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CytRx Posts Decline in Q4 Loss Amid Lower Costs; Despite Lack of Cash, RNAi Spin Out Expected Soon


CytRx released this week its financial results for the fourth quarter of 2005, posting a drop in losses on lower expenses.

The company also said that the spinout of its RNAi-based drug-development efforts into a new company is expected to be completed "in the coming months," but noted in a filing with the US Securities and Exchange Commission that it still has not secured the money necessary to do so.

Ed Umali, director of operations for CytRx, told RNAi News in an e-mail this week that the company has not made public a specific timeline for when the spinout is expected to occur.

For the fourth quarter, CytRx's total expenses dropped to $3.8 million from $5.9 million in the year-ago quarter. Research and development spending fell to $2.3 million in the quarter from $4 million a year earlier because the company recognized $3 million in costs associated with its acquisition of compounds from Biorex Research and Development in 2004. Fourth-quarter general and administrative costs rose to $1.5 million from $780,868 the year before.

CytRx's net loss for the fourth quarter fell to $3.6 million, or $0.06 per share, from $5.8 million, or $0.15 per share, in the same period of 2004.

"CytRx has indeed stated that the creation of a new RNAi subsidiary is subject to obtaining financing, but the stronger the company's financial condition, the more flexibility it will have with respect to the amount of the necessary financing, and the means of securing financing."

The company's revenues in the quarter climbed to $172,860 from $100,000, reflecting the receipt of $73,000 in service revenues from government grants and laboratory consulting in the fourth quarter of 2005.

For the year, Cytrx's total costs slipped to $15.7 million from $17 million in 2004, while revenues dropped to $184,000 versus $428,000 the year before. The company's net loss in 2005 was $15.1 million, or $0.27 per share, down from $16.4 million, or $0.48 per share, a year earlier.

As of Dec. 31, 2005, CytRx had cash and cash equivalents totaling $8.3 million, versus $3 million at the end of 2004, reflecting the completion of a private stock placement in January 2005 that netted the company $19.4 million.

In a filing with the SEC this week, CytRx said that it has "adequate financial resources to support [its] currently planned level of operations into the third quarter of 2007."

In a press release announcing the financial results, CytRx touted its recent achievements with its small-molecule drugs program and DNA-based vaccine for HIV, mentioning only once its RNAi-based drug development efforts.

Shedding RNAi

Since restructuring itself as an RNAi drugs firm in 2003, CytRx has been steadily moving away from the gene-silencing technology as a therapeutic modality, instead focusing on its HIV vaccine and its phase II small-molecule treatment arimoclomol for amyotrophic lateral sclerosis.

As first reported by RNAi News last November (see RNAi News, 11/11/2005), CytRx decided to spin out its RNAi drugs operations into an independent company in order to gain better traction in the marketplace among such rivals as Alnylam Pharmaceuticals and Sirna Therapeutics.

To date, CytRx has offered few details on how or when it plans to spin out the new company beyond stating that it plans to do so "in the coming months." Importantly, CytRx stated in the SEC filing that it has not yet found the money to bankroll such a move.

The company said in the filing that it expects to spend "approximately $17.8 million over a period of 24 to 30 months" in order to complete phase II development of arimoclomol. Additionally, once phase I development of its HIV vaccine is completed, CytRx said it will become responsible for all costs for further clinical testing, which will be "very substantial."

CytRx noted in the filing that the costs potentially required under its various collaborations, including its RNAi deals with the University of Massachusetts Medical School, "together with the operating capital requirements of our obesity and type II diabetes laboratory, our planned sponsored research funding for Massachusetts General Hospital, our phase II clinical program with arimoclomol for ALS and our development of our small molecule drug candidates, substantially exceed our current financial resources."

Despite having raised $12.4 million last month through the sale of stocks and warrants, its operations and partnerships, as well as the spin out of its RNAi drug operations, "will … require us to raise additional capital or to secure a licensee or strategic partner," the company said in the filing. However, "we have no commitments or arrangements for any financing," CytRx said.

In an e-mail this week, Umali said that CytRx is still considering its options about how to best finance the spinout, and that its recently completed financing round "improves [the firm's] financial flexibility."

He added that "CytRx has indeed stated that the creation of a new RNAi subsidiary is subject to obtaining financing, but the stronger the company's financial condition, the more flexibility it will have with respect to the amount of the necessary financing, and the means of securing financing."

— Doug Macron ([email protected])

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