CytRx is pouring money into R&D of cancer-fighting drugs
CytRx Corp. is on a mission to cure cancer — or at least slow it down.
The Los Angeles biopharmaceutical company, which recently has become embroiled in a stock-promotion controversy, specializes in researching and developing drugs to treat cancers.
The most promising medication, aldoxorubicin, is a more advanced version of the widely used chemotherapy drug doxorubicin. CytRx is conducting clinical trials of aldoxorubicin as a treatment for patients with soft-tissue sarcomas, AIDS-related Kaposi’s sarcoma and recurrent glioblastoma, or brain cancer.
Aldoxorubicin contains a so-called linker technology that essentially acts like a Trojan horse. It binds directly to a protein in the bloodstream that also accumulates in tumors, enabling the drug to be delivered directly to cancer cells. The linker releases the drug only in an acidic environment, which occurs in cancer cells but not in healthy tissue.
The technology enables patients to be treated with higher and additional doses of the cancer-fighting drug.
“It’s sort of like a guided missile that goes to the tumor and not to the rest of the body,” said Steven Kriegsman, chief executive of CytRx.
Like many biotech companies that focus on developing drugs, CytRx isn’t profitable. The company issued stock this year, raising about $86 million for operations and research.
CytRx is in the middle of recruiting 400 patients worldwide for its pivotal Phase 3 clinical trial of a second-line treatment for soft-tissue sarcoma.
Soft-tissue sarcoma is a type of cancer that can develop in the soft tissues of the body, such as blood vessels, muscles and fat. A second-line treatment is used when the first-line treatment against the cancer fails.
If the clinical trial is successful, CytRx plans to apply for approval from the U.S. Food and Drug Administration as early as 2016, Kriegsman said. The drug could then gain approval by 2017.
Analysts said CytRx released data in December from an earlier clinical trial that indicated aldoxorubicin was a promising treatment for soft-tissue sarcoma.
“For a long time, there was a question of ‘We haven’t seen clinical data, how different is it from the underlying drug?’” said Andrew Fein, an analyst at H. C. Wainwright & Co. “The release of the results substantiated in a lot of people’s mind that it is different.”
But Fein said it is hard to predict the outcome and timeline of the current clinical trial because it significantly differs from the previous one that produced good results. “A lot of things need to go right,” he said.
Fein compared developing drugs to the mining industry.
“You invest a lot of money looking for that one spot on the ground that bears gold, and up until you find that spot you continue to pour money in,” he said. “Up until you successfully commercialize the drug, it’s a continual R&D spend.”
CytRx has been hit with multiple shareholder lawsuits contending that the company unfairly touted its performance.
The lawsuits accused the company of hiring the investor relations firm DreamTeam Group, which then allegedly hired writers to promote CytRx and another biotech firm through articles on websites such as Forbes, Seeking Alpha, Motley Fool and Wall Street Cheat Sheet. The articles didn’t disclose that they were commissioned by the companies, the lawsuits alleged.
In response to the news, Seeking Alpha said it had removed articles “that were in violation of our policies.” Several stories about the company also disappeared from other websites.
Kriegsman declined to comment on the allegations. The company has hired outside counsel to defend against the lawsuits. “It’s not something I have time or energy to focus on,” he said.
Kriegsman said a real challenge facing CytRx is hiring talented employees, who tend to flock to the biotech centers of San Diego, San Francisco and Boston.
“It’s sort of a wasteland in many ways here” for the pharmaceutical industry, he said.
Shares of CytRx hit $8.08 on Jan. 10, then plunged to below $3 in April after the stock promotion allegations surfaced. Analyst said the lawsuits and negative publicity have pushed the stock price down further than the fundamentals of the company would warrant.
“It’s unfortunate,” Fein said, “but I am not sure there is an easy way to get around that as long as the perception is there.”
Two analysts have rated CytRx a buy, and one said it’s time to sell.
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