Executives at CytRx Corp. have proved savvy negotiators in garnering a $24.5 million infusion to develop a drug for deadly Lou Gehrig’s disease.

The Los Angeles-based biotech negotiated an unusual royalty agreement with the ALS Charitable Remainder Trust that will help fund development of the company’s lead drug candidate, arimoclomol, without diluting any of the company’s stock.

The deal involves the trust transferring stock holdings to CytRx that are worth $24.5 million, including shares of Tribune Co. and Berkshire Hathaway Inc. In return the trust will receive a 1 percent royalty payment from worldwide sales of the drug.

Not only is the funding source unusual the trust benefits the Greater Los Angeles Chapter of the ALS Association but the structure of the deal better protects the interests of existing shareholders of CytRx, which has a modest $102 million market cap.

“This speaks volumes to the negotiating skills of CytRx management,” said Rodman & Renshaw analyst Elemer Piros, noting that 1 percent is an extremely small royalty rate. “The trust’s motivation is to find a cure, though if the drug could achieve $1 billion or more in sales, the royalty could be a meaningful number.”

Chief Executive Steven Kriegsman noted in the Aug. 29 announcement that the company retains full control of clinical development and 99 percent of future revenues, while preserving the flexibility to negotiate corporate partnerships for ALS research. The company also plans to explore the drug’s usefulness in treating Huntington’s, Alzheimer’s and Parkinson’s diseases, as well as stroke and cystic fibrosis.

CytRx, whose lightly traded shares have rarely broken $3 in the past five years, surged more than 24 percent on heavy volume when news broke. The stock closed at $1.73 on Aug. 30.

Mid-stage clinical trials began last fall on a pill form of arimoclomol, one of three small molecule compounds under study by CytRx that appear to trigger certain proteins to repair or block other damaged proteins linked to a variety of diseases.

CytRx expects to report study results early in the fourth quarter. The drug already has received approval from the U.S. Food and Drug Administration to be “fast tracked,” which can speed up the regulatory process by several months.

Advanced Biotherapy Leaving L.A.


The remaining operations of Woodland Hills-based drug developer Advanced Biotherapy Inc. are heading east.

Board member Richard Kiphart, head of the corporate finance department at Chicago-based investment house William Blair & Co., has crafted a $6.5 million deal that will give him personal control of 80 percent of the micro-cap company’s shares. Christopher Capps, head of Kiphart’s separate private equity firm, has been named chief executive and corporate headquarters will move to Chicago.

The company already was down to a nominal presence in Los Angeles, with office staffed only by former chief executive Edmond Buccellato and his daughter. Most of the action has been at the company’s Maryland research laboratory, where researchers are developing antibody-based treatments for certain autoimmune diseases. The approach was pioneered by the company’s Russian-born scientific founder, Dr. Simon Skurkovich.

The company’s lead drug candidate treats skin diseases and is in early-stage clinical trials in Russia with any commercial launch several years away. In its most recent quarterly report, the company said that as of June 30 it had accumulated debt of $14.2 million and had only $21,447 in cash and investments on hand. Capps said the company expects to be virtually debt free and have approximately $6 million in cash when the transaction closes.

The new financing involves the sale of stock to Kiphart, Capps and other related parties at 1.5 cents per share and conversion of debt to shares at 1.5 cents per share. The company also plans to register a rights offering allowing other existing stockholders to purchase 10 shares of common stock at the same 1.5 cent price for every share held.

Getting Devices to Market


Back in the 1990s, Rick Davies learned a lot about the right and wrong ways to commercialize a clever medical device as general manager of Cogent Light Technologies, then based in Valencia.

Now an industry consultant based in Utah, Davis returns to Los Angeles on Sept. 14 to headline a daylong commercialization workshop co-sponsored by Medical Device Manufacturers Association and the Southern California Biomedical Council.

Davies, who oversaw commercialization of Cogent’s innovative light-weight surgical headlight before the company was acquired in 1998, says entrepreneurial engineers and medical doctors all too often fall short in marketing and distributing a product once it passes U.S. regulatory approval.

“They might even get all the way to the manufacturing stage before they start asking ‘how are we going to sell this thing?'” said Davies, who at Cogent used both in-house sales representatives and independent specialty reps to market the device to hospitals. “This is all stuff that really needs to be addressed from the very beginning.”

Depending on an entrepreneur’s stomach for the daily grind of running a business, commercialization options also can include licensing the technology to another company or creating a strategic partnership with a larger company that has greater sales and distribution muscle.

While geared toward individuals and start-up companies, Davies said past workshops in other cities have attracted university technology transfer officers, overseas firms looking to enter the U.S. market and even established companies hoping to spin off non-core technology from an acquisition. For information on the event, which ranges in price from $195 to $395, go to www.socalbio.org.

Staff Reporter Deborah Crowe can be reached at (323) 549-5255, ext. 232, or at [email protected].