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CytRx Corp. Reports Operating Results (10-Q)

November 09, 2009 | About:
EconMatters

10qk

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CytRx Corp. (CYTR) filed Quarterly Report for the period ended 2009-09-30.

CYTRX CORP. is engaged in the development and commercialization of pharmaceutical related products and services including human therapeutics focused on high-value critical- care therapies. Cytrx Corp. has a market cap of $104 million; its shares were traded at around $0.9499 with and P/S ratio of 16.6.

Highlight of Business Operations:

At September 30, 2009, we had cash and cash equivalents of approximately $7.8 million, short-term investments of $27.8 million and held 5,768,881 shares of restricted common stock of RXi with a market value of $14.1 million based upon the closing price of the RXi common stock on that date. On July 27, 2009, we raised approximately $18.3 million, net of fees and expenses, in a registered direct offering, and on September 23, 2009, we raised approximately $1.2 million, net of fees, from the sale of 500,000 shares of common stock of RXi. Management believes that our current cash on hand, together with our short-term investments and proceeds from possible future sales of RXi shares, will be sufficient to fund our operations for the foreseeable future. The estimate is based, in part, upon our currently projected expenditures for the remainder of 2009 and the first nine months of 2010 of approximately $14.9 million, which includes approximately $2.0 million for our clinical program for tamibarotene, approximately $2.0 million for our clinical program for INNO-206, approximately $1.1 million for our clinical program for INNO-406, approximately $0.6 million for our activities for arimoclomol, approximately $2.3 million for general operation of our clinical programs, and approximately $6.9 million for other general and administrative expenses. These projected expenditures are also based upon numerous other assumptions and subject to many uncertainties, and actual expenditures may be significantly different from these projections.

We realized net income in the quarter ended September 30, 2009 of $3.9 million as compared to net loss of $12.3 million in the comparative quarter ended September 30, 2008, or a difference of $16.0 million. Service revenues in the quarter increased by $6.0 million due to the revenue recognition from the amendment of the ALSCRT arrangement discussed previously. Our research and development expenditures were approximately $0.7 million lower in the current quarter as compared to the quarter ended September 30, 2008, due to the reduction in our arimoclomol clinical development expenses caused by the FDA s clinical hold on our clinical trial. The 2008 comparative period included an in-process research and development expense of $8.0 million, resulting from the purchase of Innovive and a loss of $1.3 million for the equity in loss of our unconsolidated subsidiary, RXi. In 2009 we did not recognize a corresponding loss, since the carrying amount of our investment in RXi was reduced to zero in the third quarter of 2008. In the quarter ended September 30, 2009, we recognized a gain on warrant derivative liability of $0.5 million and a gain of $1.2 million resulting from the sale of 500,000 RXi shares, which was offset by an impairment loss on our laboratory equipment of $1.2 million. We had no similar items in the 2008 comparative period.

We recognized $7.0 million and $9.4 million of revenue for the three-month and nine-month periods ended September 30, 2009, respectively, and $0.9 million and $4.8 million, respectively, for the same periods in 2008. These revenues relate to our $24.3 million sale to the ALSCRT of a one percent royalty interest in worldwide sales of arimoclomol in August 2006 and licensing fees. Pursuant to an amendment signed between us and the beneficiary of the ALSCRT on August 6, 2009, we were released from all restrictions on the use of any proceeds previously paid to us in connection with the arrangement. As a result, we recognized $6.7 million as service revenue in the third quarter of 2009, which represented the remaining deferred revenue and previously un-recognized portion of the value received. All future licensing fees under our current licensing agreements are dependent upon successful development milestones being achieved by the licensor. During 2009, we do not anticipate receiving any significant licensing fees.

As compensation to our consultants and in 2008 to members of RXi s scientific advisory board, and in connection with the acquisition of technology, we and RXi sometimes issue shares of common stock, stock options and warrants to purchase shares of common stock. For financial statement purposes, we value these shares of common stock, stock options, and warrants at the fair value of the common stock, stock options or warrants granted, or the services received, whichever is more reliably measurable. The value of the non-employee option grants are marked to market using the Black-Scholes option-pricing model and most of the compensation expense recognized or recovered during the period is adjusted accordingly. This resulted in a recovery of expenses of $0 and approximately $243,000 respectively, in the three-month and nine-month periods ended September 30, 2008. We recorded $0.1 million and $0.6 million of employee stock option expense both during the three-month and nine-month periods ended September 30, 2009 and 2008, respectively.

General and administrative expenses include all administrative salaries and general corporate expenses, including legal expenses associated with the prosecution of our intellectual property. Our general and administrative expenses, excluding stock option expense, non-cash expenses and depreciation expense, were $1.6 million and $5.2 million for the three-month and nine-month periods ended September 30, 2009, respectively, as compared to $1.9 million and $7.7 million during the same periods in 2008. General and administrative expenses decreased by $0.3 million in the third quarter of 2009 as compared to 2008, primarily as a result of a reduction of personnel in 2009 compared to 2008. Additionally, there was a reduction in professional fees and consulting fees of approximately $0.1 million in 2009 as compared to the comparable period in 2008.

Employee stock option expense relates to options granted to recruit and retain directors, officers and other employees. We recorded approximately $0.7 million in the three-month period ended September 30, 2009, which included approximately $0.5 million of expense resulting from the re-pricing of stock options, as compared to $0.4 million of employee stock option expense during the three-month period ended September 30, 2008. We incurred stock-based compensation expense of $1.3 million and $1.3 million for the nine-month periods ended September 30, 2009 and 2008, respectively.

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