Chemotherapy may be effective in the fight against cancer, but it’s also very damaging to the human body. After all, the genesis of chemotherapy was actually a derivative mustard gas that was developed as a chemical warfare agent during the First World War. Chemotherapy agents may have improved since then, but they remain very destructive to the human body.
Traditional chemotherapeutic agents work by killing cells that divide rapidly, which is one of the properties shared by all cancer cells. Unfortunately, there are many other types of cells in the body that also rapidly divide, including cells in the bone marrow, digestive tract and hair follicles, leading to many side-effects, including digestive discomfort and hair loss.
Investors may want to take note of one company that’s changing this paradigm…
Selectively Targeting Cancer Cells
CytRx Corporation (NASDAQ: CYTR) is working to improve chemotherapy by selectively targeting cancer cells. By taking this approach, the company’s technologies may be able to not only reduce side effects, but also substantially increase the dosage that the body can withstand. Ideally, this would result in safer and more effective chemotherapy treatments for cancer patients.
The company’s lead compound, aldoxorubicin, is a novel, tumor-targeted conjugate of the commonly prescribed chemotherapeutic agent doxorubicin. By using a linker designed to release doxorubicin in the low pH environment of a tumor, the chemotherapeutic agent is concentrated in areas where it damages the tumor instead of healthy tissue.
In a Phase I clinical trial, aldoxorubicin was administered at dosages up to 4.5 times the standard dosage without an increase in side effects typically seen. A subsequent Phase Ib/II clinical trial showed clinical benefit in 10 of 13 (76.9%) of patients with relapsed or refractory soft tissue sarcoma, including five patients that had previously used doxorubicin unsuccessfully. In 2013, CytRx plans to start a pivotal Phase 3 clinical trial in patients with soft tissue sarcomas that have received prior chemotherapy.
Safer Play than Others for Investors
There are many different public companies targeting the oncology space, from Onyx Pharmaceuticals Inc.’s (NASDAQ: ONXX) Carfilzomib to Amgen Inc.’s (NASDAQ: AMGN) OncoVex. But, many of these compounds rely on testing and proving completely new approaches to cancer treatment, and involve substantial investment in safety and efficacy testing.
CytRx differs in that it’s simply modifying an existing chemotherapy agent, doxorubicin, to include a selective linker. As a result, the company benefits from doxorubicin’s substantial existing clinical data. The clinical trials are significantly de-risked since it is known which types of cancer respond to doxorubicin. Therefore, a more potent version should have greater efficacy which benefits the patients.
Meanwhile, the FDA has granted orphan drug status for aldoxorubicin for the treatment of patients with soft tissue sarcomas and pancreatic cancer. The status, designed for rare diseases, provides tax credits and marketing incentives designed to expedite development and approval.
Trading at a Significant Discount
In addition to its aldoxorubicin and its robust clinical pipeline, CytRx appears to be trading at a substantial discount to many of its peers. The company’s $66 million market capitalization is less than many other companies with Phase II cancer treatments in development, while the valuation fails to account for many of the potentially bullish factors mentioned above.
Consider the following comparison of soft tissue sarcoma competitors:
Similarly, the company trades at a discount to its targeted chemotherapy competitors:
Strong Investment Opportunity
CytRx may be a strong investment opportunity, with a promising, lower-risk, late-stage clinical pipeline and significant discount to its peers. Since doxorubicin is widely used to treat many major cancers, the company’s aldoxorubicin alone may have blockbuster potential (e.g. $1 billion or more in sales), if it successfully completes clinical trials and gets to market.
Looking forward, investors can expect data from four clinical trials this year, including data to be presented at the ASCO Annual Meeting that will be held in Chicago, IL on June 3, 2013, as well as the filing of a pivotal Phase III SPA global clinical trial for aldoxorubicin. These events could provide strong catalysts for the stock to close its peer valuation gap throughout this year.
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