Overview
CytRx Corporation ("CytRx") is a biopharmaceutical research and development
company specializing in oncology. The Company's focus is on the discovery,
research and clinical development of novel anti-cancer drug candidates that
employ novel technologies that target chemotherapeutic drugs to solid tumors and
reduce off-target toxicities. During 2017, CytRx's discovery laboratory in
Freiburg, Germany, synthesized and tested over 75 rationally designed drug
conjugates with highly potent anti-cancer payloads, culminating in the creation
of two distinct classes of compounds. Four lead candidates (LADR-7 through
LADR-10) were selected based on in vitro and animal studies in several different
cancer models, stability, and manufacturing feasibility. In addition, a novel
companion diagnostic, ACDx™, was developed to identify patients with cancer who
are most likely to benefit from treatment with these drug candidates.
On June 1, 2018, CytRx launched Centurion BioPharma Corporation ("Centurion"), a
wholly-owned subsidiary, and transferred into Centurion all of its assets,
liabilities and personnel associated with the laboratory operations in Freiburg,
Germany. In connection with said transfer, the Company and Centurion entered
into a Management Services Agreement whereby the Company agreed to render
advisory, consulting, financial and administrative services to Centurion, for
which Centurion shall reimburse the Company for the cost of such services plus a
5% service charge. On December 21, 2018, CytRx announced that Centurion had
concluded the pre-clinical phase of development for its four LADR drug
candidates, and of its albumin companion diagnostic (ACDx™). As a result of
completing this work, operations taking place at the pre-clinical laboratory in
Freiburg, Germany were no longer needed and the lab was closed at the end of
January 2019.
On March 9, 2022, Centurion merged with and into CytRx, with CytRx absorbing all
of Centurion's assets and continuing after the merger as the surviving entity
(the "Merger"). The Merger was implemented through an agreement and plan of
merger pursuant to Section 253 of the General Corporation Law of the State of
Delaware and did not require approval from either our or Centurion's
stockholders. The Certificate of Ownership merging Centurion into CytRx was
filed with the Secretary of State of Delaware on March 9, 2022.
The LADR Technology Offers the Opportunity for Multiple Pipeline Drugs
Our LADR™ (Linker Activated Drug Release) technology platform consists of an
organic backbone that is attached to a chemotoxic agent. The purpose of the LADR
backbone is to first target and deliver the chemotoxic agent to the tumor
environment, and then to release the chemotoxic agent within the tumor. By
delivering, concentrating, and releasing the chemotoxic agent within the tumor,
one expects to reduce the off-target side-effects of the chemotherapeutic, which
in turn allows for several-fold higher dosing of the chemotherapeutic to the
patient. Being small organic molecules, we expect LADR-based drugs to offer the
benefits of targeting the tumor without the complexity, side effects, and
expense inherent in macromolecules such as antibodies and nanoparticles.
Our LADR-based drugs use circulating albumin as the binding target and as the
trojan horse to deliver the LADR drugs to the tumor. Albumin is the most
abundant protein in plasma and accumulates inside tumors due to the aberrant
vascular structure that exists within them. Tumors use albumin as a nutritional
source and for transport of signaling and other molecules that are important to
the maintenance and growth of the tumor, which makes albumin an excellent target
for drugs that are intended for solid tumors.
Our LADR development efforts are focused on two classes of ultra-high potency
albumin-binding drugs. These LADR-based drugs, LADR7, 8, 9, and 10, combine the
proprietary LADR™ backbone with novel derivatives of the auristatin and
maytansinoid drug classes. Auristatin and maytansinoid are highly potent toxins,
and require targeting to the tumor for safe administration to humans, as is the
case for the FDA-approved drugs Adcetris (auristatin antibody-drug-conjugate by
Seagen) and Kadcyla (maytansine antibody-drug-conjugate by Genentech). We
believe that LADR-based drugs offer the benefits of tumor targeting without the
disadvantages of antibodies and other macromolecules, which include expense,
complexity, and negative side effects. Additionally, albumin is a very
well-characterized drug target, which the Company believes will reduce clinical
and regulatory risks.
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Our postulated mechanism of action for the LADR-based drugs is as follows:
? after administration, the linker portion of the drug conjugate forms a rapid
and specific covalent bond to the cysteine-34 position of circulating albumin;
? circulating albumin preferentially accumulates in tumors due to a mechanism
called "Enhanced Permeability and Retention", which results in lower exposure
to the drug in noncancerous tissues of the heart, liver, and other organs;
? once localized at the tumor, the acid-sensitive linker of the LADR backbone is
cleaved due to the lower pH within the tumor and within the tumor
microenvironment; and
? free active drug is then released within the tumor, causing tumor cell death.
The first-generation LADR-based drug is called Aldoxorubicin. Aldoxorubicin is
the well-known drug doxorubicin attached to the LADR backbone. Aldoxorubicin has
been administered to over 600 human subjects in human clinical trials and has
proven the concept of LADR in that several-fold more doxorubicin can be safely
administered to patients when the doxorubicin is attached to LADR than when
administered as native doxorubicin. Aldoxorubicin has been licensed to
ImmunityBio, and is currently in a Phase II registrational intent trial for
pancreatic cancer. Aldoxorubicin is expected to enter a Phase I/II trial for
glioblastoma in 2022 or 2023.
The IND-enabling work that remains prior to applying to the FDA for
first-in-human studies for LADR7-10 is limited due to the extensive
experimentation already completed. For example, in the case of LADR7, a
manufacturing run under Good Laboratory Practices (GLP) must be completed and
some toxicology studies completed using the GLP material must be completed in
animals. Toxicology studies with LADR7 have already been completed with non-GLP
manufactured drug. Management estimates that these final IND-enabling activities
for LADR7 would take approximately 12 months to complete, once funded and
initiated, and that Investigational New Drug approval and first-in-human dosing
would be achieved within approximately 6-9 months after IND.
Our novel companion diagnostic, ACDx™ (albumin companion diagnostic) was
developed to identify patients with cancer who are most likely to benefit from
treatment with the four LADR lead assets. The Company has not yet determined
whether the use of a companion diagnostic will be necessary or helpful, and
plans to continue to investigate this question in parallel to the pre-clinical
and clinical development of LADRs 7-10.
The LADR backbone and drugs that employ LADR are protected by domestic and
international patents, and additional patents are pending.
Partnering of Aldoxorubicin
On July 27, 2017, the Company entered into an exclusive worldwide license with
ImmunityBio, Inc. (formerly known as NantCell, Inc. ("ImmunityBio")), granting
to ImmunityBio the exclusive rights to develop, manufacture and commercialize
aldoxorubicin in all indications. As a result, we are no longer working on
development of aldoxorubicin (ImmunityBio merged with NantKwest, Inc. in March
2021). As part of the license agreement, ImmunityBio made a strategic investment
of $13 million in CytRx common stock at $6.60 per share (adjusted to reflect our
2017 reverse stock split), a premium of 92% to the market price on that date.
The Company also issued ImmunityBio a warrant to purchase up to 500,000 shares
of common stock at $6.60, which expired on January 26, 2019. The Company is
entitled to receive up to an aggregate of $343 million in potential milestone
payments, contingent upon achievement of certain regulatory approvals and
commercial milestones. The Company is also entitled to receive ascending
double-digit royalties for net sales for soft tissue sarcomas and mid to high
single digit royalties for other indications. There can be no assurance that
ImmunityBio will achieve such milestones, approvals or sales with respect to
aldoxorubicin.
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ImmunityBio is conducting an open-label, randomized, Phase 2 study of a
combination of immunotherapy, aldoxorubicin, and standard-of-care chemotherapy
versus standard-of-care chemotherapy alone for the treatment of locally advanced
or metastatic pancreatic cancer in patients who have had 1 or 2 lines of
treatment (Cohorts A and B) or 3 or greater lines of treatment (Cohort C). In
June 2022, Immunity Bio presented data at the American Society of Clinical
Oncology meeting showing that patients receiving combination immunotherapy with
aldoxorubicin plus standard-of-care chemotherapy experienced overall survival of
5.8 months, compared to 3 months for historical control patients that had
received only the standard-of-care chemotherapy (n=78, 95% confidence interval 4
to 6.9 months). An additional 25 patients in the experimental group remain in
the study. Thus far, there have been no treatment-related deaths, and serious
adverse events have been uncommon (6%). Immunity Bio plans to meet with the FDA
in 2022 to discuss the path for approval of this combination therapy for
pancreatic cancer.
Aldoxorubicin has received Orphan Drug Designation (ODD) by the U.S. Food and
Drug Administration ("FDA") for the treatment of soft tissue sarcoma ("STS").
ODD provides several benefits including seven years of market exclusivity after
approval, certain R&D related tax credits, and protocol assistance by the FDA.
European regulators granted aldoxorubicin Orphan designation for STS which
confers ten years of market exclusivity among other benefits.
ImmunityBio also lists ongoing clinical studies in head and neck cancer and has
submitted a protocol with the FDA for glioblastoma; it is currently reviewing
its options in STS.
Transfer of Rights to Molecular Chaperone Assets
In 2011, CytRx sold the rights to arimoclomol and iroxanadine, based on
molecular chaperone regulation technology, to Orphazyme A/S ("Orphazyme",
formerly Orphazyme ApS) in exchange for a one-time, upfront payment and the
right to receive up to a total of $120 million in milestone payments upon the
achievement of certain pre-specified regulatory and business milestones, as well
as royalty payments based on a specified percentage of any net sales of products
derived from arimoclomol (the "2011 Arimoclomol Agreement"). Orphazyme
transferred its rights and obligations under the 2011 Arimoclomol Agreement to
KemPharm Denmark A/S ("KemPharm"), a wholly owned subsidiary of KemPharm Inc.,
in May 2022.
In May 2021, Orphazyme announced that the pivotal phase 3 clinical trial for
arimoclomol in Amyotrophic Lateral Sclerosis did not meet its primary and
secondary endpoints, reducing the maximum amount that CytRx currently has the
right to receive under the 2011 Arimoclomol Agreement to approximately $100
million. Orphazyme also tested arimoclomol in Niemann-Pick disease Type C
("NPC") and Gaucher disease, and following a Phase II/III trial submitted to the
FDA a New Drug Application for the treatment of NPC with arimoclomol. On June
18, 2021, Orphazyme announced it had received a complete response letter (the
"Complete Response Letter") from the FDA indicating the need for additional
data. In late October 2021, Orphazyme announced it held a Type A meeting with
the FDA, at which the FDA recommended that Orphazyme submit additional data,
information and analyses to address certain topics in the Complete Response
Letter and engage in further interactions with the FDA to identify a pathway to
resubmission. The FDA concurred with Orphazyme's proposal to remove the
cognition domain from the NPC Clinical Severity Scale ("NPCCSS") endpoint, with
the result that the primary endpoint is permitted to be recalculated using the
4- domain NPCCSS, subject to the submission of additional requested information
which Orphazyme had publicly indicated that it intended to provide. To bolster
the confirmatory evidence already submitted, the FDA affirmed that it would
require additional in vivo or pharmacodynamic (PD)/pharmacokinetic (PK) data.
Orphazyme planned to request a Type C Meeting with the FDA in the second quarter
of 2022. Subject to discussions with the regulatory body, Orphazyme had publicly
indicated that it planned to resubmit the NDA for arimoclomol in the second half
of 2022.
Orphazyme had also submitted a Marketing Authorization Application ("MAA") with
the European Medicines Agency (the "EMA"). In February 2022, Orphazyme announced
that although they had received positive feedback from the Committee for
Medicinal Products for Human Use ("CHMP") of the EMA, they were notified by the
CHMP of a negative trend vote on the MAA for arimoclomol for NPC following an
oral explanation. In March 2022 Orphazyme removed its application with the EMA.
Orphazyme has publicly indicated that it will assess its strategic options and
provide an update to the market at the applicable time.
On May 31, 2022, Orphazyme announced that it had completed the sale of
substantially all of its assets and business activities for cash consideration
of $12.8 million and assumption of liabilities estimated to equal approximately
$5.2 million to KemPharm (the "KemPharm Transaction"). KemPharm is a specialty
biopharmaceutical company focused on the discovery and development of novel
treatments for rare central nervous system ("CNS") diseases. As part of the
KemPharm Transaction, all of Orphazyme's obligations to CytRx under the 2011
Arimoclomol Agreement, including with regard to milestone payments and royalties
on sales, were assumed by KemPharm. KemPharm is expected to continue the early
access programs with arimoclomol, and to continue to pursue the potential
approval of arimoclomol as a treatment option for NPC. KemPharm indicated it
plans on resubmitting the NDA for arimoclomol in the first quarter of 2023.
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Recent Developments
Series D Preferred Stock
On May 19, 2022, the Board declared a dividend of one one-thousandth of a share
of Series D Preferred Stock, par value $0.01 per share, for each outstanding
share of Company's Common Stock to stockholders of record at 5:00 p.m. Eastern
Time on May 20, 2022. The Certificate of Designation of Series D Preferred Stock
provides that all shares of Series D Preferred Stock that are not present in
person or by proxy at any meeting of stockholders held to vote on the Reverse
Stock Split (as defined in the Series D Certificate of Designation) and the
Adjournment Proposal (as defined in the Series D Certificate of Designation) as
of immediately prior to the opening of the polls at such meeting (Initial
Redemption Time) will automatically be redeemed in whole, but not in part, by
the Company at the Initial Redemption Time without further action on the part of
the Company or the holder of shares of Series D Preferred Stock (Initial
Redemption). Any outstanding shares of Series D Preferred Stock that have not
been redeemed pursuant to an Initial Redemption will be redeemed in whole, but
not in part, (i) if such redemption is ordered by the Board in its sole
discretion, automatically and effective on such time and date specified by the
Board in its sole discretion or (ii) automatically upon the approval by the
Corporation's stockholders of the Reverse Stock Split at any meeting of the
stockholders held for the purpose of voting on such proposal (Subsequent
Redemption). On July 27, 2022, at the Company's 2022 Annual Meeting of
Stockholders, the Company's stockholders approved the Reverse Stock Split and
the Adjournment Proposal, and all outstanding shares of Series D Preferred Stock
were automatically redeemed. As a result, no shares of Series D Preferred Stock
remain outstanding.
On July 27, 2022, at the Company's 2022 Annual Meeting of Stockholders, the
Company's stockholders approved a proposal to authorize the Board, in its
discretion but prior to July 26, 2023, to amend the Company's Restated
Certificate of Incorporation to effect a reverse stock split of all of the
outstanding shares of the Company's Common Stock, at a ratio in the range of
l-for-2 to l-for-100, with such ratio to be determined by the Board, and all
outstanding shares of Series D Preferred Stock were automatically redeemed. As a
result, no shares of Series D Preferred Stock remain outstanding.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue
and expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, management evaluates its estimates, including those related to
revenue recognition, impairment of long-lived assets, including finite-lived
intangible assets, research and development expenses and clinical trial expenses
and stock-based compensation expense.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ materially from these estimates under different assumptions or
conditions.
Our significant accounting policies are summarized in Note 2 to our financial
statements contained in the 2021 Annual Report.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements.
Stock-Based Compensation
The Company accounts for share-based awards to employees and nonemployees
directors and consultants in accordance with the provisions of ASC 718,
Compensation-Stock Compensation., and under the recently issued guidance
following FASB's pronouncement, ASU 2018-07, Compensation-Stock Compensation
(Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under
ASC 718, and applicable updates adopted, share-based awards are valued at fair
value on the date of grant and that fair value is recognized over the requisite
service, or vesting, period. The Company values its equity awards using the
Black-Scholes option pricing model, and accounts for forfeitures when they
occur.
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Inflation Risk
The Company does not believe that inflation has had a material effect on its
operations to date, other than the impact of inflation on the general economy.
However, there is a risk that the Company's operating costs could become subject
to inflationary pressures in the future, which would have the effect of
increasing the Company's operating costs, and which would put additional stress
on the Company's working capital resources.
Liquidity and Capital Resources
Going Concern
The Company's condensed consolidated financial statements have been presented on
the basis that it will continue as a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. During the six months ended June 30, 2022, the Company incurred a net
loss of $2,089,687, utilized cash in operations of $2,248,429, and had an
accumulated deficit of $486,573,965 as of June 30, 2022. In addition, the
Company has no recurring revenue. As a result,management has concluded that
there is substantial doubt about the Company's ability to continue as a going
concern. The Company's consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty. The
Company's independent registered public accounting firm, in its report on the
Company's consolidated financial statements for the year ended December 31,
2021, has also expressed substantial doubt about the Company's ability to
continue as a going concern.
At June 30, 2022, we had cash and cash equivalents and short-term investments of
approximately $4.1 million. The continuation of the Company as a going concern
is dependent upon its ability to obtain necessary debt or equity financing to
continue operations until it begins generating positive cash flow. No assurance
can be given that any future financing will be available or, if available, that
it will be on terms that are satisfactory to the Company. Even if the Company is
able to obtain additional financing, it may contain undue restrictions on our
operations, in the case of debt financing or cause substantial dilution for our
stockholders, in case or equity financing.
Net cash used in operating activities for the six months ended June 30, 2022 was
$2.2 million, which was primarily the result of a net loss from operations of
$2.1 million, and $0.1 million in net cash outflows associated with changes in
assets and liabilities. The net cash outflows associated with changes in assets
and liabilities were primarily due to decreases of $0.9 million of prepaid
expenses and other current assets, $0.1 million of insurance claim receivable
and $0.1 million of amortization of right-of-use asset, offset by reductions of
$0.3 million of accounts payable, $0.8 million in accrued liabilities and $0.1
million of decrease in lease liabilities.
Net cash used in operating activities for the six months ended June 30, 2021 was
$1.6 million, which was primarily the result of a net loss from operations of
$2.5 million, offset by $0.8 million in net cash inflows associated with changes
in assets and liabilities. The net cash inflows associated with changes in
assets and liabilities were primarily due to increases of $0.8 million of
prepaid expenses and other current assets, $0.3 million of insurance claim
receivable, $0.1 million of accrued expenses and other current liabilities and
$0.1 million of amortization of right-of-use asset, offset by reductions of $0.4
million of accounts payable and $0.9 million of decrease in lease liabilities.
We purchased minimal fixed assets in the six-month period ended June 30, 2022
and a minimal amount of fixed assets in the six-month period ended June 30,
2021, and do not expect any significant capital spending during the next 12
months.
We paid dividends on the preferred shares of $0.4 million in the six-month
period ended June 30, 2022. Net cash provided by financing activities for the
six months ended June 30, 2021 was $0.1 million, resulting from the exercise of
stock options.
We continue to evaluate potential future sources of capital, as we do not
currently have commitments from any third parties to provide us with additional
capital and we may not be able to obtain future financing on favorable terms, or
at all. The results of our technology licensing efforts and the actual proceeds
of any fund-raising activities will determine our ongoing ability to operate as
a going concern. Our ability to obtain future financings through joint ventures,
product licensing arrangements, royalty sales, equity financings, grants or
otherwise is subject to market conditions and our ability to identify parties
that are willing and able to enter into such arrangements on terms that are
satisfactory to us. Depending upon the outcome of our fundraising efforts, the
accompanying financial information may not necessarily be indicative of our
future financial condition. Failure to obtain adequate financing would adversely
affect our ability to operate as a going concern.
We do not have any off-balance sheet arrangements.
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There can be no assurance that we will be able to generate revenues from our
product candidates and become profitable. Even if we become profitable, we may
not be able to sustain that profitability.
Results of Operations
We recorded a net loss of approximately $0.8 million and $2.1 million for the
three-month and six-month periods ended June 30, 2022, respectively, as compared
to a net loss of approximately $1.2 million and $2.5 million for the three-month
and six-month periods ended June 30, 2021, respectively.
We recognized no licensing revenue in the six-month periods ended June 30, 2022
and 2021. All future licensing fees under our current licensing agreements are
dependent upon successful development milestones being achieved by the licensor.
General and Administrative Expenses
Three-Month Period Ended Six-Month Period Ended
June 30, June 30,
2022 2021 2022 2021
(In thousands) (In thousands)
General and administrative
expenses $ 1,141 $ 1,178 $ 2,430 $ 2,454
Amortization of stock awards 3 - 6 -
Depreciation and
amortization 4 3 7 7
$ 1,148 $ 1,181 $ 2,443 $ 2,461General and administrative expenses include all administrative salaries and
general corporate expenses, including legal expenses. Our general and
administrative expenses, excluding stock expense, non-cash expenses and
depreciation and amortization, were $1.1 million and $2.45 million for the three
and six-month periods ended June 30, 2022, respectively, and $1.2 million and
$2.5 million, respectively, for the same periods in 2021. Our general and
administrative expenses in the comparative periods excluding amortization of
stock awards, non-cash expenses and depreciation and amortization, decreased
marginally.
Depreciation and Amortization
Depreciation expense reflects the depreciation of our equipment and furnishings.
Forgiveness of Accounts Payable
During the three-month period ended June 30, 2022, one of the Company's vendors
issued a credit note of $353,565 related to past general and administrative
services.
Interest Income
Interest income was approximately $1,000 and $2,000 for the three-month and
six-month periods ended June 30, 2022, respectively, as compared to $4,000 and
$9,000, respectively, for the same periods in 2021.
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LADRX CORPORATION 
