Small Cap CytRx Corporation (CYTR) Starts the Year Out With a Bang (IBB & XBI)

Small cap biotech stock CytRx Corporation (NASDAQ: CYTR) started the new year jumping 10.05% for an almost 50% rise over the past week or so after it surged 68.2% in one day in early December, meaning it might be time to take a closer look at the stocks along with the performance of biotech ETF benchmarks like the iShares NASDAQ Biotechnology Index ETF (NASDAQ: IBB) and SPDR S&P Biotech ETF (NYSEARCA: XBI). I should mention that we have recently added CytRx Corporation to our SmallCap Network Elite Opportunity (SCN EO) portfolio since December 20th and we are up around 49% since then.

What is CytRx Corporation?

Small cap CytRx Corporation is a biopharmaceutical research and development company specializing in oncology whose pipeline is focused on the clinical development of aldoxorubicin (formerly known as INNO-206), an improved version of the widely used chemotherapeutic agent doxorubicin. In addition, CytRx Corporation is expanding its pipeline of oncology candidates:

CytRx Corporation also has rights to two additional drug candidates, tamibarotene and bafetinib with the company having completed its evaluation of bafetinib in the ENABLE Phase 2 clinical trial in high-risk B-cell chronic lymphocytic leukemia (B-CLL). There are plans to seek a partner for further development of bafetinib plus the company is evaluating further development of tamibarotene. 

As for performance benchmarks or peers, the iShares NASDAQ Biotechnology Index ETF tracks the Nasdaq Biotechnology Index through 119 stocks and has a 77.18% weight in "biotechnology" and a 22.78% weight in Pharma while the SPDR S&P Biotech ETF tracks the S&P Biotechnology Select Industry Index with a 100% allocation in 57 biotechnology stocks

What You Need to Know or Be Warned About CytRx Corporation

There appears to be no end of the year news about CytRx Corporation to account for the sudden nearly 50% rise in shares for the last trading week of the year beyond a positive article on Seeking Alpha (CytRx Corporation Poised For Success In 2014) last Tuesday and another one in Forbes (The Race To Develop A Brain Cancer Treatment Takes An Interesting Turn) last Friday which appeared to get things moving for the stock.

Earlier in December, CytRx Corporation surged 68.2% when the company announced that its potential treatment aldoxorubicin had fared much better than an established chemotherapy in mid-stage testing on patients with soft-tissue sarcoma (a cancer that occurs in muscle, fat, blood vessels, tendons and other tissue) with the median progression-free survival being 8.4 months verses 4.7 months for patients who just took the chemotherapy doxorubicin (which has been on the market for decades). Investigators also found that the disease had not progressed after six months for 67% of aldoxorubicin patients verses 36% for patients in the other group. It should be mentioned that according to the American Cancer Society, about 11,410 new soft tissue sarcomas would have been diagnosed (6,290 cases in males and 5,120 cases in females) in the USA this year and 4,390 Americans (2,500 males and 1,890 females) are expected to have died from the disease at the end of this year - not particularly big numbers, but that may not matter as CYTR can probably charge a premium for aldoxorubicin should it gain FDA approval. 

Moreover, the Forbes article gave this rather rosy forecast:

Given the remarkable results that aldoxorubicin demonstrated in 1st-Line STS, it's hard not to believe that something similar could be in store for the Phase 2 GBM trial.  CytRx certainly appears poised for a significant run in the months and years ahead as the company's platform continues to be validated by science….. CytRx Corporation appears to be an extremely compelling investment story and investors may want to consider taking a position before the share price really starts to take off.

On the financials side of things, CytRx Corporation has reported revenues of $100k (2012), $250k (2011), $100k (2010) and $9.5M (2009) for the past four years plus net losses of $17.96M (2012) and $14.42M (2011), net income of $41k (2010) and a net loss of $4.80M (2009) while for this year, the company has reported just $200k in revenues and net losses of $9.980M (Sept 30, 2013), $3.423M (June 30, 2013) and $6,864M (March 31, 2013). More importantly though, CytRx Corporation had $6.036M in cash and $17M in short term investments at the end of September before an October share offering raised approximately $25.9 million (gross) to add to that. In other words, the company is not endanger of running out of cash any time soon. 

Share Performance: CytRx Corporation vs. IBB and XBI

On Thursday, small cap CytRx Corporation jumped 10.05% to $6.90 (CYTR has a 52 week trading range of $1.83 to $7.30 a share) for a market cap of $289.63 million plus the stock is up 277% over the past year and up 228.7% over the past five years. Here is a look at CytRx Corporation's performance verses that of biotech ETF benchmarks the iShares NASDAQ Biotechnology Index ETF and SPDR S&P Biotech ETF:

As you can see from the above chart, the performance of small cap CytRx Corporation has finally caught up to the performance of biotech ETFs.

Finally, here is a look at the latest technical charts for CYRT (note the pull back after the early December surge) plus the iShares NASDAQ Biotechnology Index ETF and SPDR S&P Biotech ETF:

The Bottom Line. If you were like us and got into small cap CytRx Corporation when we did or before early December, then congratulations while new investors might want to be more cautious and wait for some pull back (as what happened after the early December surge) before getting in. Nevertheless, CytRx Corporation is looking like a pretty good long term biotech bet.

SmallCap Network Elite Opportunity (SCN EO) has an open position in CYTR. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.