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CytRx CEO Says Firm s RNAi Program is Buried, But Vows to Mine it for Value; Offers No Details


CytRx this week continued its migration away from the RNAi therapeutics space when President and CEO Steven Kriegsman said that the company's RNAi program is "buried" and has "no intrinsic value."

Kriegsman, speaking during his company's presentation at the Biotechnology Industry Organization CEO and Investor conference held in New York this week, also reaffirmed CytRx's plans to spin out the RNAi operations as a way to boost shareholder value — a challenge considering the company's balance sheet.

"Our RNAi program [is] buried now at CytRx," Kriegsman said after highlighting the company's non-RNAi programs and plans. "So there really is no intrinsic value [in it], although it is very, very valuable."

Despite being one of the first companies to become involved in RNAi-based drug development, CytRx has let its RNAi programs fall by the wayside recently in order to dedicate more time and money to nearer-term opportunities, namely a phase II small molecule drug for amyotrophic lateral sclerosis and a phase I DNA vaccine for HIV.

It wasn't until last September that CytRx even identified an RNAi clinical candidate for development — an siRNA targeting RIP140, a ligand-dependent transcriptional repressor that has been shown to play a role in fat burning in animals and fat cells — and early this year the company announced plans to spin out its RNAi drug activities into a separate subsidiary (see RNAi News, 9/9/2005 and 2/2/2006).

"Our RNAi program [is] buried now at CytRx. So there really is no intrinsic value [in it], although it is very, very valuable."

Speaking at the BIO-CEO conference, Kriegsman left no doubt that RNAi is not an area the CytRx sees itself working in for much longer. He downplayed the importance of the company's efforts in the field compared with its other programs while at the same time trying to tout its overall potential — a tightrope to walk for a company with little cash on hand and in need of funds to not only spin out its RNAi operations but simply to stay afloat.

According to Kriegsman, CytRx's RNAi operations "are very active" despite being buried, and consist of the RIP140 program, as well as earlier-stage efforts in ALS and cytomegalovirus retinitis. However, he said that the RNAi division "isn't getting the kind of value it should."

Therefore CytRx plans to "very shortly … transfer the assets from our RNAi division" into a new pure-play RNAi company "that can more easily be compared with" Sirna Therapeutics and Alnylam Pharmaceuticals, he said.

Kriegsman noted that both Alnylam and Sirna's "market caps [together] are probably close to $600 [million] or $700 million," while CytRx's "total market cap is around $80 million," indicating that its RNAi operations aren't "even valued."

It is unclear how Kriegsman arrived at his conclusions regarding Sirna's and Alnylam's market caps (about $281.7 million and $420.5 million, respectively, according to Nasdaq) in relation to the value of their RNAi programs versus CytRx's market cap given that the other firms have RNAi drugs in the clinic and a record of publishing key research in peer-reviewed journals — two things CytRx Can't claim for itself.

Kriegsman provided no details on how CytRx plans to fund the start-up. When the company announced that it would be setting up the new company, it noted that such a step would require "obtaining financing." In an SEC filing last September, the company said it had only enough cash on hand to operate into the second quarter of this year — which closes March 31 — and that "it does not currently have commitments from any third parties to provide capital."

However, he told his audience at BIO-CEO that spinning out the new RNAi company "would dramatically increase the value for CytRx shareholders.

"Why do we say that? First off, we have the co-discoverer of RNAi, Craig Mello," Kriegsman said. Mello, a researcher at the University of Massachusetts Medical School, is one of CytRx's scientific advisors. "We [also] have Tariq Rana, who's an expert in stability and delivery," he added, referring to another scientific advisor from UMMS.

Kriegsman did not offer any other examples of how the RNAi spinout would boost shareholder value beyond naming additional members of CytRx's scientific advisory board and board of directors.

— Doug Macron ([email protected])

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