Cytrx: Another Stride Ensuring Continued Shareholder Value

May.18.11 | About: CytRx Corporation (CYTR)
Timeless Wealth is compensated for research coverage, which denotes a clear bias to our investment opinion. We believe that our research is objective, weighing both the risks and rewards of an investment opportunity. However, our end goal is to highlight firms that we believe are innovative and offer compelling investment propositions. We thought this would be an ideal time to provide an update on Los Angeles, California-based CytRx Corporation (NASDAQ:CYTR), as the firm completes a shareholder-friendly transaction.
Yesterday morning Cytrx Corp. revealed the sale of its molecular chaperone assets, a non-core component of the oncology company in clinical-stage trials with three cancer drugs for seven indications. Denmark-based Orphazyme ApS agreed to pay cash upfront and milestone payments for what may total $120M when all is said and done.
Cytrx Corp will also ink royalties on sales of products developed from Orphazyme's molecular chaperone technology.
As Cytrx's market capitalization falls shy of this latest deal's potential payout, investors may find a lucrative opportunity to invest in a rare case of a solvent development-stage biotechnology company.
Cytrx had cash and marketable securities of $30M as of the most recent quarter. Depending on the terms of the molecular chaperone asset sale, investors may end up holding shares more than 25% backed by cold hard cash. This significantly decreases exposure, and thus investment risk.
As I wrote in an earlier report, Cytrx's strong financial position is reminiscent of a talented management team and unprecedented corporate governance. This latest transaction is another stride that ensures shareholder value continues to be emphasized and the risk of common shareholders being diluted is negated.
Liquidity is often the foremost concern when biotechnology firms advance their drug candidates into late-stage trials, as expenses tend to quickly mount. However, Cytrx conducts trails on late-stage disease, reaching meaningful data sooner and saving on unnecessary expenditures, resultantly.
Now adding to its liquid assets, on the basis of last year's expenditures, the company has enough resources to fund operations for at least the next two years.
Cytrx's ongoing trials in INNO-206 for the treatment of soft tissue sarcomas and pancreatic cancer, Bafetinib in B-cell chronic lymphocytic leukemia (B-CLL), advanced prostate cancer and brain cancer, and Tamibarotene for Acute promyelocytic leukemia (APL) and non-small-cell lung cancer, should give investors meaningful reason to invest in the late-stage oncology company.

Insiders and institutional investors hold 4%, and 12%, respectfully.

Disclosure: I am long CYTR.

Additional disclosure: In April, Timeless Wealth was retained by JSDC Inc., a boutique advisory firm, to provide research coverage on their client, CytRx Corp. Timeless Wealth receives compensation for providing said services. However, the views expressed are purely our own.