Cancer Drug Maker Passes Animal, Investor Tests

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CytRx Corp., a biopharmaceutical research and development company in Los Angeles specializing in cancer treatments, received positive results last week from an animal study of its brain cancer drug, sending its share soaring.

The company said the results of the test were an indication that the drug, aldoxorubicin, could be an effective treatment for glioblastoma, a common, aggressive cancer that is diagnosed in about 12,000 people in the United States each year.

The markets were encouraged as well, sending shares of CytRx up 21 percent last week to close at $2.61, making it the top gainer on the LABJ Stock Index for the week. (See page 26.)

Like many biotech firms, CytRx has been burning through money as it works to bring treatments to market. It raised $21.5 million in an October 2012 offering of 9.2 million shares at $2.50 per share. That followed an August 2011 offering of 5.6 million shares priced at $3.57 in which it raised $18.9 million. It reported a 2012 net loss of $18 million on revenue of $100,000 for the year ended Dec. 31.

But with aldoxorubicin showing promise, Steven Kriegsman, CytRx’s chief executive, said the $73 million market cap company had a chance to join the ranks of multibillion-dollar companies.

“This is a drug within a pipeline,” Kriegsman said.

Aldoxorubicin is positioned as a more potent version of the widely used chemotherapy drug doxorubicin, and it offers a safer path to shrinking brain tumors in less time and with fewer side effects. The drug is also in late-stage clinical development for soft-tissue sarcoma, a cancer of the connective tissue.

Raghuram Selvaraju, managing director and head of health care equity research at Aegis Capital Corp. in New York, said the sarcoma drug could be on a rapid path to market by the end of 2015.

“That’s the reason why we feel the stock had the reaction that it did,” Selvaraju said, adding that he expects continued strength in the stock as the coming months unfold. “This isn’t just any old run-of-the mill novo drug being tested in an animal model. It’s a drug that’s been around for a long time. It’s a drug whose safety and efficacy profile is well known in other disease indications, and it’s a drug that’s being targeted in a new area where the medical need is very large.”

Selvaraju, who has a “buy” recommendation on CytRx, has set a target price of $7 for the stock, which is just below the consensus analyst target of $8.

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