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Francisco Javier Garcia
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I have a degree in Economics from the University of Seville. Master in Accounting and finance. Currently working in a large Spanish bank. I've been investing in the stock market for several years. I like reading and sports.
  • Great Future For Cytr Thanks To Aldoxorubicin 1 comment
    Dec 26, 2013 4:15 PM | about stocks: CYTR

    CytRx Corporation (NASDAQ: CYTR), located in Los Angeles, California, is a biopharmaceutical research and development company specializing in oncology. The CytRx ( oncology pipeline is focused on the clinical development of Aldoxorubicin (formerly known as INNO-206), its improved version of the widely used chemotherapeutic agent doxorubicin. CytRx has initiated an international Phase 2b clinical trial as a treatment for soft tissue sarcomas, has completed its Phase 1b/2 clinical trial primarily in the same indication, and has initiated a Phase 1b pharmacokinetics clinical trial in patients with metastatic solid tumors and a Phase 1b study of Aldoxorubicin in combination with doxorubicin in patients with advanced solid tumors. The Company is initiating a Phase 3 pivotal trial under a special protocol assessment (NYSE:SPA) with Aldoxorubicin as a therapy for patients with soft tissue sarcomas whose tumors have progressed following treatment with chemotherapy. CytRx is expanding its pipeline of oncology candidates based on a novel linker platform technology that can be utilized with multiple chemotherapeutic agents and could allow for greater concentration of drug at tumor sites. The Company also has rights to two additional drug candidates, tamibarotene and bafetinib. The Company completed its evaluation of bafetinib in the ENABLE Phase 2 clinical trial in high-risk B-cell chronic lymphocytic leukemia (B-CLL), and plans to seek a partner for further development of bafetinib, and is evaluating further development of tamibarotene

    The impact on investments of the approval of the commercialization of Aldoxorubicin by Cytr

    It is vitally important for the sharp-eyed investor to be aware of the potential economic benefit of the approval by the FDA of Aldoxorubin and its later commercialization in order for them to have a good perspective of where the share price may be heading in the future. A reference for these cashflows and sales could be the progression of the drug doxorubicin, which is currently marketed by Johnson and Johnson (NYSE:JNJ) under the brand Doxil through its subsidiary Janssen Products. The production of the drug is subcontracted out to Sun Pharma,

    Aldoxorubicin is a drug, now being clinically developed, aimed at improving the efficiency of the medication, reducing the risk and secondary effects of doxorubicin, so in fact it will be an improved version of it. And in the case that it can finally be released on to the market, it is reasonable to think that the new drug will occupy the gap currently occupied in the market for Doxorubicin.

    The worldwide sales of Doxil (doxorubicin) are $ 600 Million, of which $ 250 Million come from the US market. Interannual sales have been growing at 25% over the last few years.

    Supposing that the new drug (Aldoxorubicin) takes over all the market of Doxil - successfully becoming a better alternative to it and therefore wins over its sales - which is the most likely, we are talking about a huge annual income ($ 600 million) for a small pharmaceutical company with a stock market value of about $ 90.

    The current net worth of CYTR is $ 15.24M, which compared to the $ 600 million revenue from the new drug it is to receive, would mean a real explosion in its share value.

    It is evident that production and marketing costs have to be subtracted from these gross incomes in order to correctly calculate the impact on the bottom line in the profit and loss from the sales of this drug. If we are very cautious in our estimates, and supposing a margin on sales of 20%, the profit will be $ 120M annually, that is to say 8 times the current net worth ($ 15.24 million).

    The current P/B ratio (Price/book) is 5.74, which means that in the first year of commercialization, if net profits of $ 120 million were obtained, CYTR would have a net worth of $ 135 million (120+15). If we take the current P/ B value 5.74 as a reference, this means we are looking at an objective share price of $ 18.

    This target share price should be reached over a period of about two years, always counting on getting the approval from the FDA. Therefore this means a potential increase of 300% on the current stock market price, which is around $ 4.65.

    (click to enlarge)

    Last week CytRx Reported Highly Statistically Significant Positive Results from its Global Phase 2b Clinical Trials. The results obtained so far indicate that the drug has good possibilities of getting full clearance and approval.

    One possible option for CYTR, in the case that the drug were approved, would be to sell the license for Aldoxoburicin on to a large pharmaceutical company, or to forge a commercial license to market the drug in partnership with another company.

    Risk factors

    As with all small scale pharmaceutical companies, the principal risk would come from the result in the clinical tests being negative, added to the risk of the share value being diluted because of the need for fresh capital - share issues. However this possibility need not be considered, at least in the coming one or two years because the company made a share issue last month and strengthened its cash resources.


    All this leads us to believe that this is a pharmaceutical company with a great future. Its principal drug (Aldoxoburicin) will probably substitute, Doxil, already on the market, for the treatment of soft tissue for cancer of the ovaries, sarcomas, melanomas, etc, as it is more effective and has less unwelcome secondary effects.

    The figures we have set out earlier show us that Aldoxoburicin will generate cashflow of about $ 600 million a year, calculated working from the current sales of Doxil. Therefore we reckon that an objective share price would be $ 18 in about two to three years time. Now is an exceptionally good moment to take positions in the company for long term investors.

    Today CYTR has a healthy balance sheet as it recently benefited from a capital increase, which provided it with about $ 26 million. This will enable it to fund its activity until 2015.

    All in all, now is an excellent opportunity to invest in a small stock market company, with a promising future, both in the long term or the short run.

    Disclosure: I am long CYTR.

    Stocks: CYTR
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  • U.S. Biotech Investor
    , contributor
    Comments (113) | Send Message
    Nice article and factual... the price target is fairly conservative if all goes well.


    U.S. Biotech Investor
    26 Dec 2013, 04:31 PM Reply Like
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