Grant Zeng, CFA
CytRx Completes Sale of Molecular Chaperone Assets
On May 17, 2011, CytRx Corporation (CYTR - Snapshot Report) ) announced that it has sold the worldwide rights to its molecular chaperone assets to privately-held, Copenhagen, Denmark-based Orphazyme ApS.
If all of the development and commercialization milestones in the transaction agreement are met, in addition to an up-front payment, CytRx could receive total payments of up to $120 million, in addition to royalties on sales of products developed by Orphazyme from its molecular chaperone technology. This transaction represents the completion of CytRx’s previously announced, non-dilutive monetization strategy for its non-core assets.
The CytRx molecular chaperone portfolio includes three drug candidates, arimoclomol, iroxanadine and bimoclomol, which are orally administered molecular chaperone amplifiers. The compounds collectively have proven to be safe and well tolerated in more than 680 human subjects tested in 13 Phase I and six Phase II clinical trials. By targeting the underlying cause of many diseases, this novel approach has the potential to be developed for a broad variety of indications, including genetic diseases.
Orphazyme was formed in 2009 to develop molecular chaperone therapies to treat rare genetic lysosomal diseases. Orphazyme develops innovative new therapies for the treatment of a family of serious genetic disorders called lysosomal storage diseases.
What are the implications of this transaction for CytRx?
As a reminder, CytRx is a biopharmaceutical company focused on the development and commercialization of human therapeutics for the treatment of cancers. CytRx is focused on advancing its oncology portfolio and currently has six clinical trials underway and one additional clinical trial planned with its oncology drug candidates, bafetinib, tamibarotene and INNO-206. Preliminary data from the Company’s clinical trial of bafetinib in advanced-stage leukemia is expected this quarter.
In pursuing its strategy to monetize non-oncology assets, CytRx recently completed its sale of common stock in RXi Pharmaceuticals, successfully raising a total of approximately $17 million from its former RNAi assets. Additionally, CytRx received 163,000 shares of common stock of Adventrx Pharmaceuticals in exchange for its 19.1% stake in SynthRx. If all milestones under that agreement are achieved, CytRx could receive up to 2.9 million additional shares of Adventrx.
The sale of the Company’s molecular chaperone assets represents another example how CytRx is utilizing its non-dilutive financing strategy to fund its operations. This transaction provides CytRx with additional resources to focus on its highly promising oncology drug candidates. This transaction illustrates CytRx’s exceptional execution of a strategy to acquire assets and add value, in this case through multiple clinical and preclinical trials, then monetize them to support its focus on oncology.
We believe CytRx is well capitalized with a strong balance sheet which sets it apart from most small cap biotech companies in the industry. At March 31, 2011, CytRx had $30 million in cash/cash equivalents and marketable securities. There was no debt on the balance sheet as of March 31, 2011. 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.
We have an Outperform rating on CytRx with a twelve-month price target of $1.8.
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