SUBSEQUENT EVENTSOn January 4, 2011 and January 5, 2011, we, entered into two purchase agreements and a registration rights agreement withLincoln Park Capital Fund, LLC, an Illinois limited liability company (“LPC”). In addition to the agreements entered into with LPC,on January 5, 2011, we entered into securities purchase agreements for a private placement with affiliates of Sigma-Tau Group, ourlargest stockholder.Purchase Agreements with Lincoln Park Capital Fund, LLCOn January 5, 2011, we entered into a securities purchase agreement with LPC, pursuant to which we sold in a registered directoffering 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 offeringexpenses (the “Registered Offering”). As part of the Registered Offering, we also issued to LPC, for no additional consideration, awarrant to purchase 740,741 shares of common stock at an exercise price of $0.38 per share (the “LPC Warrant”). Subject to certainownership limitations, the LPC Warrant will be exercisable beginning on July 7, 2011 and will expire on January 7, 2016. Theexercise price of the LPC Warrant is subject to adjustment in the case of stock splits, stock dividends, combinations of shares andsimilar recapitalization transactions.The Registered Offering was made pursuant to an S-3 shelf registration statement on (SEC File No. 333-150675), which wasdeclared 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 are payable in connection with theRegistered Offering, and the Company expects to use the proceeds from the Registered Offering for preclinical and clinicaldevelopment of the Company’s drug candidates and for general corporate purposes, including working capital.On January 4, 2011, we and LPC also entered into a committed equity facility (the “LPC Equity Facility”), together with aRegistration Rights Agreement (the “Registration Rights Agreement”), whereby we have the right to sell to LPC up to $11,000,000of our common stock over a 30-month period (any such shares sold being referred to as the “Purchase Shares”). Under theRegistration Rights Agreement, we filed a registration statement related to the transaction with the SEC covering the Purchase Sharesand the Additional Commitment Shares (as defined below), which was declared by the SEC on February 11, 2011. We will generallyhave the right, but not the obligation, over a 30-month period, to direct LPC to periodically purchase the Purchase Shares in specificamounts under certain conditions. The purchase price for the Purchase Shares will be the lower of (i) the lowest trading price on thedate of sale or (ii) the arithmetic average of the three lowest closing sale prices for the common stock during the 12 consecutivebusiness days ending on the business day immediately preceding the purchase date. In no event, however, will the Purchase Shares besold 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 initialcommitment fee (the “Initial Commitment Shares”) and are required to issue up to 958,333 shares of common stock as additionalcommitment shares on a pro rata basis (the “Additional Commitment Shares”) as we direct LPC to purchase our shares under theEquity Facility over the term of the agreement. The LPC Equity Facility may be terminated by us at any time at our discretionwithout any cost to us. The proceeds that may be received by us under the LPC Equity Facility are expected to be used for preclinicaland clinical development of our drug candidates and for general corporate purposes, including working capital. 63Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUnder the LPC Equity Facility, we have agreed that, subject to certain exceptions, we will not, during the term of the LPCEquity Facility, effect or enter into an agreement to effect any issuance of common stock or securities convertible into, exercisable foror 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 toreceive additional shares of common stock either (A) at a conversion price, exercise price or exchange rate or other price that is basedupon and/or varies with the trading prices of or quotations for the shares of common stock at any time after the initial issuance ofsuch debt or equity securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future dateafter the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectlyrelated 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 futuredetermined price.We have also agreed to indemnify LPC against certain losses resulting from our breach of any of our representations, warrantiesor covenants under the agreements with LPC.Purchase Agreements with Affiliates of Sigma-Tau GroupOn 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-TauPurchasers”), 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 arepayable in connection with the Private Placement, and we intend to use the net proceeds of the Private Placement for working capitaland other general corporate purposes.In connection with the Private Placement, we also issued to the Sigma-Tau Purchasers warrants (the “Sigma-Tau Warrants”) topurchase an aggregate of 1,407,407 additional shares of common stock at an exercise price of $0.38 per share. The Sigma-TauWarrants will be exercisable beginning on July 7, 2011 and will expire on January 7, 2016. The exercise price of the Sigma-TauWarrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalizationtransactions. The Private Placement closed on January 7, 2011.Warrant Amendment Agreement with Affiliates of Sigma-Tau GroupIn 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 andDecember 2008, exercisable for an aggregate of 3,046,453 shares of Common Stock and with exercise prices between $1.60 per shareand $4.06 per share, were amended to reduce their exercise prices to $0.38 per share and to extend their expiration dates toDecember 31, 2011. 64Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEXHIBIT INDEX 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 ofIncorporation 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 ofIncorporation Exhibit 3.3 to Registration Statement on Form S-1(File No. 333-166146) (filed April 16, 2010) 3.4 Certificate of Amendment of Restated Certificate ofIncorporation 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 ParticipatingCumulative 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 Quarterly Report on Form 10-Q(File No. 001-15070) for the quarter ended June30, 2006 (filed August 14, 2006) 3.7 Amendment to Amended and Restated Bylaws Exhibit 3.6 to 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 theCompany and American Stock Transfer & TrustCompany, as Rights Agent Exhibit 4.3 to Registration Statement on Form S-1(File No. 333-166146) (filed April 16, 2010) 65Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 4.4 Amendment No. 1 to Rights Agreement, dated March 4,2004, between the Company and American StockTransfer & 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 theCompany and American Stock Transfer & TrustCompany, as Warrant Agent Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed May 21, 2010) 4.6 Form of Warrant Certificate Exhibit 4.6 to Amendment No. 1 to RegistrationStatement on Form S-1 (File No. 333-166146)(filed May 17, 2010) 10.1^ Amended and Restated 2000 Stock Option andIncentive Plan, as amended Annex A to the Company’s Proxy Statement onSchedule 14A (File No. 001-15070) (filed May 9,2008) 10.2^ 2010 Equity Incentive Plan Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed July 20, 2010) 10.3 Form of Stock Option Grant Notice and Stock OptionAgreement under the 2010 Equity Incentive Plan Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed July 20, 2010) 10.4 Patent License Agreement — Exclusive, datedJanuary 24, 2001, between the Company and the U.S.Public Health Service Exhibit 10.1 to Annual Report on Form 10-KSBfor the year ended December 31, 2000 (FileNo. 001-15070) (filed April 2, 2001)** 10.5 Thymosin Beta 4 License and Supply Agreement, datedJanuary 21, 2004, between the Company and DefianteFarmaceutica S.A. Exhibit 10.10 to Registration Statement onForm SB-2 (File No. 333-113417) (filed March 9,2004)** 10.6^ Second Amended and Restated Employment Agreement,dated March 11, 2009, between the Company and AllanL. Goldstein, as amended Exhibit 10.4 to Amendment No. 1 to AnnualReport on Form 10-K for the year endedDecember 31, 2008 (File No. 001-15070) (filedApril 30, 2009) 10.7^ Second Amended and Restated Employment Agreement,dated March 12, 2009, between the Company and J.J.Finkelstein, as amended Exhibit 10.5 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 10.8^ Second Amended and Restated Employment Agreement,dated March 31, 2009, between the Company and C.Neil Lyons, as amended Exhibit 10.6 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 10.9^ Second Amended and Restated Employment Agreement,dated March 31, 2009, between the Company and DavidCrockford Exhibit 10.7 to Annual Report on Form 10-K forthe year ended December 31, 2008 (File No. 001-15070) (filed April 15, 2009) 66Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 10.10 Lease, by and between the Company and The RealtyAssociates Fund V, L.P., dated December 10, 2009 Exhibit 10.25 to Annual Report on Form 10-K forthe year ended December 31, 2009 (File No. 001-15070) (filed March 31, 2010) 10.11 Stock Purchase Agreement, dated June 23, 2005 Exhibit 99.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed June 23, 2005) 10.12 Form of Warrant to Purchase Common Stock, datedMarch 17, 2006 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed March 7, 2006) 10.13 Registration Rights Agreement, dated December 15,2006 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 18, 2006) 10.14 Form of Warrant to Purchase Common Stock, datedDecember 18, 2006 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 18, 2006) 10.15 Form of Securities Purchase Agreement, datedFebruary 27, 2008 Exhibit 99.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed February 27, 2008) 10.16 Form of Warrant to Purchase Common Stock, datedFebruary 29, 2008 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed February 27, 2008) 10.17 Form of Securities Purchase Agreement, datedDecember 10, 2008 Exhibit 99.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 12, 2008) 10.18 Form of Warrant to Purchase Common Stock, datedDecember 10, 2008 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed December 12, 2008) 10.19 Form of Warrant to Purchase Common Stock datedApril 30, 2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed April 16, 2009) 10.20 Securities Purchase Agreement, dated April 13, 2009 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed April 16, 2009) 10.21 Form of Common Stock Purchase Warrant, datedOctober 5, 2009 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed September 30, 2009) 10.22 Securities Purchase Agreement, dated September 30,2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed September 30, 2009) 67Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 10.23 Form of Warrant, dated October 15, 2009 Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed October 5, 2009) 10.24 Securities Purchase Agreement, dated September 30,2009 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed October 5, 2009) 10.25 Representative’s Warrant to Purchase Common Stock,dated May 21, 2010 Exhibit 4.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed May 21, 2010) 10.26 Purchase Agreement, dated January 4, 2011 Exhibit 10.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.27 Registration Rights Agreement, dated January 4, 2011 Exhibit 10.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.28 Securities Purchase Agreement, dated January 5, 2011 Exhibit 10.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.29 Warrant to Purchase Common Stock, dated January 7,2011, issued to Lincoln Park Capital Exhibit 4.1 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.30 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and DefianteFarmaceutica S.A. Exhibit 10.4 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.31 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and Taufin InternationalS.A. Exhibit 10.5 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.32 Securities Purchase Agreement, dated January 5, 2011,by and between the Company and Sinaf S.A. Exhibit 10.6 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.33 Form of Warrant to Purchase Common Stock, datedJanuary 7, 2011, issued to the Sigma-Tau Purchasers Exhibit 4.2 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 10.34 Omnibus Warrant Amendment Agreement, datedJanuary 5, 2011 Exhibit 4.3 to Current Report on Form 8-K (FileNo. 001-15070) (filed January 7, 2011) 68Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Exhibit No. Description of Exhibit Reference* 23.1 Consent of Reznick Group, P.C. Filed herewith 24.1 Powers of Attorney Included on signature page 31.1 Certification of Principal Executive Officer pursuant toRules 13a-14 and 15d-14 promulgated under theSecurities Exchange Act of 1934 Filed herewith 31.2 Certification of Principal Financial Officer pursuant toRules 13a-14 and 15d-14 promulgated under theSecurities Exchange Act of 1934 Filed herewith 32.1 Certification of Principal Executive Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Filed herewith*** 32.2 Certification of Principal Financial Officer pursuant to18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Filed herewith*** * Except where noted, the exhibits referred to in this column have heretofore been filed with the Securities and ExchangeCommission as exhibits to the documents indicated and are hereby incorporated by reference thereto. The RegistrationStatements referred to are Registration Statements of the Company. ** The registrant has been granted confidential treatment with respect to certain portions of this exhibit (indicated by asterisks),which have been filed separately with the Securities and Exchange Commission. *** These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are notbeing filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference intoany filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language insuch filing. ^ Compensatory plan, contract or arrangement. 69Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 and related prospectuses(Registration Nos. 333-150675, 333-140415, 333-125861 and 333-122386) and on Form S-8 (Registration Nos. 333-168252, 333-152250 and 333-111386) of RegeneRx Biopharmaceuticals, Inc. of our report dated March 31, 2011, with respect to the financialstatements of RegeneRx Biopharmaceuticals, Inc., included in this Annual Report (Form 10-K) for the year ended December 31,2010./s/ Reznick Group, P.C.Vienna, VirginiaMarch 31, 2011 Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1CERTIFICATIONI, J.J. Finkelstein, certify that:1. I have reviewed this annual report on Form 10-K of RegeneRx Biopharmaceuticals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report; 4. The registrant’s other certifying officer 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 inExchange 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 underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade 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 bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date: March 31, 2011 /s/ J.J. Finkelstein J.J. Finkelstein President and Chief Executive Officer(Principal Executive Officer) Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2CERTIFICATIONI, C. Neil Lyons, certify that:1. I have reviewed this annual report on Form 10-K of RegeneRx Biopharmaceuticals, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report; 4. The registrant’s other certifying officer 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 inExchange 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 underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade 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 bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation 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 ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date: March 31, 2011 /s/ C. Neil Lyons C. Neil Lyons Chief Financial Officer and Treasurer(Principal Financial Officer) Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of RegeneRx Biopharmaceuticals, Inc. (the “Company”) on Form 10-K for the fiscal yearended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (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 theSarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of and for the periods presented in this report.This certification accompanies this Report to which it relates, shall not be deemed “filed” with the Securities and ExchangeCommission 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 generalincorporation language contained in such filing.Date: March 31, 2011 /s/ J.J. Finkelstein J.J. Finkelstein President and Chief Executive Officer(Principal Executive Officer) Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of RegeneRx Biopharmaceuticals, Inc. (the “Company”) on Form 10-K for the fiscal yearended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. Neil Lyons,Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of and for the periods presented in this report.This certification accompanies this Report to which it relates, shall not be deemed “filed” with the Securities and ExchangeCommission 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 generalincorporation language contained in such filing.Date: March 31, 2011 /s/ C. Neil Lyons C. Neil Lyons Chief Financial Officer and Treasurer(Principal Financial Officer andPrincipal Accounting Officer) Source: REGENERX BIOPHARMACEUTICALS INC, 10-K, March 31, 2011Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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