Investing in BioPharma: Coverage of CytRx

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Investing in pharma companies with a portfolio of drugs in its development pipeline can be extremely profitable if the research pays off. The risks are high since a large number of drug candidates don’t even make it out of the lab. But in order to make an informed decision, you need to understand drug development lifecycle.

Once the drug discovery phase is completed and a compound identified, there are two major clinical test phases - pre-clinical testing phase and clinical testing phase. Pre-clinical testing is done in the lab and on animals, the effects studied and monitored. If the results are satisfactory and if the company sees potential, a patent application is filed and an IND application is filed with the FDA. If the FDA doesn’t object within 30 days, this can proceed to the clinical trials phase.

What is an IND application?

IND, Investigational New Drug, is a program administrated by the Food and Drug Administration (FDA), whereby a pharmaceutical company obtains permission to ship an experimental drug across state lines before the drug has been approved for marketing.

The IND is a pre-requisite for Phase I clinical Trials. The FDA reviews the application to ensure that the subjects are not exposed to unreasonable risks.

Clinical trials are done on human subjects and carried out under strict FDA regulations and guidelines. The trials are closely monitored with utmost priority given to safety of the subjects and side-effects of the drug. Each phase must be approved by the FDA before proceeding on to the next phase.

Phase I:
Small group (20-100) of human subjects
Often has healthy individuals
One of the objectives is to find the therapeutic dose
Main objective is to study the safety of the drug

Phase II:
Testing conducted on a larger group (20-300)
Further studies conducted to see the effectiveness of the drug

Phase III:
Much larger group (300-3000) of test subjects
Objective is to find out how well the drug works against the current best drug treatment
Expensive and time consuming process
If successful, most drugs can be marketed as per FDA norms with guidelines and recommendations

Phase IV:
Also called post-marketing surveillance trial, aims to study the safety of the drug once it is in the market. Adverse, harmful side-effects can result in the drug being recalled.

This is a very short summary of how a drug is developed and marketed. An investor in the Pharma sector, must understand these phases to make an informed decision.

CytRx

CytRx is a biopharmaceutical company specializing in treatment of various forms of cancers. CytRx was incorporated in 1985, but spun off its RNAi operations as a separate company, RXi Pharmaceuticals and focussed mainly on oncology. CytRx has three drug candidates, involved in 7 clinical trials at various stages in its drug development portfolio. One of its drugs has been granted Fast Track designation by the FDA and two of the drugs have been given the Orphan Drug Status by the FDA.

What is Orphan Drug Designation?

This designation is granted by the FDA to a drug that is intended to treat or cure a rare disease or condition that affects a very small number of people (less than 200K). This designation gives the sponsor, market exclusivity for a seven year period and tax credits related to clinical trial expenses provided certain conditions are met.

Having multiple products undergoing clinical trials offers investors a better hedge against failure. Below is a brief description of the 3 drug candidates at various stages in the clinical trial process.
cytrx drug development pipeline

Drug Candidate: TAMIBAROTENE

  • Interim results presented at ASH 2009 showed 27% (3 of 11) objective complete responses and 45% (5 of 11) morphological leukemia free
  • Fast track designation granted by FDA
  • Orphan drug status in US and Europe
  • Former NBA player who was diagnosed with an aggressive form of APL in 2004, received tamibarotene treatment in 2009 and has shown complete response after failing other treatments and is still tumor free. He is currently touring with the Ray Johnston band.

Pivotal Phase II Trial For The Treatment of acute promyelocytic leukemia (APL)

  • Approved in Japan and has been used for treatment of APL since 2005
  • APL is a rare form of Leukemia and currently has no approved 3rd line treatment
  • Market potential of upto $100 million

Phase II Trial for non-small cell lung cancer

  • Market potential of $13.3 billion by 2015
  • In 2010, ~113,485 US cases
  • CytRx has rights to North America and Europe

Drug Candidate: BAFETINIB

  • FDA’s granted Orphan Drug Status for the treatment of Philadelphia chromosome-positive (Ph+) CML
  • CytRx has worldwide rights excluding Japan
  • CytRx has rights to North America and Europe

Phase II Trial for B-Cell CLL (Leukemia)
Phase II Trial for Advanced Prostate Cancer
Phase I Trial for Brain Cancer

Drug Candidate:INNO 206

  • INNO-206 is a novel tumor targeted doxorubicin prodrug
  • Doxorubicin is a widely used cancer drug for breast, lung, ovarian cancers, NHL, and sarcoma
  • INNO-206 was designed to improve toxicity profile and allow for higher doxorubicin exposure by targeting directly to tumors

Phase Ib on going trial for Pancreatic Cancer
Phase II announced for Soft Tissue Sacrcomas

Why Phase II Trials Matter?

From an investor’s perspective, Phase II trials are a critical juncture in a drug’s lifecycle. A majority of the drugs don’t make it beyond this phase either due to safety concerns or if the drug does not prove to be as effective as anticipated.

Closing Notes

Cytrx is a small cap biopharma with a market cap of 95 million. Unlike other small cap bio pharmas, CytRx has zero debt and cash equivalent reserves of $30.1 million (as of Mar 31, 2011). CytRx also retains a 17% stake in RXi Pharmaceuticals. With a strong balance sheet, proven record and strong line of promising drug candidates in the pipeline, CytRx is a stock to watch.

DISCLOSURE: This is part of a paid, but independent Research Series on CytRx. The views and opinions expressed in this Series are purely my own. I have no positions in CytRx, and no plans to initiate any positions within the next 72 hours. Rule 17B requires disclosure of payment for investor relations services. Money Cone has been compensated sum of two hundred dollars by a third party on May 24, 2011 for this review to be available for a period of one year on this site. For complete disclosure/disclaimer statement, please review the Disclosure Policy relevant to this Series. cytrx

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2 thoughts on “Investing in BioPharma: Coverage of CytRx

  1. Untemplater says:

    It’s pretty amazing what scientists do to develop new drugs. Too bad animals have to be the first test subjects but guess there’s not much that can be done to avoid that. Better a rat gives his life than a human!

  2. I’ve tried getting into biotech after I heard it was a hot commodity. But I don’t think I have the patience to wait for these drugs to make it through the pipeline and especially when they could flop. I would play this with a “fun money” fund.

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