http://seekingalpha.com/article/1922201-CytRx-Corporation-Poised-For-Success-In-2014?source=yahoo
Shares of CytRx Corporation (CYTR) continued moving significantly higher last week on the back of a positive Forbes article that mentioned that CytRx could become a major player in treating brain cancer (glioblastoma multiforme). While becoming a leader in that field would certainly add significant value to CytRx, the company has massive potential in many other areas of science as well.
CytRx is a biopharmaceutical research and development specializing in cancer treatment. The company's portfolio of treatment candidates is led by the clinical development of aldoxorubicin, a greatly enhanced version of the commonly used chemotherapeutic agent doxorubicin.
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Doxorubicin is a chemotherapy drug used to treat many types of cancer. It is an anthracycline antibiotic that works through its interaction with DNA by intercalation and inhibition of macromolecular biosynthesis. This inhibits the progression of the enzyme topoisomerase II, which relaxes supercoils in DNA for transcription. Doxorubicin is able to stabilize the topoisomerase II complex after it has broken the DNA chain for replication, preventing the DNA double helix from being resealed. This process is able to stop the process of replication.
It is widely used in the treatment of a wide range of cancers such as hematological malignancies, many types of carcinoma, and soft tissue sarcomas. While doxorubicin is one of the most widely used chemotherapies, it unfortunately comes with significant risk of adverse events. The biggest risk is life-threatening heart damage. But the other risks include, but are not limited to increased risk of infection, increased risk of bleeding, hair loss, nausea, vomiting, allergic reaction, and leukemia (which may occur years after treatment). Those are some extremely serious side effects which can certainly make someone think twice about going through the treatment. However, it appears hope may be on the horizon for those looking for a safer and more effective drug.
In an attempt to provide cancer patients with a safer and more effective chemotherapeutic agent, CytRx is developing aldoxorubicin. Aldoxorubicin combines doxorubicin with a single-molecule linker that binds directly to circulating albumin which is the most abundant protein in a person's bloodstream. Tumors typically concentrate albumin because of the need for protein. This concentration increases the delivery of the linker molecule with the attached doxorubicin to tumor sites. This allows for greater doses of doxorubicin (3.5 to 4 times) to be delivered while at the same time minimizing adverse events. The promise of aldoxorubicin was seen earlier this month when CytRx reported some very positive data.
On December 11th, 2013, CytRx Corporation announced extremely encouraging data from its Phase 2b trial for first-line metastatic, locally advanced or unresectable soft tissue sarcomas. The results included both an investigator assessment and a central lab review, both of which agreed that aldoxorubicin was far superior to doxorubicin. In the investigator assessment, the median PFS (progression free survival) was 8.4 months compared to just 4.7 months for doxorubicin patients. The overall response rate determined by the investigators was 25.4% for patients treated with aldoxorubicin compared to just 5.4% for those treated with doxorubicin. The central lab review concluded that the median PFS was 5.7 months for those on aldoxorubicin compared to just 2.8 months for doxorubicin patients. The central lab review found that the overall response rate for aldoxorubicin subjects was 23.0% compared to 0% for doxorubicin subjects. Additionally, the data was found to be safe and well tolerated with no treatment-related deaths. Either way you slice it, these results bode well for the future of CytRx which may end up becoming a major player in the cancer space.
Shares of CytRx have already soared nearly 200% over the past year as the chart below indicates.
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With shares still near the highs of 2013 and several catalysts looming in 2014, it's likely that shares are headed even higher.
There are several events set to occur in 2014 that investors should keep their eyes on. Those events include the following:
- Phase 2 Trial Initiation for Kaposi's Sarcoma - Expected in late 2013/early 2014
- Phase 3 Trial Initiation for 2nd-Line Soft Tissue Sarcoma - Expected during 1st quarter 2014
- Preliminary Phase 2 GBM (glioblastoma multiforme) results - Expected during 3rd quarter 2014
- Overall survival data from Phase 2b 1st-Line Soft Tissue Sarcoma Trial - Expected during 3rd quarter 2014
With all of these potential catalysts occurring over the next 12 months, it's hard not to be excited about the future prospects for CytRx. What's even more appealing for investors is the current state of the company's finances.
When evaluating a small-cap biotechnology stock, analyzing the cash balance is critical. If a company has enough cash, it is likely that dilution won't occur (one of the biggest risks facing small-cap biotechnology investors). As of the end of the third quarter, CytRx had approximately $23 million in available cash and cash equivalents. That amount does not include the $24.1 million that the company raised in an October 15th secondary. Based on the company's monthly burn rate of approximately $2.2 million, the $47.1 million should be enough to take the company through 2015. Based on this timeline, it would appear that the available cash may not be enough to take the company through a product launch. However, based on corporate presentations and webcasts, CytRx management is considering a strategic alliance which would ease the need for additional operating funds. If such a strategic alliance is consummated in the future, the cash on hand would be more than adequate to take the company through its first product launch as the partner would ease the burden on CytRx to fund operating costs by itself. If CytRx decides that such an alliance is not in the best interests of its shareholders, then the company may need to raise funds after 2015.
It appears that CytRx is well on its way to becoming a cancer pioneer. But what about the risks facing investors? As mentioned earlier, the biggest risk facing small-cap biotechnology investors is dilution risk. Since these companies typically aren't generating revenue, the funds for operation will come from shareholders until the company has a sellable product. However, based on the company's current cash balance and burn rate, it appears that no secondary offerings are imminent. A second risk is of course trial failure. This risk is typically higher for companies that are only pursuing a single treatment indication. CytRx is pursuing multiple indications which mean that if one fails, the company still has several other opportunities for future revenue generation. That diversification would minimize the share price drop that would occur after a poor data announcement.
CytRx Corporation certainly seems well on its way for future growth. The Phase 2b STS results were extremely encouraging not only for that indication but for the applicability of aldoxorubicin to other indications. If the company continues to execute over the next couple of years like it has over the past couple, there is no telling how high the share price could go.
