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CytRx Forms Subsidiary to Use RNAi For Small Molecule Drug Development

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CytRx, of Los Angeles, said this week that it had established a subsidiary, called Araios, to use RNAi technology to validate small molecules with the goal of developing them into treatments for type 2 diabetes and obesity.

According CytRx CEO Steve Kriegsman, Araios was established under an agreement with Mike Czech, professor and chair of molecular medicine and professor of biochemistry and molecular pharmacology at UMass Medical School. Kriegsman told RNAi News that the origins of the arrangement lie in his company’s two late-April deals with UMass: the first involved the licensing the university’s RNAi technology for cancer, type 2 diabetes, and obesity; under the second, CytRx is sponsoring research at the Czech lab on the development of RNAi therapeutics for obesity and type 2 diabetes.

While those deals were being hammered out, Kriegsman said, “I got to know Mike Czech … and found out … [he] was number one in his class in these indications. So we talked about a small molecule deal” and did it. Araios’ activities will be separate from those being conducted under the sponsored research arrangement with UMass, he noted, but the two may be merged later.

Araios will operate with its own management and scientific team, Kriegsman said, and increase its initial staff of nine to roughly 25 within the first year of operation. Mark Tepper — formerly the CEO of Boston-based compact disc microfluidics maker Arradial and a one-time post-doc fellow in Czech’s lab at UMass Medical Schoo l— has signed on as the subsidiary’s president. Czech will be CSO and serve as chairman of the new company’s scientific board, which includes Ronald Kahn of the Joslin Diabetes Center and Luciano Rosseti of the Albert Einstein College of Medicine Diabetes Research and Training Center.

Kriegsman said that Araios’ finances, however, will be handled by CytRx, which will consolidate the subsidiary’s operations into its own in its financial filings.

As it stands now, Kriegsman said, the subsidiary is 95 percent owned by CytRx and 5 percent owned by Czech. Czech will later trade his ownership in Araios for an undisclosed CytRx equity stake, but Kriegsman declined to specify when this would likely occur. He also declined to comment on CytRx’s motivation for forming the subsidiary, other than saying it was for “business and financial reasons,” although he said that CytRx does not plan to create subsidiaries for its ALS or cancer drug programs.

CytRx separately announced that it had grossed $8.7 million through the private stock placement.

The company said that $7 million from the sale would be used to fund Araios. Kriegsman said the capital should be sufficient to keep the subsidiary going for at least two years. Money left over will go into CytRx’ coffers, he added.

— DM

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