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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED].
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File No. 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 30092
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 368-9500
__________________________
Securities registered pursuant to Section l2(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 par value per share
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 and (2) has been subject to such filing requirements for
the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On March 19, 1996, the aggregate market value of the Registrant's common stock
held by non-affiliates was approximately $27,453,000.
On March 19, 1996, there were 7,860,803 shares of the Registrant's common stock
outstanding, exclusive of treasury shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the CytRx Corporation 1995 Annual Report to Stockholders are
incorporated by reference into Parts I, II, III and IV. Portions of the CytRx
Corporation Proxy Statement for the 1996 Annual Meeting of Stockholders are
incorporated by reference into Part III.
PART I
Item 1. Business
Overview
CytRx Corporation was founded in 1985 and is engaged in the development and
commercialization of pharmaceutical related products and services including
human therapeutics focused on high-value critical-care therapies. In addition
to its development work in human therapeutics, CytRx has also created three
wholly-owned subsidiaries to broaden the development of its technologies without
losing focus on its core critical-care strategy. Vaxcel, Inc. is developing its
Optivax delivery system to enhance the effectiveness of vaccines. Vetlife, Inc.
is developing products to enhance food animal growth. Proceutics, Inc. provides
preclinical development services to the pharmaceutical industry. Reference
herein to "the Company" includes CytRx and its wholly-owned subsidiaries.
The Company presently has no product that is approved by a regulatory agency for
commercial use in human or veterinary applications.
Product Development
CytRx's human therapeutics product development efforts are focused on critical-
care products providing target opportunities for high-value breakthrough
products to address unmet medical needs. Projects include RheothRx which has
the potential to alleviate the pain and suffering associated with sickle cell
crisis.
In 1995, results from a 2,900 patient RheothRx trial indicated unacceptable side
effects at doses that provided therapeutic benefit to heart attack victims. As
a result, CytRx's licensee, Glaxo Wellcome PLC, returned rights to the Company.
CytRx believes that RheothRx still offers opportunity in treating sickle cell
disease. RheothRx has shown promise in reducing crisis duration, pain and
length of hospitalization in patients suffering acute crisis. Scientists are
currently exploring the feasibility of continuing development in this area.
In June 1989, the FDA informed CytRx of its decision to grant RheothRx "Orphan
Drug" designation for the treatment of sickle cell crisis. In March 1990,
RheothRx also received Orphan Drug designation for the treatment of severe
burns. The Orphan Drug Act of 1983, as amended, provides incentive to drug
manufacturers to develop drugs for the treatment of rare diseases (e.g. diseases
that affect less than 200,000 individuals in the United States, or diseases that
affect more than 200,000 individuals in the United States where the sponsor does
not reasonably anticipate that its product will become profitable). As a result
of the designation of RheothRx as an Orphan Drug, if the Company is the first
manufacturer to obtain FDA approval to market RheothRx for treatment of sickle
cell crisis or severe burns, the Company will obtain a seven-year period of
marketing exclusivity beginning from the date of its approval. During this
period, the FDA cannot approve the same drug for the same use from another
sponsor. There can be no assurance that the Company will receive approval to
market RheothRx for the treatment of sickle cell crisis or severe burns.
CytRx is also developing Protox as a treatment for tuberculosis as well as for
use in combination with certain antibiotic and anti-viral compounds to enhance
their uptake and resulting effectiveness.
VAXCEL'S Optivax System represents a novel approach to improving the
effectiveness of vaccines including the potential to enable single-dose
formulations for vaccines that currently require multiple injections. Phase I
human clinical trials were initiated in January 1996 to study the Optivax System
in combination with a cancer vaccine. Vaxcel is focusing on building corporate
partnerships with vaccine producers. The company recently entered into option
agreements with Connaught Laboratories and Medeva PLC to combine the Optivax
System with high priority vaccine development projects at these firms. The
Optivax System is being made available to other vaccine companies on an antigen
by antigen basis.
VETLIFE is engaged in the development, licensing and marketing of technologies
to improve the value of food animal products to the cattle, poultry, swine and
dairy industries. In January 1996, Vetlife entered into an agreement to market
and distribute a line of FDA-approved cattle growth products in North America.
The Vetlife Cattle Marketing Group projects sales, profits and positive cash
flow beginning in 1997. Vetlife products under development are targeted at
improving product benefits or reducing cost without compromising safety or
quality. Projects include a non-antibiotic growth promoter for poultry and
swine, adjuvants to enhance animal vaccines and antibiotic potentiators to
overcome antibiotic resistance or reduce required doses.
Regulations imposed by the United States government and other countries require
a demonstration of the safety and efficacy of new therapeutic agents through
studies in animals and controlled clinical testing in human beings prior to
marketing. See "Government Regulation." There can be no assurance that any
particular development program of the Company will lead to the development of a
marketable product or that any such product will be profitable.
Consolidated expenditures for research and development activities were $7.1
million, $6.8 million and $4.7 million during the years ended December 31, 1995,
1994 and 1993, respectively.
Other Products and Services
PROCEUTICS was formed in 1995 and commenced formal operations in January 1996.
Proceutics is targeting a growing need within biopharmaceutical companies by
providing high-value, high-quality pharmaceutical development services to
supplement pre-IND activities. Proceutics services include analytical methods
development and testing, formulations, clinical supply manufacturing,
pharmacokinetic studies, protocol preparation and other services to the
preclinical development of new drug candidates.
CytRx also manufactures, markets and distributes TiterMax, an adjuvant used to
produce cell mediated and humoral responses in research animals. The keys to
the potency of TiterMax lie in its immunostimulatory activity and the formation
of stable water-in-oil emulsions. TiterMax aids in the antigen's effective
presentation to the immune system without the toxic effects of other research
adjuvants.
Manufacturing
The Company has converted a portion of its Norcross, Georgia headquarters into a
pilot manufacturing facility in order to produce the bulk clinical supply
ingredients for its product development programs. See "Product Development."
Production of the final dosage form of materials for use in clinical trials will
be performed by third party manufacturers. The Company's pilot facility is
intended for manufacture of investigational supplies of certain of the Company's
products under development and is generally not large enough to produce
quantities of product adequate for commercial purposes. The process used in the
pilot facility also may require modification to achieve commercial scale. If
the Company modifies its manufacturing process or changes the source or location
of product supply, regulatory authorities will require the Company to
demonstrate that the material produced from the modified or new process or
facility is equivalent to the material used in the Company's clinical trials.
Further, any manufacturing facility and the quality control and manufacturing
procedures used by the Company for the commercial supply of a product must
comply with applicable OSHA, EPA, and FDA standards, including Good
Manufacturing Practice regulations.
Patents and Proprietary Technology
CytRx considers the protection of its discoveries and inventions important to
its business. The Company seeks patent protection for its technology when
deemed appropriate and has filed patent applications in the United States and
selected foreign countries covering several general product areas, including
technology licensed from Emory University (see below) and others.
There can be no assurance that patent applications which have been or will in
the future be filed by the Company will result in the issuance of any patents,
or, if issued, that such patents will provide sufficient protection or be of
commercial benefit to CytRx and its licensees.
Pursuant to an agreement with Emory University ("Emory") whereby certain basic
research was performed by the Company utilizing the research facilities and
support staff at Emory, Emory will be assigned the rights to all patents
acquired as a result of discovery activities conducted at Emory on behalf of
CytRx. Emory has granted CytRx exclusive worldwide licenses to these patents.
Emory is entitled to receive royalty payments on sales made by CytRx of products
covered by the licensed patents, and on payments received by CytRx as a result
of sales of such products made by a third party. In the event that patents are
not issued with respect to a particular class of products, the Company's license
with respect to that class of products will terminate.
Competition
Many companies, including large pharmaceutical, chemical and biotechnology firms
with financial resources, research and development staffs, and facilities that
are substantially greater than those of the Company, are engaged in the research
and development of pharmaceutical products that could compete with the products
under development by the Company. The industry is characterized by rapid
technological advances and competitors may develop their products more rapidly
and/or such products may be more effective than those under development by the
Company or its licensees and corporate partners. The Company competes in this
research and development environment by attempting to develop its products and
technologies in an innovative and timely fashion that would provide the Company
with an advantage in the licensing and/or marketing of its products and
technologies.
Government Regulation
The marketing of pharmaceutical products requires the approval of the FDA and
comparable regulatory authorities in foreign countries. The FDA has established
guidelines and safety standards which apply to the pre-clinical evaluation,
clinical testing, manufacture and marketing of pharmaceutical products. The
process of obtaining FDA approval for a new therapeutic product (drug) generally
takes several years and involves the expenditure of substantial resources. The
steps required before such a product can be produced and marketed for human use
in the United States include preclinical studies in animal models, the filing of
an Investigational New Drug ("IND") application, human clinical trials and the
submission and approval of a New Drug Application ("NDA"). The NDA involves
considerable data collection, verification and analysis, as well as the
preparation of summaries of the manufacturing and testing processes, preclinical
studies, and clinical trials. The FDA must approve the NDA before the drug may
be marketed. There can be no assurance that the Company will be able to obtain
the required FDA approvals for any of its products.
The manufacturing facilities and process for the Company's products, whether
manufactured directly by the Company or by a third party, will be subject to
rigorous regulation, including the need to comply with Federal Good
Manufacturing Practice regulations. The Company is also subject to regulation
under the Occupational Safety and Health Act, the Environmental Protection Act,
the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act
and the Resource Conservation and Recovery Act.
Environmental Protection
The Company's pharmaceutical development center is exempt from the CFR (40-Part
370) hazardous chemical reporting. The facility is classified as a small
quantity generator of hazardous waste, which includes radio-isotopes, biological
and chemical hazards. Such waste is removed by a qualified waste hauler. The
Company has established a Corporate Safety Committee to oversee its Health and
Safety Policy which defines procedures for identification of risks posed to
employees from hazardous material and training of employees in the proper
handling and disposal of such materials.
During 1993 and 1994 the Company incurred approximately $2.6 million to expand
and renovate its pharmaceutical development facility. These expenditures
included amounts related to the installation of a single pass air handling
system with HEPA filters for the exhaust air from Biosafety Level III and
radiological hoods. Also included were the installation of backflow prevention
devices and acid dilution basins to neutralize waste water leaving the facility.
During 1995 compliance with federal, state and local regulations pertaining to
environmental standards did not have a material effect upon the capital
expenditures or earnings of the Company.
Number of Employees
As of December 31, 1995, the Company had 59 full-time and 1 part-time employees.
Item 2. Properties
The Company's executive offices and operational facilities, consisting of an
aggregate of approximately 30,700 square feet, are located on property owned by
the Company at 150 and 154 Technology Parkway, Norcross, Georgia. These
facilities include approximately 20,000 square feet of laboratories, pilot
manufacturing, and associated space.
The above-mentioned facilities are in satisfactory condition and suitable for
the particular purposes for which they were acquired or constructed and are
adequate for present operations.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
On December 22, 1995, the Registrant mailed a Proxy Statement to its
stockholders of record as of December 7, 1995 pertaining to a Special Meeting of
Stockholders held on February 5, 1996. The only item of business acted upon at
the Special Meeting was a proposal to amend the Registrant's Certificate of
Incorporation to effect a recapitalization through a one-for-four reverse stock
split. At the meeting approximately 26.6 million votes were cast (either by
person or by proxy) in favor of the proposal, 1.6 million against the proposal,
with 128,000 abstentions. There were 3.1 million nonvoted shares. Accordingly,
the reverse stock split was effected February 6, 1996.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's Common Stock is traded on the The Nasdaq Stock Market under the
symbol CYTR. The following table sets forth the high and low closing prices for
the Common Stock for the periods indicated as reported by Nasdaq. Such prices
represent prices between dealers without adjustment for retail mark-ups, mark-
downs, or commissions and may not necessarily represent actual transactions.
Such prices have been adjusted to reflect the one-for-four reverse stock split
effected February 6, 1996.
High Low
COMMON STOCK:
1996
January 1 to March 19 6 3 11/16
1995
Fourth quarter 12 5/8 3 1/2
Third quarter 13 1/2 6 1/2
Second quarter 10 3/4 5 3/4
First quarter 10 3/8 5 1/4
1994
Fourth quarter 10 3/4 5
Third quarter 18 1/2 8 1/2
Second quarter 26 1/2 16
First quarter 33 22 1/2
On March 19, 1996, the closing price of the Common Stock as reported on The
Nasdaq Stock Market, was $4.00. As of December 31, 1995 there were
approximately 1,500 holders of record of the Company's Common Stock. The number
of record holders does not reflect the number of beneficial owners of the
Company's Common Stock for whom shares are held by Cede & Co., certain brokerage
firms and other institutions. The Company has not paid any dividends since its
inception and does not contemplate payment of dividends in the foreseeable
future.
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
The information required by Items 6-8 is incorporated by reference to the
applicable portions from the Company's 1995 Annual Report to Stockholders. See
Part IV, Item 14 for an index of the statements, notes and schedules.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by Items 10-12 is incorporated by reference from the
Company's definitive proxy statement for the Company's 1996 Annual Meeting of
Stockholders, which is expected to be filed pursuant to Regulation 14A within
120 days after the end of the Company's 1995 fiscal year.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Documents filed as part of this 10-K:
1. The consolidated financial statements listed below are
incorporated by reference from the Company's 1995 Annual
Report to Stockholders:
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Auditors dated February 19, 1996
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for
the years ended December 31, 1995, 1994 and 1993 Page 9
All other schedules are omitted because they are either not
applicable or the related information is provided in the notes
to the financial statements.
3. Exhibits required by Item 601 of Regulation S-K:
See Exhibit Index on page 10 of this Form 10-K.
(b) Reports on Form 8-K:
On November 7, 1995 a Current Report on Form 8-K was filed
pertaining to the termination of a license agreement
between CytRx Corporation and Glaxo Wellcome PLC (see
"RheothRx License Agreement").
On October 30, 1995 a Current Report on Form 8-K was filed
pertaining to the adoption of a stock buy-back program by
the Company.
CYTRX CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1995, 1994 and 1993
Additions
------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
- ------------------------------------- --------- --------- ---------- ---------- ----------
Reserve Deducted in the Balance Sheet
from the Asset to Which it Applies:
Allowance for Deferred Tax Assets
Year ended December 31, 1995 $9,200,000 $4,400,000 $0 $0 $13,600,000
Year ended December 31, 1994 $6,700,000 $2,500,000 $0 $0 $9,200,000
Year ended December 31, 1993 $4,400,000 $2,300,000 $0 $0 $6,700,000
Marketable Securities Valuation Reserve
Year ended December 31, 1995 $2,475,277 $0 $0 $2,475,277 $0
Year ended December 31, 1994 $131,329 $0 $2,475,277 $131,329 $2,475,277
Year ended December 31, 1993 $127,015 $4,314 $0 $0 $131,329
CytRx Corporation
Form 10-K Exhibit Index
Exhibit Number Page
3.1 Articles of Incorporation, as Amended and Restated
3.2 By-Laws (a)
10.1 Agreement with Emory University, as amended (a)
10.2 Agreement with BASF Corporation, as amended (a)
10.3 Exclusive License Agreement with Burroughs Wellcome Co. (e)
10.4 Letter Agreement between the Registrant and Burroughs Wellcome Co.
extending the Exclusive License Agreement dated April 19, 1990
to Japan (c)
Executive Compensation Plans and Arrangements
10.3 Employment Agreement dated March 24, 1989, with Jack J. Luchese,
as amended (c)
10.4 1995 Employment Agreement, dated January 1, 1995, with
Jack J. Luchese (d)
10.5 1986 Stock Option Plan, as amended and restated as of May 30,1991 (b)
10.6 1994 Stock Option Plan (d)
10.7 1995 Stock Option Plan (f)
11.1 Computation of Income (Loss) Per Share
13.1 Selected Portions from the CytRx Corporation 1995 Annual Report to
Stockholders
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
___________________
(a) Incorporated by reference to the Registrant's Registration Statement on Form
S-l (File No. 33-8390) filed on November 5, 1986.
(b) Incorporated by reference to the Registrant's Registration Statement on Form
S-3 (File No. 33-38206) filed on June 25, 1991.
(c) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed as of March 20, 1989.
(d) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (File No. 33-93816) filed on June 22, 1995.
(e) Incorporated by reference to the Registrant's Current Report on Form 8-K
filed as of April 25, 1991.
(f) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (File No. 33-93818) filed on June 22, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Jack J. Luchese
Jack J. Luchese, President
Date: March 27, 1996 and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Jack Bowman Director March 27, 1996
Jack Bowman
/s/ Raymond C. Carnahan, Jr. Director March 27, 1996
Raymond C. Carnahan, Jr.
/s/ Jack J. Luchese Chairman of the March 27, 1996
Jack J. Luchese Board of Directors, President,
Chief Executive Officer,
(Principal Executive Officer)
/s/ Herbert H. McDade, Jr. Director March 27, 1996
Herbert H. McDade, Jr.
Director
Selvi Vescovi
/s/ James M. Yahres Vice President of Finance March 27, 1996
James M. Yahres Secretary
(Principal Financial Officer)
/s/ Mark W. Reynolds Corporate Controller March 27, 1996
Mark W. Reynolds (Principal Accounting Officer)