CytRx: All That Glitters Could Be Gold

by: Joseph Krueger
Today, CytRx Corporation (NASDAQ:CYTR) announced that bafetinib (formerly known as INNO-406) had received official notification from the Committee for Orphan Medicinal Products (COMP) of the European Medicines Agency (EMEA) that a positive opinion was made regarding the application for orphan medicinal product for the treatment of chronic myeloid leukemia (CML). The positive opinion of the COMP has now been forwarded to the EU commission for final approval and publication in the community register. Bafetinib had previously been granted Orphan Drug Status for the treatment of Philadelphia chromosome-positive (Ph+) CML by the U.S. Food and Drug Administration (FDA).
This is a huge development for a small company. The response to this news did cause about a 10-15% spike in the stock price, but I feel this response was quite underwhelming and suggests that investors don’t really understand the implications of this development in the company. I think investors are missing the big picture with CYTR. In my article earlier this year about what biotech companies to look for, I suggested that investors look for companies with drugs late in development (coming out of phase II or going into phase III). For these types of companies you can expect a large company to pay a small biotech company tens of millions of dollars up front with hundred of millions of continued milestone payments to support the studies; with royalties upon marketing of the drug.
Today’s news about Array Biopharma’s (NASDAQ:ARRY) partnership with Novartis (NYSE:NVS) is just another example of what has been happening repeatedly this year. Soon enough, it should be CYTR’s turn for several reasons:
CYTR is a biopharmaceutical company specializing in oncology, and its this development in its bafetinib program should be enough to increase its market cap by an additional $50 million at least. Bafetinib is a potent, orally available, dual Bcr-Abl and Lyn-kinase inhibitor. For those in the know, this sounds an awful lot like imatinib, Novatis’s blockbuster drug Gleevec. Gleevec is approved for treating chronic myelogenous leukemia (CML), gastrointestinal stromal tumors (GISTs) and other cancers. It is easy to brush off Bafetinib, given the competition, and the fact that CYTR is seeking an indication for CML. From this perspective, Bafetinib seems like a follower with little chance of gaining a market share.
But again, I feel investors are missing the big picture: Bafetinib is not trying to capture some of Gleevec’s market share, it is in fact relying of Gleevec to create a market for it! One of the most (scientifically) interesting developments since Gleevec’s approval is the surprising failure rate. CML is caused by a translocation and fusion between chromosome 9 and 22, creating an unnatural, constantly active protein called BCR/Abl, which drives the development of CML in 95% of cases. By all respects, Gleevec was a marvel of modern medicine as it was the first “magic bullet” drug that targeted the BCR/Abl gene product that is the underlying cause of CML.
As it directly targets the cause of CML, Gleevec is highly effective in most CML patients. Patients will remain on Gleevec the rest of their life to keep the disease at bay. But as the drug gained widespread use, it was discovered that about 15% of CML patients were found to resistant to Gleevec after 15 months of therapy. As well, many patients were resistant from the onset of treatment. These patients were the ones who demonstrated “blast crisis” at the onset of diseases. These “blast crisis” patients did have the hallmark chromosomal translocation associated with CML, but also had mutations and other genetic changes that lead to resistance. Resistance to Gleevec occurs in approximately 60-70% of these patients.
There is a huge gap still to be filled to treat Gleevec resistant CML. Novartis has tried to fill this gap with its own Tasigna, which has the same target and mechanism as Gleevec. In clinical trials with Tasigna, 78% of Gleevec resistant patients in the chronic phase responded to Tasigna up to 10 months. However, only 25% of the patients in the “blast crisis” phase responded. Thus, out of 60-70% of the patients above who are resistant to Gleevec from the onset, only 25% of these respond to Tasigna. Thus, there is still a huge gap to be filled. Bristol-Meyers Squibb’s (NYSE:BMY) Dasatinib has tried to fill this gap by targeting many other mechanisms, but has proven to be only modestly effective and quite toxic.
Bafetinib is 25 to 55 times more potent than imatinib in cell culture, and at least 10 times as effective as imatinib mesylate in suppressing the growth of Bcr-Abl bearing tumors. Bafetinib has demonstrated activity in 12 of 13 imatinib-resistant cell lines. Bafetinib is 25 to 55 times more potent than imatinib in cell culture, and at least 10 times as effective as imatinib mesylate in suppressing the growth of CML tumors in mice. In November 2008, CytRx announced that bafetinib demonstrated clinical responses in patients with CML in an international Phase I dose-ranging clinical trial conducted in patients with CML and other leukemias that have a certain mutation called the Philadelphia Chromosome (Ph+) and are intolerant of or resistant to Gleevec and, in some cases, inhibitors such as Dasatinib and Tasigna).
Thus, there is still a lot of room for Bafetinib to treat Gleevec resistant CML. Apart from these, there is room for Bafetinib to treat Gleevec/Tasigna resistant CML. The FDA has recognized this potential already: Bafetinib has been granted Orphan Drug Status for the treatment of Philadelphia chromosome-positive (Ph+) CML by the FDA. With today’s news, the EMEA is on board as well. This has opened the door for almost worldwide approval for Bafetinib for a much needed indication. CytRx holds rights to bafetinib for all territories except Japan. With worldwide sales of Gleevec approaching $2 billion in 2009, there is a lot of potential revenue for CYTR with approval of Bafetinib.
CytRx also plans in the first half of 2010 to initiate a Phase 2 proof-of-concept clinical trial to evaluate the efficacy and safety of Bafetinib in patients with high-risk B-cell chronic lymphocytic leukemia (B-CLL). Based on these positive trial results, CytRx hopes to conduct a larger comparative trial to further determine efficacy of this agent.
Finally, CytRx also plans to initiate Phase 2 proof of concept clinical trials with bafetinib as a treatment for glioblastoma multiforme, a common and aggressive type of primary brain tumor, as well as advanced prostate cancer, in the second half of 2010.
CYTR is more than just Bafetinib:
CYTR is filling in a lot of other gaps big pharma has left behind:
They are developing INNO-206, a prodrug derivative of the commonly prescribed chemotherapeutic agent doxorubicin. INNO-206 is designed to reduce adverse events by controlling drug release and preferentially targeting tumors.
CYTR is also developing Tamibarotene, an which was designed to potentially avoid toxic side effects of all trans-retinoic acid (ATRA), the current first line treatment for APL. The FDA has granted Orphan Drug Designation for APL and Fast Track Designation for the use of tamibarotene in patients with relapsed or refractory APL.
In addition to its oncology programs, they are also developing treatments for neurodegenerative and other disorders based upon its small-molecule molecular chaperone amplification technology. Arimoclomol is a drug being evaluated as a treatment for ALS and stroke recovery, and Iroxanadine is being evaluated as a treatment for cardiovascular disease.
In addition to this deep pipeline, CYTR owns a 28% stake in RXi Pharmaceuticals Corporation (NASDAQ:RXII), which in itself represents an entire different class of drug discovery based on RNAi technology. With a current market cap of about $80 million (as high as $160 million in March), this stake in RXII has a value of about $30 million.
In addition to this $25 million stake in RXII, CYTR has about $30 million in cash and short term investments and no long term debt. CYTR burns about $15 million per year, thus has sufficient funds for operations for at least two years. This should be long enough to finish the key phase II data for Bafetinib in CML and find a partner for Bafetinib in B-CLL and glioblastoma. This may be sufficient time to complete phase II trials for Arimoclomol, and find a partner for Iroxanadine. Investors may be rewarded handsomely by success in any of these numerous endeavors and any RXII has to offer. CYTR is clearly showing progress in all its programs, and seems to have found several niche indications left empty by big pharma. From this standpoint, CYTR is exactly the kind of company biotech investors should hold a long position in. I would expect significant news about any of these endeavors this year.
The reader is also invited to read on, and see why CYTR’s potential has not been appropriately valued:
Filling other gaps left behind by big pharma:
INNO-206 (formerly DOXO-EMCH) is a prodrug derivative of the commonly prescribed chemotherapeutic agent doxorubicin. CytRx holds the exclusive worldwide rights to INNO-206, which is designed to reduce adverse events by controlling drug release and preferentially targeting tumors. In a Phase 1 clinical trial, INNO-206 was administered in doses at up to six times the standard dosing of doxorubicin without an increase in observed side effects over those historically seen with doxorubicin. In the Phase 1 clinical trial of 35 patients with various cancers treated with INNO-206, three patients showed a partial tumor reduction and 20 patients showed stable disease over the course of the trial. Results of these studies were published in the peer-reviewed journal Investigational New Drugs. The Company has announced plans to initiate three Phase 2 clinical trials of INNO-206 in patients with pancreatic cancer, gastric cancer and soft tissue sarcomas in 2010.
Tamibarotene (formerly known as TM-411, TOS-80T, Am-80, and INNO-507) is an orally available synthetic retinoid compound which was designed to potentially avoid toxic side effects by binding to its molecular target more selectively than all trans-retinoic acid (ATRA), the current first line treatment for APL. There is currently a Special Protocol Assessment (SPA) in place with the FDA for a Phase 2 registration clinical trial, known as STAR-1, which is evaluating the efficacy and safety of tamibarotene as a third-line treatment for APL. The STAR-1 trial is ongoing and currently includes six clinical sites in the U.S. CytRx recently reported that, of the 11 patients enrolled in the STAR-1 trial to date, three (27%) achieved a hematologic complete response, and four (36%) a morphologic leukemia-free state. Based on the preliminary results in the clinical trial for third-line APL, CytRx plans to initiate a clinical trial to develop its oncology drug candidate tamibarotene in combination with chemotherapy or arsenic trioxide (ATO) as a first-line treatment for APL.
The FDA has granted Orphan Drug Designation for APL and Fast Track Designation for the use of tamibarotene in patients with relapsed or refractory APL following treatment with all-trans retinoic acid (ATRA) and arsenic trioxide. In addition, tamibarotene has been granted orphan medicinal product status by the European Medicines Agency for the treatment of APL. The efficacy of orally-administered tamibarotene was demonstrated in two Phase 2 studies conducted in Japan in a total of 63 Japanese subjects with APL. The overall complete response rate in these subjects was 60%. In subjects experiencing their first relapse, the overall complete response rate was 81%.
The near-term market opportunity for CytRx’s tamibarotene in refractory APL in the U.S. alone is estimated to approach $20 million per year - with the market opportunity for an expanded label including refractory, maintenance and front-line therapy increasing to $150 million in potential recurring revenue in the U.S. and Europe. There are currently no approved third-line treatment options for refractory APL patients.
Non-Oncology Pipeline
Outside of oncology, other drugs in CYTR’s pipeline include arimoclomol and iroxanadine. These drugs are said to function by amplifying "molecular chaperone" proteins, also known as “heat shock proteins,” which normally found in all cells of the body. In general, these chaperone proteins help mend damaged, misfolded proteins. Medical science believes that the mismanagement of proteins caused by cell stress is associated with diabetes, high blood pressure, high cholesterol, stroke, and even Amyotrophic Lateral Sclerosis (ALS, or Lou Gehrig's disease). These types of drugs represents a new class of targeted therapy for the treatment of a variety of diseases.
Arimoclomol is being evaluated as a treatment for ALS and stroke recovery. In June 2007, CytRx reported promising data from the six-month, open-label extension of its Phase 2a clinical trial with arimoclomol in ALS volunteers. Arimoclomol at the 100 mg dose level administered orally three times daily reduced the rate of decline of the Revised ALS Functional Rating Scale (ALSFRS-R) and Vital Capacity (VC), a measure of ALS symptoms. This trial observed a decrease in the rate of decline of 21% for ALSFRS-R, 8.0% for vital capacity, 23% for total body weight and 20% for body mass index. However, this trial was flawed and the results not fairly interpretable because no placebo group was included in the study- patients were compared with an historical control. As a result, the FDA put the trial on hold. In December 2009, CytRx announced that the FDA lifted its initial clinical hold on the Company’s flawed arimoclomol Phase 2 ALS clinical study, and CytRx has announced plans to resume the clinical trial in parallel with its discussions with potential partners.
Arimoclomol has completed seven Phase 1 and two Phase 2 clinical trials and began a Phase 2b clinical trial without any significant adverse events in patients. CytRx said they intend to seek a partner for the development of arimoclomol and iroxanadine for all indications on a worldwide basis. The clinical trial is ongoing, and is now being financially supported by grants from the ALS Association and the U.S. Food and Drug Administration’s Office of Orphan Products Development (OOPD), and CytRx is supplying the drug and allowing the sponsor to reference the Company's Investigational New Drug Application for regulatory purposes.
Iroxanadine is being evaluated as a drug to repair damage to endothelial cells; cells that line the interior of blood vessels. Damaged endothelial cells alter functions as blood flow, coagulation, and inflammation. This can lead to complications such as diabetic ulcers, renal failure, stroke and atherosclerosis. Iroxanadine may prove to be an effective treatment for cardiovascular disease, as it has been shown to block the process known as coronary restenosis in experimental models. Coronary restinosis is the undesirable re-closing of the coronary artery following balloon angioplasty for atherosclerosis. Iroxanadine was also effective in treating cardiovascular disease in an experimental mouse model for atherosclerosis. The experiments demonstrated that iroxanadine significantly reduced plaque formation and arterial thickening in mice, both of which are symptoms that lead to serious cardiovascular disease. Additional experimental animal models suggest that iroxanadine may be useful in the treatment of other diseases of poor blood circulation, such as diabetic foot ulcers. CytRx is seeking a strategic partner for the further development of iroxanadine.
Disclosure: I maintain a long position in CYTR