Abused biotech firm CytRx hires new CEO, Retools

Abused biotech firm CytRx hires new CEO, Retools

Fifteen years ago, Brentwood-based biopharmaceutical company CytRx Corp. was flying strong, with its share price exceeding $ 150 as investors poured money into its efforts to develop drugs to fight cancer and other diseases.

But the company’s downfall has since been abrupt as investors have largely shifted its cancer treatment approach to improving chemotherapy drugs in favor of newer, more targeted cancer therapies. And things have gone from bad to worse since last summer when the bear market in small-cap biotech investments took hold. For the past nine months, CytRx shares have remained in penny stock territory, closing on April 19 at an all-time low of 12.3 cents per share.

To try and fix the ship, CytRx recently hired a new CEO – serial entrepreneur and venture capitalist Stephen Snowdy – and made a few moves to save costs, including bringing its main subsidiary fully in and out. convert preferred stock into common stock to avoid paying a penalty to a major investor hedge fund.

Snowdy replaced longtime CEO and chairman of the board Steven Kriegsman, who retired at the age of 80. Last month, Snowdy wrote an unscheduled letter to shareholders outlining the company’s recovery strategy. But that did little to stem the slide in CytRx shares. In an interview last week, Snowdy explained the company’s recent moves and tried to reassure investors that the company’s drug pipeline could start generating revenue as early as next year.

“Our focus now is on these drugs being developed and preparing them for FDA approval for clinical trials,” Snowdy said. “That and get more money to accelerate drug development, either through partnerships with other drug companies or through other means.”

The liquidity crisis was so severe that Snowdy, who recently stepped down as CEO of Atlanta-based Visioneering Technologies Inc., decided to stay in Atlanta and run CytRx from there rather than get paid for the costs of transfer from the company.
Snowdy is one of only three full-time employees of CytRx; the other two are based in the company’s Brentwood office. All drug manufacturing work is outsourced.
But will the steps taken by Snowdy and the CytRx board be enough to save the company?

David Nierengarten, chief executive of equity research for downtown Wedbush Securities Inc., said CytRx faces a fundamental problem.
“They are pursuing their strategy of taking existing chemotherapy drugs and trying to improve them,” Nierengarten said. ‚ÄúThat strategy may work as chemotherapy has worked for decades to treat cancers. But there has been a general shift away from this strategy in favor of newer and more targeted approaches such as administering antibodies directly into cancer cells or therapies that enhance the immune system response. “

Rocky path

Investors in CytRx have gotten used to trying to overcome obstacles. A decade ago, they were hoping for a significant income from two drugs that CytRx licensed to Copenhagen-based Orphazyme A / S in 2011; one of the drugs targeted amyotrophic lateral sclerosis (ALS or Lou Gehrig’s disease), among other diseases, and the other drug targeted the treatment of diabetic ulcers. But the drug to treat ALS has not yet been approved in clinical trials in the United States and has been rejected by the European Medicines Agency. There is no recent news on the development of the other drug. In addition, Orphazyme underwent a restructuring under the supervision of the Danish equivalent of the bankruptcy court.

Meanwhile, CytRx was developing a drug platform called LADR that allowed the administration of higher concentrations of chemotherapy drugs without a corresponding increase in toxic side effects.
The first existing chemotherapy drug to be applied to this platform was doxorubicin, which in typical use has side effects ranging from congestive heart failure to intestinal inflammation and skin rashes. The CytRx name for its version of the drug combined with its LADR platform is aldoxorubicin.

In July 2017, CytRx licensed the drug to Culver City-based ImmunityBio Inc. (then known as NantCell), the immunotherapy company founded by billionaire Patrick Soon-Shiong, for further development. As an upfront payment of the agreement, ImmunityBio purchased $ 13 million in CytRx common stock. For the “along the way” portion of the agreement, CytRx is entitled to receive up to $ 343 million in potential milestone payments when the drug passes specified regulatory approvals or commercial milestones.

ImmunityBio is now in a Phase 2 clinical trial for aldoxorubicin; Snowdy said in the interview that she expects ImmunityBio to enter into talks with the FDA later this year on the path to take to consider drug approval.
“This could become a short-term source of revenue,” Snowdy said.
But Snowdy admitted that the company lacks the money to complete preclinical testing for these drugs.

“We will need more money to help development, whether through licensing or other partnerships with pharmaceutical companies or through another infusion of money,” he said.
Last year, New York-based hedge fund Armistice Capital invested approximately $ 11 million in CytRx through the purchase of shares. But because CytRx did not have enough common stock at the time, Armistice Capital agreed to be paid in preferred stock which would later be converted into common stock. Failure to convert into common stock would result in CytRx paying a $ 1 million fee to Armistice Capital.

Shareholders last month approved the conversion of Armistice Capital’s holdings into common stock, thus avoiding the $ 1 million fee.
And in another cost-cutting move, Snowdy brought in a fully in-house subsidiary company. That subsidiary, Centurion BioPharma Corp., held the LADR and drug assets, but had no independent staff or resources.
With those moves now in the rearview mirror, Snowdy said the company’s goal can go full-time back to preparing pipeline drugs for clinical trials. Analyst Nierengarten said some of the forces behind that recession appear to be stabilizing.

“There is still a bit of a hangover from all the delays in clinical trials that were dismissed during Covid,” he said. “Once these clinical trials resume in full swing, this should begin to increase the valuations of biotech companies and, in turn, create a more favorable environment for investment.”

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