Company Overview
CytRx Corporation (NASDAQ: CYTR) is a clinical-stage pharmaceutical company specializing in oncology. In particular, the company is focused on anti-cancer drugs that employ linker technologies to enhance the accumulation and release of drugs at the tumor site. CytRx’s lead product candidate is aldoxorubicin, an alternative to widely-used chemotherapy agent doxorubicin.
Aldoxorubicin is currently in late-stage development for the treatment of relapsed soft tissue sarcoma (STS), and is also being evaluated for several other cancer indications including small-cell lung cancer. The company is also engaged in the development of a new class of oncology candidates utilizing their proprietary LADR technology.
CytRx was originally incorporated in 1985, and is headquartered in Los Angeles, California.
Pipeline and Products
The company’s primary product candidate is designed to improve on doxorubicin, a widely-used chemotherapy agent. Aldoxorubicin binds to circulating albumin in the bloodstream and is believed to concentrate the drug at the site of the tumor. This mechanism is outlined below:
Source: Company Presentation
Other potential advantages of aldoxorubicin include the potential to increase the total doxorubicin dose, a reduction in certain adverse events associated with doxorubicin, and improved efficacy.
The potential applications of aldoxorubicin are summarized in the CytRx’s pipeline:
Source: Company Presentation
The company released updated Phase III data in November 2016. Aldoxorubicin demonstrated a significant improvement in progression-free survival over the investigator’s choice therapy in 246 patients with either leiomyosarcoma or liposarcoma. It also achieved a statistically significant improvement in the disease control rate.
CytRx met with the FDA in March 2017 to discuss a regulatory approval pathway. Aldoxorubicin was subsequently granted orphan drug designation and no further clinical trials were requested. At this time, the company expects to initiate a rolling new drug application for aldoxorubicin as a treatment for STS in the fourth quarter of 2017, with commercialization projected for 2018.
The company is also in the early stages of development of a compound known as DK049. This drug is a derivative of the chemotherapeutic agent gemcitabine combined with a dual releasing linker. CytRx released its initial findings at the 2016 annual meeting of the American Association of Cancer Research. Preclinical data in animal models of pancreatic, ovarian, and non-small cell lung cancers show superior anti-tumor effects compared to gemcitabine while using approximately one-sixth of the dose.
Recent Developments
- On July 28, 2017, CytRX announced that it has entered a strategic license agreement with NantCell, Inc., for the exclusive rights to develop and commercialize aldoxorubicin for all indications. NantCell is a private subsidiary of NantWorks, LLC, is a clinical stage immuno-oncology company focused on developing novel molecularly targeted therapeutics including antibody, T-cell and NK cell based treatments for patients with cancer. Under the terms of the agreement, NantCell purchased $13 million of CytRx’s common stock at a price of $1.10 (a 92 percent premium to the prevailing market price), and will make up to $343 million in payments tied to regulatory approvals and commercial milestones. CytRx will also receive double-digit royalties for sales of aldoxorubicin related to STS, and mid to high single digit royalties for all other indications. NantCell will be responsible for all future development, manufacturing, and commercialization expenses. CytRx also issued NantCell a warrant to purchase 3 million shares of common stock at a price of $1.10 within the next 18 months. We also note that CytRx made a $5 million payment on its long-term loan facility in conjunction with the transaction.
- In May 2017, the company sold approximately 30 million shares at a purchase price of $0.50. Net proceeds from the transaction were approximately $13.9 million.
Second Quarter Earnings Review
In the quarter ended June 30, 2017, the company did not record any revenue as compared to $100,000 in the second quarter of 2016. Other than licensing agreements (such as that described above), the company does not yet generate revenues from the sale of products.
Research and development expenses fell more than 50 percent year-over-year to $6.2 million. General and administrative expenses also fell nearly 50 percent to $3.1 million. Accordingly, the company’s net loss decreased from $18.3 million ($0.27 per share) in the second quarter of 2016 to $14.4 million ($0.10 per share) in the most recent quarter.
At June 30, 2017, CytRx listed cash and equivalents of $55.0 million and debt equal to $15.8 million, yielding a net cash position of $39.2 million. Stockholders’ equity totaled $19.2 million. As discussed above, subsequent to June 30, 2017, the company received a $13 million investment from NantCell and reduced debt by $5 million.
Stock Influences
- Regulatory approval for aldoxorubicin for the treatment of STS;
- Clinical trial data regarding additional applications of aldoxorubicin; and
- Progress related to the development of DK049.
Risk Factors
- Although aldoxorubicin is currently projected to reach commercialization in 2018, it could face material delays;
- If aldoxorubicin is materially delayed, the company could be forced to seek additional financing and possibly lead to the dilution of existing shareholders;
- Doxorubicin is a widely used anti-cancer drug and new versions (i.e. potential competitors) are continually being developed; and
- The company may not be able to develop any other product candidates using its proprietary technology.
Stock Performance
As of August 8, 2017, shares of CytRx closed at $0.64, yielding a market capitalization of approximately $100 million. The stock hit a 12-month high of $1.00 immediately after the agreement with NantCell was announced, but has traded between $0.60 and $0.70 since second quarter earnings were released. As shown above, the stock has experienced multiple enthusiastic spikes only to retreat shortly thereafter. Still, shares are up 70 percent year-to-date.
Summary
Aldoxorubicin offers several potential improvements to existing chemotherapy. Furthermore, the agreement with NantCell ensures that CytRx has an experienced partner to develop and commercialize aldoxorubicin for all indications. The agreement also provides the company with an immediate infusion of cash. It is also noteworthy that NantCell will be responsible for all future development, manufacturing, and commercialization expenses
However, while the company has discussed a regulatory pathway with the FDA, it must ensure that aldoxorubicin receives approval before it begins to generate recurring revenues. CytRx’s cash reserves seem to be sufficient for now, but it is uncertain how long the approval process will take.
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