Description of Company and Basis of Presentation

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Description of Company and Basis of Presentation

1. Description of Company and Basis of Presentation

CytRx Corporation (“CytRx,” “we,” “us” or “the Company”) is a biopharmaceutical research and development company specializing in oncology. The Company’s focus is on the discovery, research and clinical development of novel anti-cancer drug candidates that employ novel linker technologies to enhance the accumulation and release of cytotoxic anti-cancer agents at the tumor. CytRx has an active drug discovery and research operation at its laboratory facilities in Freiburg, Germany.

During 2017, CytRx’s discovery laboratory synthesized and tested over 75 rationally designed drug conjugates with highly potent payloads, culminating in the creation of two distinct classes of compounds. To date, four lead candidates have been selected based on in vitro and animal preclinical studies, stability, and manufacturing feasibility. Additional animal efficacy and toxicology testing of these lead candidates is underway.

On June 1, 2018, CytRx launched Centurion BioPharma Corporation (“Centurion”), a private wholly owned subsidiary, and transferred all of its assets, liabilities and personnel associated with the laboratory operations in Freiburg, Germany. In connection with said transfer, the Company and Centurion entered into a Management Services Agreement whereby the Company agreed to render advisory, consulting, financial and administrative services to Centurion, for which Centurion shall reimburse the Company for the cost of such services plus a 5% service charge. The Management Services Agreement may be terminated by either party at any time. Centurion is focused on the development of personalized medicine for solid tumor treatment.

There are two key elements to Centurion’s strategy:

1. A novel companion diagnostic, ACDx™ (albumin companion diagnostic), developed to identify patients with cancer who are most likely to benefit from treatment with Centurion’s lead assets.

2. Development of its four albumin binding, linker activated drug release (LADR) oncology candidates.

Personalized medicine requires diagnostic and therapeutic approaches utilized together in order to select the right patients for treatment and to treat with a highly effective therapy. ACDx™ utilizes new imaging agents to radiolabel albumin. When used in combination with state-of-the art imaging techniques, the new agent facilitates detection of albumin uptake and distribution in the patient’s tumor. Since the LADR™ drug candidates are albumin-binding drugs, the Company believes response rates to their therapeutic compounds will be higher in patients who test positive with this personalized medicine companion diagnostic.

The LADR™ technology platform is a discovery engine combining CytRx’s expertise in linker chemistry and albumin biology to create a pipeline of anti-cancer molecules that will avoid unacceptable systemic toxicity while delivering highly potent agents directly to the tumor. The Company has created a “toolbox” of linker technologies that have the ability to significantly increase the therapeutic index of ultra-high potency drugs (10-1,000 times more potent than traditional drugs) by controlling the release of the drug payloads and improving drug-like properties. After infusion, these ultra-high potency drug conjugates bind to circulating albumin for transport of the drug to the tumor. Subsequently, due to specific conditions within the tumor environment, the linkers are cleaved and release the anti-cancer drug payload.

Centurion’s current efforts are focused on two classes of ultra-high potency drug conjugates. Its strategy across these programs is to generate additional pre-clinical data that will allow it to make informed decisions regarding the selection of one or both programs for moving into human clinical trials either independently or on a partnered basis.

The lead drug candidates that are currently being advanced by Centurion are the next generation drugs following the proof-of concept compound, aldoxorubicin, that CytRx had been developing. Aldoxorubicin is a conjugate of the commonly prescribed cytotoxic agent doxorubicin that binds to circulating albumin in the bloodstream and concentrates the drug at the site of the tumor. It has been tested in over 600 patients with various types of cancer.

Aldoxorubicin has received Orphan Drug Designation (ODD) by the U.S. FDA for the treatment of soft tissue sarcoma (“STS”). ODD provides several benefits including seven years of market exclusivity after approval, certain R&D related tax credits, and protocol assistance by the FDA. European regulators granted aldoxorubicin Orphan designation for STS which confers ten years of market exclusivity among other benefits.

On July 27, 2017, CytRx entered into an exclusive worldwide license with NantCell, Inc. (“NantCell”), granting to NantCell the exclusive rights to develop, manufacture and commercialize aldoxorubicin in all indications. As a result, the Company is no longer directly working on development of aldoxorubicin. NantCell made a cash investment of $13 million in CytRx common stock at $6.60 per share (adjusted to reflect the reverse stock split effective November 1, 2017), a premium of 92% to the market price on that date. CytRx also issued NantCell a warrant to purchase up to 500,000 shares of common stock at $6.60 expiring on January 26, 2019. The Company is entitled to receive up to an aggregate of $343 million in potential milestone payments, contingent upon achievement of certain regulatory approvals and commercial milestones. CytRx is also entitled to receive ascending double-digit royalties for net sales for soft tissue sarcomas and mid to high single digit royalties for other indications. On October 3, 2017, CytRx entered into a Reimbursement Agreement with NantCell, Inc. whereby the Company agreed to reimburse it for payment obligations under certain of the contracts assigned as part of the licensing agreement, up to a maximum of $4.2 million plus one half of any amounts in excess thereof; the Company now anticipates the reimbursement will not exceed $3.4 million (see Note 3).

In the first half of 2018, CytRx announced that NantCell was expanding aldoxorubicin’s use by combining it with immunotherapies and cell based treatments, specifically in metastatic pancreatic cancer, in advanced squamous cell carcinoma of the head and neck or non-small cell lung cancer and in triple negative breast cancer.

Currently, the Company’s only research and development activities are conducted through its wholly-owned subsidiary, Centurion BioPharma Corporation. For this reason, and the transfer of the aldoxorubicin program to NantCell, operating expenses are expected to be significantly lower in the near future. Therefore, period to period comparisons should not be relied upon as predictive of the results in future periods.

The accompanying condensed consolidated financial statements at June 30, 2018 and for the three-month and six-month periods ended June 30, 2018 and 2017, respectively, are unaudited, but include all adjustments, consisting of normal recurring entries, that management believes to be necessary for a fair presentation of the periods presented. Interim results are not necessarily indicative of results for a full year. Balance sheet amounts as of December 31, 2017 have been derived from our audited financial statements as of that date.

The consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements should be read in conjunction with the Company’s audited financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2017.