Grant Zeng, CFA
CYTR: Initiating with an Outperform
CytRx Corporation (NASDAQ: CYTR) is a biopharmaceutical company focused on the development and commercialization of human therapeutics for the treatment of cancers. The Company’s pipeline consists of three candidates under middle to late stage development: tamibarotene, bafetinib and INNO-206, targeting various cancer indications.
Tamibarotene is currently in a pivotal Phase II clinical trial for the treatment of acute promyelocytic leukemia (APL) and a Phase IIb trial for the treatment of non-small cell lung cancer (NSCLC). A Phase I/II combination trial with Trisenox is also underway for APL.
Bafetinib is currently in Phase II trials for refractory B-cell chronic lymphocytic leukemia (B-CLL) and advanced prostate cancer. Bafetinib is also in a Phase I clinical trial for brain cancer.
INNO-206 is currently under a Phase Ib trial, but the Company plans to initiate a Phase II trial for soft tissue sarcoma in 2H11. In addition, the Tumor Biology Center in Freiburg, Germany, plans to initiate a Phase II trial in advanced pancreatic cancer in 2H11. More importantly, the acid sensitive linker used by INNO-206 represents a platform technology which can be used by many different anticancer agents.
All three oncology candidates have known mechanisms of action which minimize its clinical risks. More rapid indication of efficacy can be shown because clinical trials will treat patients with advanced cancers.
The diversified oncology portfolio offers substantial market opportunities. We believe the Company’s combined cancer programs target multi-billion dollar cancer markets.
In addition to its core oncology programs, CytRx owns rights to drug candidates based on its molecular chaperone regulation technology, which are designed to repair or degrade mis-folded proteins associated with disease. The Company’s current business strategy is to seek one or more strategic partnerships to pursue the development of this technology.
CytRx is well capitalized with a strong balance sheet which sets it apart from most small cap biotech companies in the industry. At December 31, 2010, CytRx had $33.8 million in cash/cash equivalents and marketable securities. There was no debt on the balance sheet as of December 31, 2010. Current liquidity source will be sufficient to fund operations for the foreseeable future, probably to the end of 2012 according to our financial model.
We are pleased with the Company’s non-dilutive financing strategy. By monetizing its non-core assets, or though partnership, CytRx funds its operations without diluting its existing shareholder base. CytRx still has two non-core programs the Company could use to form partnerships. This would not only allow the Company to continue to advance these compounds through clinical development, but also provide additional non-dilutive capital to fund the company’s continuing operations.
Valuation is low for CytRx at its current market price based on the Company’s fundamentals. Therefore we rate the Company’s shares a market outperform with a twelve-month price target of $1.80. Risks include clinical and regulatory uncertainties and potential competition for each of the Company’s three cancer candidates.
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