UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM lO-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-15327
CYTRX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 58-1642740
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
154 Technology Parkway, Norcross, Georgia 30092
(Address of principal executive offices) (Zip Code)
(770) 368-9500
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2)has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Number of shares of CytRx Corporation Common Stock, $.001 par value, issued
and outstanding as of September 30, 1995: 31,631,524
<PAGE>
CYTRX CORPORATION
Form 10-Q
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of
September 30, 1995 (unaudited) and December 31, 1994 3
Condensed Consolidated Statements of Operations (unaudited) for the
Three Month and Nine Month Periods Ended September 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows (unaudited) for the
Nine Month Periods Ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBIT 11 -- Computation of Net Loss Per Share 12
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. - Financial Statements
CYTRX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $24,031,771 $3,395,974
Short-term investments 3,067,120 27,453,502
Receivables 109,955 68,590
Inventories 4,753 6,651
Other current assets 259,280 447,165
Total current assets 27,472,879 31,371,882
Property and equipment, net 5,324,387 5,649,056
Other assets:
Patents and patent application costs,
less accumulated amortization (Note 5) - 1,395,476
Other 244,153 244,153
Total other assets 244,153 1,639,629
Total assets $33,041,419 $38,660,567
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $81,826 $284,179
Accrued liabilities 1,027,743 350,041
Total current liabilities 1,109,569 634,220
Commitments
Stockholders' equity:
Common stock, $.001 par value, 75,000,000
shares authorized; 31,631,524 and 31,575,847
shares issued at September 30, 1995 and
December 31, 1994, respectively 31,632 31,576
Additional paid-in capital 62,427,735 62,327,244
Accumulated deficit (30,527,517) 21,857,196)
Net unrealized loss on investments - (2,475,277)
Total stockholders' equity 31,931,850 38,026,347
Total liabilities and stockholders' equity $33,041,419 $38,660,567
See accompanying notes
<PAGE>
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Month Period Ended Nine Month Period Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Net sales $102,154 $114,912 $353,985 $411,277
License fees 25,000 - 25,000 -
Investment income, net
(Note 4) 473,528 493,351 1,424,849 1,399,608
Other 16,507 21,853 52,782 66,473
617,189 630,116 1,856,616 1,877,358
Expenses:
Cost of sales 9,931 23,395 31,602 48,703
Research and development 1,648,760 1,684,774 5,223,093 4,668,716
Selling and marketing 79,491 14,470 139,159 172,842
General, administrative and
business development 831,215 847,589 2,634,986 2,554,035
Realized loss on short-term
investments, net (Note 4) - - 1,102,621 -
Write-off of patent costs
(Note 5) - - 1,395,476 -
2,569,397 2,570,228 10,526,937 7,444,296
Loss before cumulative
effect of change in
accounting principle (1,952,208) (1,940,112) (8,670,321) (5,566,938)
Cumulative effect of
change in accounting
principle (Note 4) - - - 131,329
Net loss $(1,952,208) $(1,940,112) $(8,670,321) $(5,435,609)
Per share amounts:
Loss before cumulative
effect of change in
accounting principle $(0.06) $(0.06) $(0.27) $(0.17)
Cumulative effect of
change in accounting
principle (Note 4) - - - 0.00
Net loss -- see Exhibit 11 $(0.06) $(0.06) $(0.27) $(0.17)
See accompanying notes.
<PAGE>
CYTRX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Month Period Ended
September 30,
1995 1994
Cash flows from operating activities:
Net loss $(8,670,321) $(5,435,609)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 441,199 399,691
Cumulative effect of change in accounting
principle - (131,329)
Write-off of patent costs 1,395,476 -
Net change in assets and liabilities 623,767 (1,707,396)
Total adjustments 2,460,442 (1,439,034)
Net cash used by operating activities (6,209,879) (6,874,643)
Cash flows from investing activities:
Decrease in short-term investments 26,861,659 1,137,786
Capital expenditures (116,530) (2,690,122)
Net cash provided (used) by investing activities 26,745,129 (1,552,336)
Cash flows from financing activities:
Proceeds from issuance of common stock 100,547 112,408
Short-term borrowings - 1,975,000
Net cash provided by financing activities 100,547 2,087,408
Net increase (decrease) in cash and cash equivalents 20,635,797 (6,339,571)
Cash and cash equivalents at beginning of period 3,395,974 6,855,473
Cash and cash equivalents at end of period $24,031,771 $515,902
See accompanying notes.
<PAGE>
CYTRX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
1. Description of Company and Basis of Presentation
CytRx Corporation is a biopharmaceutical company engaged in the research
and development of critical care pharmaceutical products intended for use in
the treatment of vascular and infectious diseases, and cancer. Reference
herein to "the Company" includes CytRx and its wholly-owned subsidiaries --
Vaxcel, Inc., Vetlife, Inc. and Proceutics, Inc. Vaxcel is developing the
Optivax vaccine delivery system. Vetlife is developing non-antibiotic
solutions to enhance food animal growth. Proceutics was recently formed to
provide high quality preclinical development services to the pharmaceutical
industry.
The accompanying condensed consolidated financial statements at
September 30, 1995 and for the three and nine month periods ended
September 30, 1995 and 1994 include the accounts of CytRx and its wholly-owned
subsidiaries. The condensed consolidated financial statements as of
September 30, 1995 and for the periods ended September 30, 1995 and 1994 are
unaudited, but include all adjustments, consisting of normal, recurring
entries, which the Company's 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. The financial statements should be read
in conjunction with the Company's audited financial statements in its Form 10-K
for the year ended December 31, 1994.
2. Inventories
Inventories at September 30, 1995 and December 31, 1994 are comprised of
the following:
September 30, 1995 December 31, 1994
Finished goods $ 1,956 $ 2,392
Raw materials 2,797 4,259
$ 4,753 $ 6,651
3. Net Loss Per Common Share
Net loss per common share is computed based on the weighted average number
of common shares outstanding during each period. Stock options and warrants
outstanding are excluded from the computation of net loss per share since
their effect is antidilutive.
<PAGE>
4. Adoption of FASB Statement No. 115
In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", effective for fiscal years beginning after
December 15, 1993. Under the new rules, debt securities that the Company has
both the positive intent and ability to hold to maturity are carried at
amortized cost. Debt securities that the Company does not have the positive
intent and ability to hold to maturity and all marketable equity securities
are classfied as either "available-for-sale" or "trading" and carried at fair
value. Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of shareholders'
equity. Unrealized holding gains and losses on securities classified as
trading are reported in earnings. The Company adopted the new rules as of
January 1, 1994 and, in accordance with the Statement, did not restate prior
period financial statements. The cumulative effect of adopting Statement 115
decreased net loss by $131,329 in the first quarter of 1994.
During 1995 the Company sold the majority of its short-term investments,
realizing a net loss of $1,102,621 thereon, and reinvested the proceeds in
cash equivalents. As of September 30, 1995, the Company has classified all of
its short-term investments as "held-to-maturity".
5. Patent Costs
Prior to 1995, the Company capitalized the costs associated with obtaining
patents on its technologies. During the first quarter of 1995 the Company
changed from deferring and amortizing such costs to recording them as expenses
when incurred because, even though the Company believes the patents and
underlying technology have continuing value, the amount of future benefits to
be derived therefrom are uncertain. Accordingly, the new accounting method
has been adopted in recognition of a possible change in estimated future
benefits. Since the effect of this change in accounting principle is
inseparable from the effect of the change in accounting estimate, such change
has been accounted for as a change in estimate in accordance with Opinion
No. 20 of the Accounting Principles Board. As a result, the Company recorded a
non-cash write-off of $1,395,476 ($.04 per share) during the first quarter of
1995. Future patent costs are expected to be expensed since the benefits to
be derived therefrom are likely to be uncertain.
6. Termination of RheothRx License Agreement
In October 1995 Glaxo Wellcome PLC ("GW") informed the Company of its
decision to cease development of the Company's RheothRx copolymer and its
intention to terminate its license. Pursuant to the CytRx's 1990 license
agreement with GW (then Burroughs Wellcome Co.), the Company has received a
cumulative total of $9 million to date under the agreement. In 1993 GW
completed its obligation to pay initial license fees and milestone payments
under the agreement. Subsequent to the termination of its license, GW has no
further financial obligations to CytRx. This event had no impact on the
accompanying financial statements.
<PAGE>
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition and Liquidity
At September 30, 1995 the Company had cash and short-term investments of
$27.1 million and net assets of $31.9 million, compared to $30.8 million and
$38.0 million, respectively, at December 31, 1994. Working capital totalled
$26.4 million at September 30, 1995, compared to $30.7 million at
December 31, 1994.
On October 23, 1995 Glaxo Wellcome PLC ("GW") informed the Company of its
decision to cease development of the Company's RheothRx copolymer and its
intention to terminate its license. Since May 1994, RheothRx was under
evaluation in the CORE (Collaborative Organization for RheothRx Evaluation)
trial, a multi-national Phase II/III study of RheothRx in patients with acute
myocardial infarction. The CORE trial was planned to eventually enroll more
than 9,000 patients. In July, GW completed patient enrollment in Stage 1 of
the CORE trial, involving 2,948 patients. An analysis of Stage 1 by GW
indicated that RheothRx showed benefit only in certain clinical evaluations
and were limited to high dose levels associated with unacceptable toxicity.
Lower dosages of the drug were not associated with any clinical benefit.
Pursuant to CytRx's 1990 license agreement with GW (then Burroughs Wellcome
Co.), the Company received a cumulative total of $9 million under the
agreement. Subsequent to the termination of its license, GW has no further
financial obligations to CytRx.
On October 30, 1995 CytRx announced that its Board of Directors had authorized
the repurchase of up to 5 million shares of its common stock. Purchases may
be made from time to time on the open market or in unsolicited block
transactions.
Although GW's termination of the RheothRx license agreement has negatively
impacted CytRx's long-term cash flow potential, management believes that cash
and short-term investments, combined with income to be generated therefrom,
will be sufficient to satisfy the Company's working capital needs for the next
several years. The Company will consider additional sources of funding as
appropriate and available.
Results of Operations
The following table presents the breakdown of consolidated results of
operations by operating unit for the three month and nine month periods ended
September 30, 1995 and 1994. Although the subsequent discussion addresses the
onsolidated results of operations for CytRx and its subsidiaries, management
believes this presentation by operating unit is important to an understanding
of the consolidated financial statements taken as a whole. No results are
shown for Proceutics, Inc. as this subsidiary will not commence formal
operations until 1996.
<PAGE>
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 1995 1994 1995 1994
CytRx $(1,566) $(1,541) $(6,955) $(4,277)
Vaxcel (246) (154) (1,138) (864)
Vetlife (140) (245) (577) (295)
Consolidated Net Loss $(1,952) $(1,940) $(8,670) $(5,436)
Net sales of TiterMax were $102,000 during the three months ended September 30,
1995 compared to $115,000 in 1994 and $354,000 during the nine months ended
September 30, 1995 compared to $411,000 in 1994. Selling and marketing
expenses in 1995 increased by $65,000, or 449%, from 1994 for the three months
ended September 30, and decreased by $34,000, or 19%, for the nine months ended
September 30, due to variances in promotional expenditures as well as personnel
resources devoted to the Titermax marketing effort.
Investment income was $474,000 and $1,425,000 during the three months and nine
months ended September 30, 1995, as compared to $493,000 and $1,400,000 for
the same periods in 1994. In 1995 CytRx chose to convert the majority of its
short-term investments into cash equivalents. At December 31, 1994 the Company
had $2.5 million in unrealized losses as a result of 1994's dramatic increase
in interest rates. By taking advantage of strength in the bond market during
the second quarter, CytRx reduced its unrealized losses by $1.4 million,
recording non-cash charges of $1.1 million during the nine months ended
September 30, 1995. These charges are shown as a separate line item on the
Condensed Consolidated Statements of Operations. The Company believes that
during the period in which these losses were incurred and then recognized
(February 1994 to June 1995), total investment income, net of realized losses,
exceeded the amount of potential investment income had the Company invested
in shorter-term securities. During the first quarter of 1994 the Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (see Note 4 to Condensed
Consolidated Financial Statements).
Research and development expenditures in 1995 decreased by $36,000, or 2%, from
1994 for the three months ended September 30, and increased by $554,000 or 12%,
for the nine months ended September 30. These fluctuations are due to the
nature of work being performed and are difficult to compare from period to
period. However, the increase for the nine month period ended September 30 is
primarily due to costs associated with clinical trials conducted on the
Company's CRL-1336 compound in early 1995 as well as costs related to the
hiring of a Vice-President of Research and Development for each of Vaxcel and
Vetlife.
General, administrative and business development expenses in 1995 decreased by
$16,000, or 2%, from 1994 for the three months ended September 30, and
increased by $81,000 or 3%, for the nine months ended September 30.
Contributing to the increase for the nine month period ended September 30 were
higher expenses for Vetlife, reflecting the hiring of the subsidiary's
president in July 1994. Additionally, patent costs in 1995 were expensed,
versus being capitalized in prior years (See Note 5 to Condensed Consolidated
Financial Statements).
<PAGE>
Part II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 -- Statement re: computation of net loss per share
(attached hereto).
(b) Reports on Form 8-K
On October 30, 1995 the Company filed a Current Report on Form 8-K
reporting that its Board of Directors had approved a stock repurchase
program.
On November 7, 1995 the Company filed a Current Report on Form 8-K
reporting the termination by Glaxo Wellcome PLC of its license agreement
for the Company's RheothRx copolymer.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTRX CORPORATION
(Registrant)
Date: November 8, 1995 By: /s/ Mark W. Reynolds
Mark W. Reynolds
Controller
(Chief Accounting Officer)
Exhibit 11
CYTRX CORPORATION
COMPUTATION OF NET LOSS PER SHARE
COMPUTATION OF LOSS PER SHARE - PRIMARY
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
1995 1994 1995 1994
Net loss ($1,952,208) ($1,940,112) ($8,670,321) ($5,435,609)
Average number of common
shares outstanding 31,630,496 31,566,470 31,593,755 31,558,045
Common shares issuable
assuming exercise of
stock options and warrants(1) 0 0 0 0
Total shares 31,630,496 31,566,470 31,593,755 31,558,045
Net loss per share ($0.06) ($0.06) ($0.27) ($0.17)
COMPUTATION OF LOSS PER SHARE - FULLY DILUTED
Net loss ($1,952,208) ($1,940,112) ($8,670,321) ($5,435,609)
Average number of common
shares outstanding 31,630,496 31,566,470 31,593,755 31,558,045
Common shares issuable
assuming exercise of
stock options and warrants(1) 0 0 0 0
Total shares 31,630,496 31,566,470 31,593,755 31,558,045
Net loss per share ($0.06) ($0.06) ($0.27) ($0.17)
(1) Stock options and warrants outstanding are excluded from the computation of
net loss per share since their effect would be anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the period ended 9/30/95 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
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