CytRx®
CORPORATION
2020 Annual Report
OTC: CYTR
www.cytrx.com
To Our Stockholders:
LETTER TO STOCKHOLDERS
There were significant developments over the past year with both Orphazyme A/S
(“Orphazyme”) and ImmunityBio, Inc. (“ImmunityBio”).
As previously reported, in 2011 CytRx agreed to sell and transfer certain data, intellectual
property rights and other assets, including our drug candidate arimoclomol, to Orphazyme.
CytRx’s agreement can deliver up to approximately $100 million in potential milestone
payments and future single digit royalties paid on sales of arimoclomol.
In June 2020, Orphazyme announced they had initiated the submission of their New Drug
Application (NDA) for a rolling review by the U.S. Food and Drug Administration (FDA) for
arimoclomol for the treatment of Niemann-Pick Disease Type-C (NPC); in July 2020 Orphazyme
announced they had completed their rolling submission of their NDA with the FDA and in
September 2020 they announced that the FDA had accepted, with Priority Review, its NDA. In
December 2020, Orphazyme disclosed that the FDA updated the Prescription Drug User Fee Act
(“PDUFA”) target action date to June 17, 2021. Arimoclomol has received Fast Track and
Breakthrough Therapy Designations for the treatment of NPC, in addition to Orphan Drug and
Rare Pediatric Disease Designations.
In November 2020, Orphayzme announced that it submitted a Marketing Authorisation
Application (“MAA”) to the European Medicines Agency (“EMA”) for approval of arimoclomol in
the treatment of NPC. They have subsequently stated they expect to hear from the Committee
for Medicinal Products for Human Use (CHMP), which is the European Medicines Agency's
(EMA) committee responsible for human medicines, in the fourth quarter of 2021. CytRx is
positioned to receive up to $10 million in potential milestone payments in 2021 based on
possible U.S. and European approvals for arimoclomol to treat NPC.
In December 2020, Orphazyme announced the expansion of its U.S. presence and workforce
ahead of potential FDA approval of NPC.
In March 2021, Orphazyme announced the appointment of Christophe Bourdon as its new Chief
Executive Officer, effective as of April 1, 2021. Mr. Bourdon has successfully launched a variety
of products in demanding environments, making him an ideal individual to lead Orphazyme as it
prepares for a potential commercial launch of arimoclomol. He joins from Amgen, Inc., where
he has held the role of Senior Vice President, General Manager for the U.S. Oncology Business.
He was leading commercialization planning and execution for several products. Previously, Mr.
Bourdon was Senior Vice President of Europe, Middle East, Africa and Canada at Alexion
Pharmaceuticals Inc. as the company launched two breakthrough ultra-orphan drugs and
negotiated payor access across the United Kingdom, Germany, France, Italy and Canada. He
holds an MBA from IMD business school (Switzerland) and a BA from ISG (France).
Orphazyme also announced MIPLYFFA TM as the global brand name for arimoclomol and
expanded its NPC Early Access Program in the U.S. and opened similar programs in France and
Germany.
In April and May 2021, Orphazyme announced that the topline data from both their pivotal
trials in Inclusion Body Myositis (“IBM”) and Amyotrophic Lateral Sclerosis (“ALS”) did not meet
primary and secondary endpoints to show benefit in people living with those diseases.
According to Orphazyme, no important safety signals were reported in either of those trials.
Turning to our other drug, aldoxorubicin, which was licensed to ImmunityBio in 2017, under
this agreement, we could receive up to $343 million in potential milestones and future
royalties.
In December 2020, ImmunityBio and NantKwest Inc. announced their proposed merger to
create a leading immunotherapy and cell therapy company, and this merger was approved by
their companies’ shareholders in March 2021. The Company now operates and trades on
NASDAQ under the ticker symbol IBRX.
Aldoxorubicin forms one of three parts of ImmunityBio’s platform. In May 2020, ImmunityBio
announced the initiation of a registrational-intent Phase 2 randomized, two-cohort, open-label
study for first and second-line treatment of locally advanced or metastatic pancreatic cancer
(QUILT-88). The study received FDA authorization and will initially enroll 268 subjects across
both cohorts. They indicated enrollment was expected to begin in June 2020. During the
summer, the Chief Executive Officer of ImmunityBio spoke about the successful experimental
treatment delivered to former Senator Reid for his stage IV pancreatic cancer. Former Senator
Reid described himself as being in “complete remission” after receiving this combination
immunotherapy that included aldoxorubicin.
In October 2020, ImmunityBio announced the addition of a third cohort to their ongoing Phase
2 study which will enable pancreatic cancer patients who have failed all approved standards of
care to participate in the study.
In January 2021, ImmunityBio announced their ongoing Phase 2 clinical trial for metastatic
pancreatic cancer had produced early indications of increased survival rates for patients with
no other approved treatment options. Interim results of the three-cohort trial showed a
median survival rate of more than double that of the historic rate in patients with advanced
metastatic pancreatic cancer (for which no other FDA approved treatment exists).
ImmunityBio plans to use their combination immunotherapy that includes aldoxorubicin in a
glioblastoma study and is reviewing their options for soft tissue sarcoma.
Centurion BioPharma Corporation, our wholly owned subsidiary, continues to pursue third-
party financing and strategic partnership opportunities to advance clinical testing for its four
LADRTM (Linker Activated Drug Release) drug candidates, and its albumin companion diagnostic
(ACDxTM). There are ongoing discussions with prospective parties, however there are no formal
agreements yet.
In February 2021, we announced that CytRx is now a part of the LD Micro Index, which is
designed to give the most accurate representation of the intraday activity of microcap stocks in
North America.
We remain committed to managing our monthly cash burn and we are positioned to capitalize
on potential results from our licensing partners and our Centurion assets.
On behalf of the CytRx board of directors, management and administrative team, we look
forward to sharing our progress and potential achievements with you throughout the balance of
the year.
Sincerely,
Steven A. Kriegsman
Chairman and Chief Executive Officer
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 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
(State or other jurisdiction of
incorporation or organization)
11726 San Vicente Blvd, Suite 650,
Los Angeles, California
(Address of principal executive offices)
58-1642740
(I.R.S. Employer
Identification No.)
90049
(Zip Code)
Registrant’s telephone number, including area code: (310) 826-5648
________________
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.001 par value per share
Series B Junior Participating Preferred Stock Purchase Rights
Name of exchange on which registered
OTC Market
OTC Market
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Securities Act Rule 405). Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934.
Yes No
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 No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Smaller reporting company x
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
Non-accelerated filer x
Accelerated filer
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Based on the closing price of the Registrant’s common stock as reported on OTC Market, the aggregate market value of the Registrant's common stock
held by non-affiliates on June 30, 2020 (the last business day of the Registrant's most recently completed second fiscal quarter) was approximately $25.2
million. Shares of common stock held by directors and executive officers and any ten percent or greater stockholders and their respective affiliates have been
excluded from this calculation, because such stockholders may be deemed to be “affiliates” of the Registrant. This is not necessarily determinative of affiliate
status for other purposes. The number of outstanding shares of the Registrant's common stock as of March 23, 2021 was 36,480,038.
CYTRX CORPORATION
2020 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
NOTE ON FORWARD-LOOKING STATEMENTS
PART I
Item 1. BUSINESS
Item 1A. RISK FACTORS
Item 1B. UNRESOLVED STAFF COMMENTS
Item 2. PROPERTIES
Item 3. LEGAL PROCEEDINGS
Item 4. MINE SAFETY DISCLOSURES
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Item 6. SELECTED FINANCIAL DATA
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
Item 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Item 16. FORM 10-K SUMMARY
SIGNATURES
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NOTE ON FORWARD-LOOKING STATEMENTS
References throughout this Annual Report on Form 10-K, the "Company," "CytRx," "we," "us," and "our," except where the
context requires otherwise, refer to CytRx Corporation and its subsidiary.
Some of the information contained in this Annual Report may include forward-looking statements that reflect our current views
with respect to our research and development activities, business strategy, business plan, financial performance and other future
events. These statements include forward-looking statements both with respect to us, specifically, and the biotechnology sector, in
general. We make these statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “estimate,” “may,” “should,” “anticipate,” “will”
and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities
laws or otherwise.
All forward-looking statements involve inherent risks and uncertainties, and there are or will be important factors that could cause
actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to,
those factors set forth in the sections entitled “Business,” “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and
“Controls and Procedures” in this Annual Report, all of which you should review carefully. Please consider our forward-looking
statements in light of those risks as you read this Annual Report. We undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
If one or more of these or other risks or uncertainties materializes, or if our underlying assumptions prove to be incorrect, actual
results may vary materially from what we anticipate. All subsequent written and oral forward-looking statements attributable to us or
individuals acting on our behalf are expressly qualified in their entirety by this Note.
INDUSTRY DATA
Unless otherwise indicated, information contained in this Annual Report concerning our industry, including our general
expectations and market opportunity, is based on information from our own management estimates and research, as well as from
industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived
from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which
we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily
subject to a high degree of uncertainty and risk due to a variety of factors, including those described below in the “Risk Factors”
section of this Annual Report. These and other factors could cause our future performance to differ materially from our assumptions
and estimates.
TRADEMARKS
CytRx, LADR and ACDx are some of our trademarks used in this Annual Report. This Annual Report also includes trademarks,
trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names
referred to in this Annual Report sometimes appear without the ® and ™ symbols, but those references are not intended to indicate
that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to
these trademarks and trade names.
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PART I
Item 1. BUSINESS
COMPANY OVERVIEW
CytRx Corporation (“CytRx”) is a biopharmaceutical research and development company specializing in oncology and rare
diseases. The Company’s focus has been 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. During 2017,
CytRx’s discovery laboratory, located in Freiburg, Germany, synthesized and tested over 75 rationally designed drug conjugates with
highly potent payloads, culminating in the creation of two distinct classes of compounds. Four lead candidates (LADR-7 through
LADR-10) were selected based on in vitro and animal preclinical studies, stability, and manufacturing feasibility. In 2018, additional
animal efficacy and toxicology testing of these lead candidates was conducted. In addition, a novel albumin companion diagnostic,
ACDx™, was developed to identify patients with cancer who are most likely to benefit from treatment with these drug candidates.
On June 1, 2018, CytRx launched Centurion BioPharma Corporation (“Centurion”), a private 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. On December 21, 2018, CytRx announced that Centurion had
concluded the pre-clinical phase of development for its four LADR™ drug candidates, and for its albumin companion diagnostic
(ACDx™). As a result of completing this work, operations taking place at the pre-clinical laboratory in Freiburg, Germany would no
longer be needed and, accordingly, the lab was closed at the end of January 2019.
We are a Delaware corporation, incorporated in 1985. Our corporate offices are located at 11726 San Vicente Boulevard, Suite
650, Los Angeles, California 90049, and our telephone number is (310) 826-5648. Our web site is located at http://www.cytrx.com.
We do not incorporate by reference into this Annual Report the information on, or accessible through, our website, and you should not
consider it as part of this Annual Report.
LADR Drug Discovery Platform and Centurion
Centurion’s LADR™ (Linker Activated Drug Release) technology platform is a discovery engine combining our 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. They have 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 cytotoxins) by
controlling the release of the drug payloads and improving drug-like properties.
Centurion’s efforts were focused on two classes of ultra-high potency albumin-binding drug conjugates. These drug
conjugates combine the proprietary LADR™ linkers with novel derivatives of the auristatin and maytansinoid drug classes. These
payloads historically have required a targeting antibody for successful administration to humans. These drug conjugates eliminate the
need for a targeting antibody and provide a small molecule therapeutic option with potential broader applicability.
Centurion’s postulated mechanism of action for the albumin-binding drug conjugates is as follows:
•
•
after administration, the linker portion of the drug conjugate forms a rapid and specific covalent bond to the
cysteine-34 position of circulating albumin;
circulating albumin preferentially accumulates at the tumors, bypassing concentration in other non-tumor sites,
including the heart, liver and gastrointestinal tract due to a mechanism called “Enhanced Permeability and
Retention”;
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•
•
once localized at the tumor, the acid-sensitive linker is cleaved due to the specific conditions within the tumor and in
the tumor microenvironment; and
free active drug is then released into the tumor.
Centurion’s novel companion diagnostic, ACDx™ (albumin companion diagnostic), was developed to identify patients with
cancer who are most likely to benefit from treatment with the four LADR lead assets.
CytRx and Centurion have been working on identifying partnership opportunities for LADR™ ultra-high potency drug
conjugates and its albumin companion diagnostic. However, no partnerships or any source of financing has become available after two
years of effort.
Business Strategy for LADR™ Platform
Currently, the Company continues to work on identifying partnership or financing opportunities for LADR™ ultra-high
potency drug conjugates and their albumin companion diagnostic. We have concluded all research and development on LADR and its
companion diagnostic and continue to focus on identifying partnership or financing opportunities.
Aldoxorubicin
Until July 2017, we were concentrating on the research and clinical development of aldoxorubicin, our modified version of
the widely used cytotoxin agent, doxorubicin. Aldoxorubicin combines the agent doxorubicin with a novel linker-molecule that binds
specifically to albumin in the blood to allow for delivery of higher amounts of doxorubicin (3½ to 4 times) without several of the
major dose-limiting toxicities seen with administration of doxorubicin alone.
On July 27, 2017, we entered into an exclusive worldwide license with ImmunityBio, Inc. (formerly known as NantCell, Inc.
(“ImmunityBio”)), granting to ImmunityBio the exclusive rights to develop, manufacture and commercialize aldoxorubicin in all
indications. As a result, the Company is no longer working on development of aldoxorubicin (ImmunityBio has recently merged with
NantKwest, Inc.). As part of the license, ImmunityBio made a strategic investment of $13 million in CytRx common stock at $6.60
per share, a premium of 92% to the market price on that date. We also issued ImmunityBio a warrant to purchase up to 500,000 shares
of common stock at $6.60, which expired on January 26, 2019. We are entitled to receive up to an aggregate of $343 million in
potential milestone payments contingent upon achievement of certain regulatory approvals and commercial milestones. We are 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. There can be no assurance that ImmunityBio will achieve such milestones, approvals or sales with respect to
aldoxorubicin. ImmunityBio has initiated a Phase 2, randomized, two-cohort, open-label registrational-intent study for first-line and
second-line treatment of locally advanced or metastatic pancreatic cancer, which includes aldoxorubicin.
Aldoxorubicin is a conjugate of the commonly prescribed cytotoxin agent doxorubicin that binds to circulating albumin in the
bloodstream and is believed to concentrate the drug at the site of the tumor. Aldoxorubicin, has been tested in over 600 patients with
various types of cancer. Specifically, it is comprised of (6-maleimidocaproyl) hydrazine, an acid-sensitive molecule that is conjugated
to doxorubicin. The initial indication for aldoxorubicin is for patients with advanced soft tissue sarcomas (STS). ImmunityBio lists a
randomized Phase 2 and a randomized Phase 3 study, as well as an aldoxorubicin and ifosfamide Phase 1/2 study in its solid tumor
platform and is currently reviewing options in STS.
Aldoxorubicin has received Orphan Drug Designation (ODD) by the U.S. FDA for the treatment of 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.
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In addition to STS, ImmunityBio has expanded aldoxorubicin’s use by combining it with immunotherapies and cell-based
treatments and is currently in late-stage clinical development in advanced and metastatic pancreatic cancer, in glioblastoma, and in
triple negative breast cancer. ImmunityBio has initiated a phase 2 registrational-intent study in metastatic pancreatic cancer.
Molecular Chaperone Assets (Orphayzme)
In 2011, CytRx sold the rights to arimoclomol and iroxanadine, based on molecular chaperone regulation technology, to
Orphazyme A/S (formerly Orphazyme ApS) in exchange for a one-time, upfront payment and the right to receive up to a total of $120
million (USD) in milestone payments upon the achievement of certain pre-specified regulatory and business milestones, as well as
royalty payments based on a specified percentage of any net sales of products derived from arimoclomol. Orphazyme is testing
arimoclomol in four indications, including Niemann-Pick disease Type C (NPC), Gaucher disease, Inclusion Body Myositis (IBM)
and Amyotrophic Lateral Sclerosis (ALS). Orphazyme has announced it expects read-outs for its registrational trials in IBM and ALS
in the first half of 2021. Orphazyme has highlighted positive Phase 2/3 clinical trial data in patients with NPC and have submitted a
New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA), which is currently under Priority Review by the
U.S. Food and Drug Administration (“FDA”) with a target action date of June 17, 2021. It also submitted a Marketing Authorization
Application (MAA) with the European Medicines Agency (EMA). They have established an Early Access Program in the U.S. as well
as other select European countries. Orphazyme has also received FDA Breakthrough Therapy Designation for arimoclomol for NPC.
Orphayzme recently announced its intention that arimoclomol will be marketed globally under the tradename MIPLYFFA™. CytRx
will be entitled to a milestone payment of $6 million upon FDA approval, $4 million upon EMA approval and $2 million upon
approval in Japan, with royalties from potential sales and potential additional milestone payments, although there can be no assurances
that such milestones will be achieved.
Innovive Acquisition Agreement
On September 19, 2008, we completed our merger acquisition of Innovive Pharmaceuticals, Inc., or Innovive, and its clinical-stage
cancer product candidates, including aldoxorubicin and tamibarotene. Under the merger agreement by which we acquired Innovive,
we agreed to pay the former Innovive stockholders up to approximately $18.3 million of future earnout merger consideration, subject
to our achievement of specified net sales under the Innovive license agreements. The earnout merger consideration, if any, will be
payable in shares of our common stock, subject to specified conditions, or, at our election, in cash or by a combination of shares of our
common stock and cash. Our common stock will be valued for purposes of any future earnout merger consideration based upon the
trading price of our common stock at the time the earnout merger consideration is paid. The earnout will be accrued if and when
earned. As of December 31, 2020 and 2019 no amounts were due under this Agreement.
Research and Development
Expenditures for research and development activities related to continuing operations were $0.8 million in 2020 and $0.4 million
for the year ended December 31, 2019, or approximately 12% and 5%, respectively, of our total expenses. For further information
regarding our research and development activities, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” below.
Commercialization and Marketing
We currently have no sales, marketing or commercial product distribution capabilities or experience in marketing products.
We are searching for a development and commercialization partner or a financing for our LADR drug candidates and do not
currently plan on commercializing them ourselves. Over the past two years, we have been unable to attract a development and
commercial partner nor a financing for this endeavor; however we are continuing to pursue all possibilities.
Patents and Proprietary Technology
We actively seek patent protection for our technologies, processes, uses, and ongoing improvements and consider our patents and
other intellectual property to be critical to our business. We regularly evaluate the patentability of new inventions and improvements
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developed by us or our collaborators, and, whenever appropriate, will endeavor to file U.S. and international patent applications to
protect these new inventions and improvements. We cannot be certain that any of the current pending patent applications we have
filed or licensed, or any new patent applications we may file or license, will ever be issued in the U.S. or any other country. There also
is no assurance that any issued patents will be effective to prevent others from using our products or processes. It is also possible that
any patents issued to us, as well as those we have licensed or may license in the future, may be held invalid or unenforceable by a
court, or third parties could obtain patents that we would need to either license or to design around, which we may be unable to do.
Current and future competitors may have licensed or filed patent applications or received patents and may acquire additional patents
and proprietary rights relating to compounds, products or processes that may be competitive with ours.
In addition to patent protection, we attempt to protect our proprietary products, processes and other information by relying on trade
secrets and non-disclosure agreements with our employees, consultants and certain other persons who have access to such products,
processes and information. Under the agreements, all inventions conceived by employees are our exclusive property, but there is no
assurance that these agreements will afford significant protection against misappropriation or unauthorized disclosure of our trade
secrets and confidential information.
As of December 31, 2020, we have three pending U.S. patent applications and forty-one pending foreign patent applications covering
our LADRTM-related technology including LADR-7, LADR-8, LADR-9 and LADR-10. The un-extended patent term of patents that
issue covering our LADRTM-related technology is between June 2036 and November 2038. We also have one pending international
patent application covering our albumin companion diagnostic (ACDxTM). The un-extended patent term of patents that issue covering
our ACDxTM is July 2039. The patents and patent applications covering our LADRTM-related technology, and ACDxTM are assigned
to Centurion BioPharma Corporation. In conjunction with our July 27, 2017 ImmunityBio licensing agreement, we granted
ImmunityBio an exclusive license to all our aldoxorubicin-related patents, including the rights in three granted U.S. patents, nine
granted foreign patents, one pending U.S. patent applications, and ten pending foreign patent applications covering aldoxorubicin and
related technologies. Our intellectual property holdings relating to aldoxorubicin and related technologies include an exclusive license
from Vergell Medical, S.A. or Vergell, to U.S. and foreign patents and patent applications. Patents and applications that cover
pharmaceutical compositions comprising aldoxorubicin and their use in treating cancer (including glioblastoma) have un-extended
patent terms expiring between March 2021 and June 2034.
LICENSE AGREEMENTS
Aldoxorubicin
We are the licensee of patent rights held by KTB for the worldwide development and commercialization of aldoxorubicin under a
license agreement dated April 17, 2006. In February 2017, we received notice that KTB had transferred and assigned its rights and
obligations under the license to Vergell Medical, S.A. The license is exclusive and applies to all products that may be subject to the
licensed intellectual property in all fields of use. We may sublicense the intellectual property in our sole discretion. Pursuant to an
amendment to the license agreement entered into in March 2014, we also have a non-exclusive worldwide license to any additional
technology that is claimed or disclosed in the licensed patents and patent applications for use in the field of oncology.
Under the agreement, we must make payments to Vergell in the aggregate of up to $7.5 million upon meeting clinical and
regulatory milestones, and up to and including the product’s second final marketing approval. We also agreed to pay:
•
•
commercially reasonable royalties based on a percentage of net sales (as defined in the agreement);
a percentage of any non-royalty sub-licensing income (as defined in the agreement); and
• milestones of $1 million for each additional final marketing approval that we obtain.
In the event that we must pay a third party in order to exercise our rights to the intellectual property under the agreement, we are
entitled to deduct a percentage of those payments from the royalties due Vergell, up to an agreed upon cap.
Under the agreement with Vergell, we must use commercially reasonable efforts to conduct the research and development
activities we determine are necessary to obtain regulatory approval to market aldoxorubicin in those countries that we determine are
commercially feasible. Under the agreement, Vergell is to use its commercially reasonable efforts to provide us with access to
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suppliers of the active pharmaceutical ingredient, or API, of aldoxorubicin, on the same terms and conditions as may be provided to
Vergell by those suppliers.
The agreement will expire on a product-by-product basis upon the expiration of the subject patent rights. We have the right to
terminate the agreement on 30 days’ notice, provided we pay a cash penalty to Vergell. Vergell may terminate the agreement if we are
in breach and the breach is not cured within a specified cure period, or if we fail to use diligent and commercial efforts to meet
specified clinical milestones.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and
a strong emphasis on proprietary products. While we believe that our LADR™ technology platform and ultra-high potency albumin-
bind drug conjugates provide us with competitive advantages, we face potential competition from many different sources, including
major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and
public and private research institutions. Any drug candidates that we successfully develop and commercialize will compete with
existing therapies and new therapies that may become available in the future.
Many competitors and potential competitors have substantially greater scientific, research and product development
capabilities, as well as greater financial, marketing and human resources than we do. In addition, many specialized biotechnology
firms have formed collaborations with large, established companies to support the research, development and commercialization of
products that may be competitive with ours.
There are many companies developing antibody-drug conjugates (ADC) for the treatment of cancer and some that use the
same classes of cytotoxic payloads as we are currently using. These include Takeda Pharmaceutical Co. Ltd. and Seattle Genetics Inc.
who market Adcetris®, and F. Hoffmann-LaRoche Ltd./Genentech who market Kadcyla®. According to www.clinicaltrials.gov,
many other major pharmaceutical companies, including Celgene and GlaxoSmithKline are testing an ADC in either on-going or
currently enrolling clinical trials. Other companies have created or have programs to create cell-killing agents for attachment to
antibodies or other targeting agents. These companies may compete with us for technology out-license arrangements.
In addition to ADCs, we face competition from other nanomedicine platforms developing targeted therapies, including
platforms focused on nanoparticles and liposomes. Non-ADC therapies may be in development for the cancer types we or our
partners elect to pursue. Further, these companies may also compete with us for technology out-license arrangements.
Continuing development of conventional and targeted cytotoxins by large pharmaceutical companies and biotechnology
companies may result in new compounds that may compete with our product candidates. More recently, immuno-oncology therapies
that stimulate the body’s own defense system to attack cancers are being developed by certain of these companies and some have been
approved for use as cancer therapeutics. In the future, immuno-oncology agents including cell therapies, targeted therapies or
cytotoxic treatments may compete with our product candidates. Other companies have created or have programs to create potent
cell-killing agents for attachment to tumor targeting agents. These companies may compete with us for technology out-license
arrangements.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are
more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may
develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we obtain approval
for ours. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage
the use of generic products. If our drug candidates achieve marketing approval, we expect that they will be priced at a significant
premium over competitive generic products.
Many companies, including large pharmaceutical and biotechnology firms with financial resources, research and
development staffs, and facilities that may be substantially greater than those of ours or our strategic partners or licensees, are engaged
in the research and development of pharmaceutical products that could compete with our potential products. To the extent that we seek
to acquire, through license or otherwise, existing or potential new products, we will be competing with numerous other companies,
many of which will have substantially greater financial resources, large acquisition and research and development staffs that may give
those companies a competitive advantage over us in identifying and evaluating these drug acquisition opportunities. Any products that
we acquire will be competing with products marketed by companies that in many cases will have substantially greater marketing
resources than we have. The industry is characterized by rapid technological advances and competitors may develop their products
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more rapidly and such products may be more effective than those currently under development or that may be developed in the future
by our strategic partners or licensees. Competitive products for a number of the disease indications that we have targeted are currently
being marketed by other parties, and additional competitive products are under development and may also include products currently
under development that we are not aware of or products that may be developed in the future.
Government Regulation
The U.S. and other developed countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage,
record-keeping, advertising, promotion, export, marketing and distribution of drugs and biologic products. The FDA, under the
Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations, regulates
pharmaceutical and biologic products.
To obtain approval of our product candidates from the FDA, we must, among other requirements, submit data supporting safety
and efficacy for the intended indication as well as detailed information on the manufacture and composition of the product candidate.
In most cases, this will require extensive laboratory tests and preclinical and clinical trials. The collection of these data, as well as the
preparation of applications for review by the FDA involve significant time and expense. The FDA also may require post-marketing
testing to monitor the safety and efficacy of approved products or place conditions on any approvals that could restrict the therapeutic
claims and commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply
with regulatory standards or if we encounter problems at any time following initial marketing of our products.
The first stage of the FDA approval process for a new drug involves completion of preclinical studies and the submission of the
results of these studies to the FDA. These data, together with proposed clinical protocols, manufacturing information, analytical data
and other information submitted to the FDA, in an investigational new drug application, or IND, must become effective before human
clinical trials may commence. Preclinical studies generally involve FDA regulated laboratory evaluation of product characteristics and
animal studies to assess the efficacy and safety of the product candidate.
After the IND becomes effective, a company may commence human clinical trials. These are typically conducted in three
sequential phases, but the phases may overlap. Phase 1 trials consist of testing of the product candidate in a small number of patients
or healthy volunteers, primarily for safety at one or more doses. Phase 2 trials, in addition to safety, evaluate the efficacy of the
product candidate in a patient population somewhat larger than Phase 1 trials. Phase 3 trials typically involve additional testing for
safety and clinical efficacy in an expanded population at multiple test sites. A company must submit to the FDA a clinical protocol,
accompanied by the approval of the Institutional Review Boards at the institutions participating in the trial, prior to commencement of
each clinical trial.
To obtain FDA marketing authorization, a company must submit to the FDA the results of the preclinical and clinical testing,
together with, among other things, detailed information on the manufacture and composition of the product candidate, in the form of a
new drug application, or NDA.
The amount of time taken by the FDA for approval of an NDA will depend upon a number of factors, including whether the
product candidate has received priority review, the quality of the submission and studies presented, the potential contribution that the
compound will make in improving the treatment of the disease in question, and the workload at the FDA.
The FDA may, in some cases, confer upon an investigational product the status of a fast-track product. A fast-track product is
defined as a new drug or biologic intended for the treatment of a serious or life-threatening condition that demonstrates the potential to
address unmet medical needs for this condition. The FDA can base approval of an NDA for a fast-track product on an effect on a
surrogate endpoint, or on another endpoint that is reasonably likely to predict clinical benefit. If a preliminary review of clinical data
suggests that a fast-track product may be effective, the FDA may initiate review of entire sections of a marketing application for a
fast-track product before the sponsor completes the application.
We anticipate that our products will be manufactured by our strategic partners, licensees or other third parties. Before approving an
NDA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the
manufacturing facilities are in compliance with the FDA’s cGMP, which are regulations that govern the manufacture, holding and
distribution of a product. Our manufacturers also will be subject to regulation under the Occupational Safety and Health Act, the
National Environmental Policy Act, the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act and the Resource
Conservation and Recovery Act. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to
ensure continued compliance with the good manufacturing practices regulations. Our manufacturers will have to continue to comply
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with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action,
such as suspension of manufacturing or recall or seizure of product. Adverse patient experiences with the product must be reported to
the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals
may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the
product occur following approval.
The labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with
FDA and Federal Trade Commission requirements which include, among others, standards and regulations for off-label promotion,
industry sponsored scientific and educational activities, promotional activities involving the internet, and direct-to-consumer
advertising. We also will be subject to a variety of federal, state and local regulations relating to the use, handling, storage and
disposal of hazardous materials, including chemicals and radioactive and biological materials. In addition, we will be subject to
various laws and regulations governing laboratory practices and the experimental use of animals. In each of these areas, as above, the
FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of
product approvals, seize or recall products, and deny or withdraw approvals.
We will also be subject to a variety of regulations governing clinical trials and sales of our products outside the U.S. Whether or
not FDA approval has been obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries
and regions must be obtained prior to the commencement of marketing the product in those countries. The approval process varies
from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the European
Union, Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the U.S.
Employees
As of March 23, 2021, we had four full-time employees.
Available Information
We maintain a website at www.cytrx.com and make available there, free of charge, our periodic reports filed with the Securities
and Exchange Commission, or SEC, as soon as is reasonably practicable after filing. The public may read and copy any materials we
file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at
http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as us that
file electronically with the SEC. Among other things, we post on our website our Code of Business Conduct and Ethics.
Potential Strategic Alternatives
From time to time, we may consider strategic alternatives available to us to enhance shareholder value. Strategic alternatives could
include the acquisition of or strategic partnership with one or more parties or the licensing of some of our proprietary technologies.
See “Item 1A – Risk Factors – The impact and results of our exploration of strategic alternatives are uncertain and may not be
successful.”
Item 1A. RISK FACTORS
Risks Associated With Our Business:
Risk Factor Summary
• We have operated at a loss and will likely continue to operate at a loss for the foreseeable future.
• Because we have no source of significant recurring revenue, we must depend on capital raising to sustain our operations, and
•
•
our ability to raise capital may be severely limited.
If Orphazyme fails to successfully develop and commercialize arimoclomol, our business prospects will be materially
adversely affected.
If ImmunityBio fails to successfully develop aldoxorubicin or our exclusive licensing arrangement with ImmunityBio is
otherwise unsuccessful, our business prospects will be materially adversely affected.
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Risks Associated With Drug Discovery and Development:
•
If the projected development goals for our product candidates are not achieved in the expected time frames, the
commercialization of our products may be delayed and our business prospects may suffer. Our financial projections also may
prove to be materially inaccurate.
• The regulatory approval process is lengthy, time consuming and inherently unpredictable, and if our products or those we
have sold or licensed are not successfully developed and approved by the FDA or foreign regulatory authorities, we may be
forced to reduce or curtail our operations.
• Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies
and trials may not be predictive of future trial results.
• We may be unable to protect our intellectual property rights, which could adversely affect our ability to compete effectively.
•
If our product candidates infringe the rights of others, we could be subject to expensive litigation or be required to obtain
licenses from others to develop or market them.
• The results of pre-clinical studies or early clinical trials are not necessarily predictive of future results, and our ultra-high
potency albumin-binding drug conjugates may not have favorable results in later clinical trials or receive regulatory approval.
• Any products that we develop or are sold or licensed may become subject to unfavorable pricing regulations or third-party
coverage and reimbursement policies, which could have a material adverse effect on our business.
• Healthcare legislative reform measures could hinder or prevent the commercial success of our products and product
candidates.
• We may also be subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could
adversely affect our business, operations and financial condition.
• We will be required to pay substantial milestone and other payments relating to the commercialization of our products.
• The COVID-19 pandemic could adversely impact our business and prospects, including active and planned clinical trials by
•
ImmunityBio and Orphazyme.
In the event of a dispute regarding our international drug development, it may be necessary for us to resolve the dispute in the
foreign country of dispute, where we would be faced with unfamiliar laws and procedures.
• Drug discovery is a complex, time-consuming and expensive process, and we may not succeed in creating new product
candidates.
• We have a limited operating history in drug discovery, which is inherently risky, and we may not succeed in addressing these
risks.
General Risk Factors:
• We are subject to intense competition, and we may not compete successfully.
• We are subject to potential liabilities from clinical testing and future product liability claims.
• We may be unable to successfully acquire additional technologies or products. If we require additional technologies or
products, our product development plans may change and the ownership interests of our shareholders could be diluted.
• The impact and results of our exploration of any strategic alternatives are uncertain and may not be successful.
• We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that
technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
• Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
• You may experience future dilution as a result of future equity offerings or other equity issuances.
• Our outstanding options and warrants and the availability for resale of the underlying shares may adversely affect the trading
price of our common stock.
• We cannot assure investors that our internal controls will prevent future material weaknesses.
• We are subject to legal actions that could adversely affect our financial condition.
• Our anti-takeover measures may make it more difficult to change our management, or may discourage others from acquiring
us, and thereby adversely affect stockholder value.
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• Our restated by-laws, as amended, designate the Court of Chancery of the State of Delaware as the sole and exclusive forum
for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
• We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of our common stock.
• We do not expect to pay any cash dividends on our common stock.
You should carefully consider the risks and uncertainties facing our business. The risks described below are not the
only ones facing us. Our business is also subject to the risks that affect many other companies, such as employment relations,
general economic conditions and geopolitical events. Further, additional risks not currently known to us or that we currently
believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price.
Risks Associated With Our Business
We have operated at a loss and will likely continue to operate at a loss for the foreseeable future.
We have operated at a loss due to our ongoing expenditures for research and development of our product candidates and for
general and administrative purposes, and lack of significant recurring revenues. We incurred a net loss of $6.7 million for the year
ended December 31, 2020 and $7.2 million for the year ended December 31, 2019 and had an accumulated deficit as of December 31,
2020 of $470.7 million. We are likely to continue to incur losses unless and until we are able to earn milestones and royalties from our
existing licensing and sale agreements and/or conclude a successful strategic partnership or financing for our LADR technology.
These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity and working
capital. Because of the numerous risks and uncertainties associated with our product development efforts, we are unable to predict
when we may become profitable, if at all. If we do not become profitable or are unable to maintain future profitability, the market
value of our common stock will be adversely affected.
Because we have no source of significant recurring revenue, we must depend on capital raising to sustain our operations,
and our ability to raise capital may be severely limited.
Developing products and conducting clinical trials require substantial amounts of capital. To date, we have relied primarily upon
proceeds from sales of our equity securities under our “shelf” registration statements on Form S-3 filed with the SEC and proceeds
from the exercise of options and warrants to generate funds needed to finance our business and operations. We will likely need to raise
additional capital to fund our general and administrative expenses and, if we determine to develop products based on Centurion’s
LADR™ technology platform, we will need to raise additional capital to fund development of product candidates, prepare, file,
prosecute, maintain, enforce and defend patent and other proprietary rights, and develop and implement sales, marketing and
distribution capabilities.
As of March 23, 2021, we have only 2 million shares of common stock that are authorized and unissued or unreserved. We would
need approval of our stockholders to increase our authorized shares of our common stock in order to raise additional capital in excess
of this amount of shares.
At December 31, 2020, we had cash and cash equivalents of approximately $10.0 million. Management believes that our current
resources will be sufficient to fund our operations for the foreseeable future. This estimate is based, in part, upon our currently
projected expenditures for 2021 and the first three months of 2022 of approximately $6.1 million (unaudited) to fund operating
activities. These projected expenditures are also based upon numerous other assumptions and subject to many uncertainties, and actual
expenditures may be significantly different from these projections. We will ultimately be required to obtain additional funding in order
to execute our long-term business plans, although we do not currently have commitments from any third parties to provide us with
long term debt or capital. We cannot assure that additional funding will be available on favorable terms, or at all. If we fail to obtain
additional funding when needed, we may not be able to execute our business plans and our business may suffer, which would have a
material adverse effect on our financial position, results of operations and cash flows.
If we raise additional funds by issuing equity securities, dilution to stockholders may result and new investors could have rights
superior to holders of the shares issued in this offering. In addition, debt financing, if available, may include restrictive covenants. If
adequate funds are not available to us, we may have to liquidate some or all of our assets or delay or reduce the scope of or eliminate
some portion or all of our development programs. We also may have to license to other companies our product candidates or
technologies that we would prefer to develop and commercialize ourselves.
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If Orphazyme fails to successfully develop and commercialize arimoclomol, our business prospects will be materially adversely
affected.
In 2011, CytRx sold the rights to arimoclomol and iroxanadine, based on molecular chaperone regulation technology, to
Orphazyme in exchange for a one-time, upfront payment and the right to receive up to a total of $120 million (USD) in milestone
payments upon the achievement of certain pre-specified regulatory and business milestones, as well as single- and double-digit royalty
payments based on a specified percentage of any net sales of products derived from arimoclomol. Orphazyme is testing arimoclomol
in four indications, including Niemann-Pick disease Type C (NPC), Gaucher disease, Inclusion Body Myositis (IBM) and
Amyotrophic Lateral Sclerosis (ALS). Orphazyme has announced it expects read-outs for its registrational trials in IBM and ALS in
the first half of 2021. Orphazyme has highlighted positive Phase 2/3 clinical trial data in patients with NPC and have submitted a New
Drug Application (NDA) with the U.S. Food and Drug Administration (FDA), which is currently under Priority Review by the U.S.
Food and Drug Administration (“FDA”) with a target action date of June 17, 2021. It also submitted a Marketing Authorization
Application (MAA) with the European Medicines Agency (EMA).
The potential revenue from our arrangement with Orphazyme will consist of contingent payments, which will depend upon
Orphazyme’s ability to achieve regulatory approvals and successfully market and sell products derived from arimoclomol. We will not
be involved in this process and will depend entirely on Orphazyme, which may fail to develop or effectively commercialize products
derived from arimoclomol for many reasons, including if they:
•
•
•
•
decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific
expertise, limited cash resources or specialized equipment limitations, or the belief that other drug development programs
may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;
do not have sufficient resources necessary to carry arimoclomol through clinical development, regulatory approval and
commercialization;
cannot obtain the necessary regulatory approvals for arimoclomol; or
decide to pursue a competitive drug candidate.
If Orphazyme does not obtain regulatory approval, or if their research and development or commercialization efforts are not
successful, we will not realize the potential commercial benefits of the arrangement and our business prospects will be materially
adversely affected.
If ImmunityBio fails to successfully develop aldoxorubicin or our exclusive licensing arrangement with ImmunityBio is otherwise
unsuccessful, our business prospects will be materially adversely affected.
In July 2017, we entered into an exclusive licensing agreement with ImmunityBio to complete the clinical development of and
commercialization of aldoxorubicin. Under this agreement, ImmunityBio has committed to provide substantial funding, as well as
significant capabilities in clinical development, regulatory affairs, marketing and sales.
If, for any reason, ImmunityBio does not devote sufficient time and resources to the development and commercialization of
aldoxorubicin, we will not realize the potential commercial benefits of the arrangement, and our results of operations will be adversely
affected. In addition, if ImmunityBio were to breach or terminate its arrangement with us, the development and commercialization of
aldoxorubicin could be delayed, curtailed or terminated, and we may not have sufficient financial resources or capabilities to continue
development and commercialization of aldoxorubicin on our own.
Under our agreement with ImmunityBio, they may opt out of a project by giving us twelve months’ prior written notice. If
ImmunityBio were to exercise its right to opt out of a program or to terminate the licensing agreement, the development and
commercialization of aldoxorubicin would be adversely affected, our potential for generating revenue from this program would be
adversely affected and attracting new partners would be made more difficult.
Much of the potential revenue from our existing and future arrangement with ImmunityBio will consist of contingent payments,
such as payments for achieving development and commercialization milestones and single- and double-digit royalties payable on
commercial sales of successfully developed aldoxorubicin. The milestone, royalty and other revenue that we may receive under this
arrangement will depend upon our, and ImmunityBio’s ability to successfully develop, introduce, market and sell aldoxorubicin. We
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will not be directly involved in this process and will depend entirely on ImmunityBio, which may fail to develop or effectively
commercialize aldoxorubicin for many reasons including if they:
•
•
•
•
decide not to devote the necessary resources due to internal constraints, such as limited personnel with the requisite scientific
expertise, limited cash resources or specialized equipment limitations, or the belief that other drug development programs
may have a higher likelihood of obtaining regulatory approval or may potentially generate a greater return on investment;
do not have sufficient resources necessary to carry aldoxorubicin through clinical development, regulatory approval and
commercialization;
cannot obtain the necessary regulatory approvals for aldoxorubicin; or
decide to pursue a competitive drug candidate.
If ImmunityBio fails to develop or effectively commercialize aldoxorubicin or for any of the other reasons described above, we
may not be able to develop and commercialize that drug independently or replace ImmunityBio with another suitable partner in a
reasonable period of time and on commercially reasonable terms, if at all.
Risks Associated With Drug Discovery and Development
If the projected development goals for our product candidates are not achieved in the expected time frames, the
commercialization of our products may be delayed and our business prospects may suffer. Our financial projections also may
prove to be materially inaccurate.
From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product
development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of
scientific studies and clinical trials and the submission of regulatory filings.
We also may disclose projected expenditures or other forecasts for future periods. These and other financial projections are based
on management’s current expectations and do not contain any margin of error or cushion for any specific uncertainties, or for the
uncertainties inherent in all financial forecasting.
The actual timing of milestones and actual expenditures or other financial results can vary dramatically compared to our estimates,
in some cases for reasons beyond our control or the control of companies that have licensed or purchased our product candidates. If
these milestones or financial projections are not met, the development and commercialization of our product candidates may be
delayed and our business prospects may suffer. The assumptions management has used to produce these projections may significantly
change or prove to be inaccurate. Accordingly, you should not unduly rely on any of these financial projections.
The regulatory approval process is lengthy, time consuming and inherently unpredictable, and if our products or those we
have sold or licensed are not successfully developed and approved by the FDA or foreign regulatory authorities, we may be
forced to reduce or curtail our operations.
All of our product candidates in development or those licensed or sold must be approved by the FDA or corresponding foreign
governmental agencies before they can be marketed. The process for obtaining FDA and foreign government approvals is both time-
consuming and costly, with no certainty of a successful outcome. This process typically includes the conduct of extensive pre-clinical
and clinical testing, including post-approval testing, which may take longer or cost more than we or our licensees, if any, anticipate,
and may prove unsuccessful due to numerous factors, including the substantial discretion of the regulatory authorities. In addition,
approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a
product candidate’s clinical development and may vary among jurisdictions. None of our product candidates in development or
licensed or sold to third parties have received regulatory approval.
Numerous factors could affect the timing, cost or outcome of product development efforts, including the following:
•
•
difficulty in enrolling patients in conformity with required protocols or projected timelines;
requirements for clinical trial design imposed by the FDA;
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•
•
•
•
•
unexpected adverse reactions by patients in trials;
difficulty in obtaining clinical supplies of the product;
changes in or our inability to comply with FDA or foreign governmental product testing, manufacturing or marketing
requirements;
regulatory inspections of clinical trials or manufacturing facilities, which may, among other things, require us or our
manufacturers or licensees to undertake corrective action or suspend or terminate the affected clinical trials if
investigators find them not to be in compliance with applicable regulatory requirements;
inability to generate statistically significant data confirming the safety and efficacy of the product being tested;
• modification of the product during testing; and
•
reallocation of our limited financial and other resources to other clinical programs.
It is possible that none of the product candidates we develop or have sold or licensed will obtain the regulatory approvals
necessary for us to begin selling them or making us eligible to receive milestone or royalty payments. The time required to obtain
FDA and foreign governmental approvals is unpredictable, but often can take years following the commencement of clinical trials,
depending upon the complexity of the product candidate. Any analysis performed on data from clinical activities is subject to
confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. In addition, even if
regulatory approval was obtained, regulatory authorities may approve any product candidates for fewer or more limited indications
than requested, may not approve the intended price for such products, may grant approval contingent on the performance of costly
post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or
desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the
commercial prospects for the product candidates that we develop, have sold or licensed.
Furthermore, even if regulatory approvals are obtained, the manufacturing processes, labeling, packaging, distribution, adverse
event reporting, storage, import, export, advertising, promotion and recordkeeping for the product will be subject to extensive and
ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,
registration, as well as continued compliance with current good manufacturing practices, or cGMPs, and good clinical practices, or
cGCPs, for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with third-party manufacturers or manufacturing processes, or
failure to comply with regulatory requirements, may result in, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory product recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic
partners, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay
regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may
arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes
in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we
may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely
affect our business. We will also be subject to periodic inspections and the potential for mandatory post- approval clinical trials
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required by the FDA and other U.S. and foreign regulatory authorities. Any delay or failure in obtaining required approvals or to
comply with post-approval regulatory requirements could have a material adverse effect on our ability to generate revenue from the
particular product candidate. The failure to comply with any post-approval regulatory requirements also could result in the rescission
of the related regulatory approvals or the suspension of sales of the offending product.
Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier
studies and trials may not be predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any
time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be
predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical development may fail to show the
desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. A number of
companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or
safety profiles, notwithstanding promising results in earlier trials. For example, aldoxorubicin has shown encouraging preliminary
clinical results in our Phase 2b clinical trial as a treatment for STS; however, these conclusions may not be reproduced in future
clinical trial results; for instance, the Phase 3 pivotal clinical trial testing aldoxorubicin as a treatment for STS narrowly missed
statistical significance although it demonstrated a statistically significant improvement in PFS over investigator's choice in 312
patients treated in North America plus Australia. Accordingly, our development partner may ultimately be unable to provide the FDA
with satisfactory data on clinical safety and efficacy sufficient to obtain FDA approval of aldoxorubicin for any indication.
Further delays may occur in clinical trials of product candidates. We do not know whether ongoing clinical trials will be completed
on schedule or at all, or whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be
completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:
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obtaining regulatory approval to commence a trial;
reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites,
the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical
trial sites;
obtaining institutional review board approval at each clinical trial site;
recruiting suitable patients to participate in a trial;
having patients complete a trial or return for post-treatment follow-up;
clinical trial sites deviating from trial protocol or dropping out of a trial;
adding new clinical trial sites; or
• manufacturing sufficient quantities of product candidate for use in clinical trials.
We may be unable to protect our intellectual property rights, which could adversely affect our ability to compete
effectively.
We will be able to protect our technologies from unauthorized use by third parties only to the extent that we have rights to valid
and enforceable patents or other proprietary rights that cover them. Although we have rights to patents and patent applications directed
to our product candidates, these patents and applications may not prevent third parties from developing or commercializing similar or
identical technologies. In addition, our patents may be held to be invalid if challenged by third parties, and our patent applications may
not result in the issuance of patents.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed
in biotechnology patents has emerged to date in the United States and in many foreign countries. The application and enforcement of
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patent laws and regulations in foreign countries is even more uncertain. Accordingly, we may not be able to effectively file, protect or
defend our proprietary rights on a consistent basis. Many of the patents and patent applications on which we rely were issued or filed
by third parties prior to the time we acquired rights to them. The validity, enforceability and ownership of those patents and patent
applications may be challenged, and if a court decides that our patents are not valid, we will not have the right to stop others from
using our inventions. There is also the risk that, even if the validity of our patents is upheld, a court may refuse to stop others on the
ground that their activities do not infringe our patents.
Any litigation brought by us to protect our intellectual property rights could be costly and have a material adverse effect on our
operating results or financial condition, make it more difficult for us to enter into strategic alliances with third parties to develop our
products, or discourage our existing licensees from continuing their development work on our potential products. If our patent
coverage is insufficient to prevent third parties from developing or commercializing similar or identical technologies, the value of our
assets is likely to be materially and adversely affected.
We also rely on certain proprietary trade secrets and know-how, especially where we believe patent protection is not appropriate or
obtainable. However, trade secrets and know-how are difficult to protect. Although we have taken measures to protect our unpatented
trade secrets and know-how, including the use of confidentiality and invention assignment agreements with our employees,
consultants and some of our contractors, it is possible that these persons may disclose our trade secrets or know-how or that our
competitors may independently develop or otherwise discover our trade secrets and know-how.
If our product candidates infringe the rights of others, we could be subject to expensive litigation or be required to obtain
licenses from others to develop or market them.
Our competitors or others may have patent rights that they choose to assert against us or our licensees, suppliers, customers or
potential collaborators. Moreover, we may not know about patents or patent applications that our products would infringe. For
example, because patent applications do not publish for at least 18 months, if at all, and can take many years to issue, there may be
currently pending applications unknown to us that may later result in issued patents that our product candidates would infringe. In
addition, if third parties file patent applications or obtain patents claiming technology also claimed by us or our licensors in issued
patents or pending applications, we may have to participate in interference proceedings in the U.S. Patent and Trademark Office to
determine priority of invention. If third parties file oppositions in foreign countries, we may also have to participate in opposition
proceedings in foreign tribunals to defend the patentability of our foreign patent applications.
If a third-party claims that we are infringing on its proprietary rights, any of the following may occur:
• we may become involved in time-consuming and expensive litigation, even if the claim is without merit;
• we may become liable for substantial damages for past infringement if a court decides that our technology infringes a
competitor’s patent;
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a court may prohibit us from selling or licensing our product without a license from the patent holder, which may not be
available on commercially acceptable terms, if at all, or which may require us to pay substantial royalties or grant cross
licenses to our patents; and
• we may have to redesign our product candidates or technology so that it does not infringe patent rights of others, which
may not be possible or commercially feasible.
If any of these events occurs, our business and prospects will suffer and the market price of our common stock will likely decline
substantially.
The results of pre-clinical studies or early clinical trials are not necessarily predictive of future results, and our ultra-high
potency albumin-binding drug conjugates may not have favorable results in later clinical trials or receive regulatory approval.
Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will generate adequate data to
demonstrate the efficacy and safety of our ultra-high potency albumin-binding drug conjugates. A number of companies in the
pharmaceutical and biotechnology industries, including those with greater resources and experience than we have, have suffered
significant setbacks in clinical trials, even after seeing promising results in earlier clinical trials. Despite the results reported in earlier
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preclinical trials for our ultra-high potency albumin-binding drug conjugates, we do not know whether the clinical trials we may
conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market them in any particular jurisdiction. If
our clinical trials do not produce favorable results, our ability to achieve regulatory approval for these drug candidates will be
adversely impacted and the value of our stock may decline.
Any products that we develop or are sold or licensed may become subject to unfavorable pricing regulations or third-
party coverage and reimbursement policies, which could have a material adverse effect on our business.
Our product candidates are intended to be marketed primarily to hospitals, which generally receive reimbursement for the health
care services they provide to their patients from third-party payors, such as Medicare, Medicaid and other domestic and international
government programs, private insurance plans and managed care programs.
Such drugs will likely need to be administered under the supervision of a physician. Under currently applicable law, drugs that are
not usually self-administered may be eligible for coverage by the Medicare program if:
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they are “incidental” to a physician’s services;
they are “reasonable and necessary” for the diagnosis or treatment of the illness or injury for which they are administered
according to accepted standard of medical practice;
they are not excluded as immunizations; and
they have been approved by the FDA.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United
States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important
role in determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare program covers certain
individuals aged 65 or older, disabled or suffering from end-stage renal disease. The Medicaid program, which varies from state-to-
state, covers certain individuals and families who have limited financial means. The Medicare and Medicaid programs increasingly are
used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs
and biologics. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement
for our product candidates.
Most third-party payors may deny coverage or reimbursement if they determine that a medical product was not used in accordance
with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication. Third-party
payors also may refuse to cover and reimburse for experimental procedures and devices. Furthermore, because our programs are in the
early stages of development, we are unable at this time to determine their cost-effectiveness and the level or method of reimbursement.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices, and are
challenging the prices charged for medical products. If the price we are able to charge for any products we develop is inadequate in
light of our development and other costs, our profitability could be adversely affected.
Healthcare legislative reform measures could hinder or prevent the commercial success of our products and product
candidates.
In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to
the healthcare system that could affect our future revenues and profitability. Federal and state lawmakers regularly propose and, at
times, enact legislation that results in significant changes to the healthcare system, some of which are intended to contain or reduce the
costs of medical products and services. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, became law in the United States. It
contains a number of provisions, including those governing enrollments in federal healthcare programs, reimbursement changes and
fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of
new programs. The Affordable Care Act, among other things, (i) increases the minimum Medicaid rebates owed by manufacturers
under the Medicaid Drug Rebate Program, extends the rebate program to individuals enrolled in Medicaid managed care
organizations, and addresses new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program
are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and for drugs that are line extension products; (ii)
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establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and (iii) enacts a new Medicare Part D
coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of
applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient
drugs to be covered under Medicare Part D.
Further, there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their
marketed products, which have resulted in several recent Congressional inquiries and proposed and enacted bills designed to, among
other things, bring more transparency to prescription drug pricing, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for products. In addition, the United States government,
state legislatures, and foreign governments have shown significant interest in implementing drug cost containment programs,
including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription
drugs to limit the growth of government paid health care costs. For example, the United States government has passed legislation
requiring pharmaceutical manufacturers to provide rebates and discounts to certain entities and governmental payors to participate in
federal healthcare programs. Further, Congress and the current administration have each indicated that it will continue to seek new
legislative and/or administrative measures to control drug costs, and the current administration recently released a “Blueprint”, or plan,
to reduce the cost of drugs. The current administration’s Blueprint contains certain measures that the U.S. Department of Health and
Human Services is already working to implement. Individual states in the United States have also been increasingly passing legislation
and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk purchasing.
We anticipate there will continue to be proposals by legislators at both the federal and state levels, regulators and commercial
payers to reduce prescription drug costs while expanding individual healthcare benefits. Additional changes that may affect our
business include those governing enrollment in federal healthcare programs, reimbursement changes, fraud and abuse enforcement,
and expansion of new programs, such as Medicare payment for performance initiatives. The ultimate implementation of any
healthcare reform legislation and any new laws and regulations, and its impact on us, is impossible to predict. Any significant reforms
made to the healthcare system in the U.S., or in other jurisdictions, may have an adverse effect on our business, financial condition,
results of operations and prospects.
We may also be subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could
adversely affect our business, operations and financial condition.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our
operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations.
These laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may be subject
to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect
our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully
offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an
individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made
under federal healthcare programs such as the Medicare and Medicaid programs;
the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or
causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal
government, and which may apply to entities that provide coding and billing advice to customers;
federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false
statements relating to healthcare matters;
the federal physician sunshine requirements under the Affordable Care Act, which requires manufacturers of drugs,
devices, biologics, and medical supplies to report annually to the Centers for Medicare & Medicaid Services information
related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and
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ownership and investment interests held by physicians and other healthcare providers and their immediate family
members;
the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare
transactions and protects the security and privacy of protected health information; and
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to
items or services reimbursed by any third-party payor, including commercial insurers; state laws that require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
applicable compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made
to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of
which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
For instance, the California Consumer Privacy Act, or the CCPA, became effective on January 1, 2020. The CCPA gives
California residents expanded rights to access and delete their personal information, opt out of certain personal
information sharing and receive detailed information about how their personal information is used by requiring covered
companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such
consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for
violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.
Although there are limited exemptions for clinical trial data and the CCPA’s implementation standards and enforcement
practices are likely to remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and
potential liability. Many similar privacy laws have been proposed at the federal level and in other states.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that
some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform
legislation has strengthened these laws. For example, the recently enacted Affordable Care Act, among other things, amends the intent
requirement of the Federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have
actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provides that the government may
assert that a claim including items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or
fraudulent claim for purposes of the False Claims Act.
Achieving and sustaining compliance with these laws may prove costly. In addition, any action against us for violation of these
laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s
attention from the operation of our business. If our operations are found to be in violation of any of the laws described above or any
other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines,
the exclusion from participation in federal and state healthcare programs, imprisonment, or the curtailment or restructuring of our
operations, any of which could adversely affect our ability to operate our business and our financial results.
We will be required to pay substantial milestone and other payments relating to the commercialization of our products.
Aldoxorubicin
The agreement relating to our worldwide rights to aldoxorubicin provides for our payment of up to an aggregate of $7.5 million
upon meeting specified clinical and regulatory milestones up to and including the product’s second, final marketing approval. We also
will be obliged to pay:
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commercially reasonable royalties based on a percentage of net sales (as defined in the agreement);
a percentage of any non-royalty sub-licensing income (as defined in the agreement); and
• milestones of $1,000,000 for each additional final marketing approval that we might obtain.
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Arimoclomol
The agreement relating to our worldwide rights to arimoclomol provides for our payment of up to an aggregate of $3.65 million
upon receipt of milestone payments from Orphayzme A/S.
Innovive
Under the merger agreement by which we acquired Innovive, we agreed to pay the former Innovive stockholders a total of up to
approximately $18.3 million of future earnout merger consideration, subject to our achievement of specified net sales under the
Innovive license agreements. The earnout merger consideration, if any, will be payable in shares of our common stock, subject to
specified conditions, or, at our election, in cash or by a combination of shares of our common stock and cash. Our common stock will
be valued for purposes of any future earnout merger consideration based upon the trading price of our common stock at the time the
earnout merger consideration is paid.
The COVID-19 pandemic could adversely impact our business and prospects, including active and planned clinical trials by
ImmunityBio and Orphazyme.
In December 2019, a novel strain of coronavirus, COVID-19, was first identified in China and has surfaced in several regions
across the world. In March 2020, the disease was declared a pandemic by the World Health Organization. The outbreak has reached
most developed countries and resulted in the implementation of significant governmental measures, including lockdowns, closures,
quarantines and travel bans, intended to control the spread of the virus.
As the situation with Covid-19 continues to evolve, the companies which are working to develop and commercialize our products,
ImmunityBio and Orphazyme, could be materially and adversely affected by the risks, or the public perception of the risks, related to
this pandemic, which could cause delays in the Company’s potential timing of receipts of milestones and royalties within the disclosed
time periods and expected costs. The disruptions to ImmunityBio and Orphazyme could include:
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delays or difficulties in recruiting and enrolling new patients in their clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site
staff;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as their
clinical trial sites and hospital staff supporting the conduct of their clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or
recommended by federal or state governments, employers and others;
limitations in employee resources that would otherwise be focused on the conduct of their clinical trials, including because of
sickness of employees or their families or the desire of employees to avoid contact with large groups of people;
interruption in global shipping that may affect the transport of clinical trial supplies and materials, such as investigational
drug product used in their clinical trials;
delays in receiving approval from the FDA and local regulatory authorities to initiate their planned clinical trials;
changes in FDA and local regulation as part of a response to the COVID-19 coronavirus outbreak which may change the
ways in which clinical trials are conducted of discontinue clinical trials altogether;
delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to
limitations in employee resources or forced furlough of government employees;
delay in the timing of other interactions with the FDA due to absenteeism by federal employees or by the diversion of their
efforts and attention to approval of other therapeutics or other activities related to COVID-19; and
refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.
The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus
may impact our business and prospects will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing
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in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United
States and other countries to contain and treat the disease. As of the date of this filing, senior management and administrative staff are
working primarily remotely and will return to their offices at a yet to be determined date.
In the event of a dispute regarding our international drug development, it may be necessary for us to resolve the dispute in the
foreign country of dispute, where we would be faced with unfamiliar laws and procedures.
The resolution of disputes in foreign countries can be costly and time consuming, similar to the situation in the United States.
However, in a foreign country, we face the additional burden of understanding unfamiliar laws and procedures. We may not be
entitled to a jury trial, as we might be in the United States. Further, to litigate in any foreign country, we would be faced with the
necessity of hiring lawyers and other professionals who are familiar with the foreign laws. For these reasons, we may incur unforeseen
expenses if we are forced to resolve a dispute in a foreign country.
Drug discovery is a complex, time-consuming and expensive process, and we may not succeed in creating new product
candidates.
Conducting drug discovery and pre-clinical development of our albumin-binding technology is a complex and expensive process
that will take many years. Accordingly, we cannot be sure whether or when our drug discovery and pre-clinical development
activities will succeed in developing any new product candidates. In addition, any product candidates that we develop in pre-clinical
testing may not demonstrate success in clinical trials required for marketing approval.
Any deficiency in the design, implementation or oversight of our drug discovery and pre-clinical testing programs could cause us
to incur significant additional costs, experience significant delays, prevent us from obtaining marketing approval for any product
candidate that may result from these programs or abandon development of certain product candidates. If any of these risks
materializes, it could harm our business and cause our stock price to decline.
We have a limited operating history in drug discovery, which is inherently risky, and we may not succeed in addressing these
risks.
We operated our drug discovery laboratory and LADR™ development program from October 2014 through January 2019.
Accordingly, we have a limited operating history in conducting our own drug discovery programs. Consequently, there is limited
information for investors to use as basis for assessing the viability of our drug discovery efforts. Investors must consider the risks and
difficulties inherent in drug discovery and pre-clinical activities, including the following:
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difficulties, complications, delays and other unanticipated factors in connection with the development of new drugs;
competition from companies that have substantially greater assets and financial resources than we have;
our ability to anticipate and adapt to a competitive market and rapid technological developments; and
our need to rely on multiple levels of complex financing agreements with outside funding due to the length of drug
development cycles and governmental approved protocols associated with the pharmaceutical industry.
• We cannot be certain that we will successfully address these risks or that our drug discovery efforts will be successful. In
the event that we do not successfully address these risks, our business, prospects, financial condition and results of
operations could be materially and adversely affected. We also may be required to reduce or discontinue altogether our
drug discovery and pre-clinical programs.
General Risk Factors
We are subject to intense competition, and we may not compete successfully.
Many companies, including large pharmaceutical and biotechnology firms with financial resources, research and development
staffs, and facilities that may be substantially greater than those of ours or our strategic partners or licensees, are engaged in the
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research and development of pharmaceutical products that could compete with our potential products. To the extent that we seek to
acquire, through license or otherwise, existing or potential new products, we will be competing with numerous other companies, many
of which will have substantially greater financial resources, large acquisition and research and development staffs that may give those
companies a competitive advantage over us in identifying and evaluating these drug acquisition opportunities. Any products that we
acquire will be competing with products marketed by companies that in many cases will have substantially greater marketing
resources than we have. The industry is characterized by rapid technological advances and competitors may develop their products
more rapidly and such products may be more effective than those currently under development or that may be developed in the future
by our strategic partners or licensees. Competitive products for a number of the disease indications that we have targeted are currently
being marketed by other parties, and additional competitive products are under development and may also include products currently
under development that we are not aware of or products that may be developed in the future.
As a result, these competitors may:
• succeed in developing competitive products sooner than us or our strategic partners or licensees;
• obtain FDA or foreign governmental approvals for their products before we can obtain approval of any of our
products;
• obtain patents that block or otherwise inhibit the development and commercialization of our product candidate
candidates;
• develop products that are safer or more effective than our products;
• devote greater resources than us to marketing or selling products;
• introduce or adapt more quickly than us to new technologies and other scientific advances;
• introduce products that render our products obsolete;
• withstand price competition more successfully than us or our strategic partners or licensees;
• negotiate third-party strategic alliances or licensing arrangements more effectively than us; and
• take better advantage than us of other opportunities.
We are subject to potential liabilities from clinical testing and future product liability claims.
If any of our products are alleged to be defective, they may expose us to claims for personal injury by patients in clinical trials of
our products or, if we obtain marketing approval and commercialize our products, by patients using our commercially marketed
products. Even if one or more of our products is approved by the FDA, users may claim that such products caused unintended adverse
effects. We maintain clinical trial insurance for our ongoing clinical trials, and we plan to seek to obtain similar insurance for any
other clinical trials that we conduct. We also would seek to obtain product liability insurance covering the commercial marketing of
our product candidates. We may not be able to obtain additional insurance, however, and any insurance obtained by us may prove
inadequate in the event of a claim against us. Any claims asserted against us also may divert management’s attention from our
operations, and we may have to incur substantial costs to defend such claims even if they are unsuccessful.
We may be unable to successfully acquire additional technologies or products. If we require additional technologies or
products, our product development plans may change and the ownership interests of our shareholders could be diluted.
We may seek to acquire additional technologies by licensing or purchasing such technologies, or through a merger or acquisition
of one or more companies that own such technologies. We have no current understanding or agreement to acquire any technologies,
however, and we may not be able to identify or successfully acquire any additional technologies. We also may seek to acquire
products from third parties that already are being marketed or have been approved for marketing, although we have not currently
identified any of these products. We do not have any prior experience in acquiring or marketing products approved for marketing and
may need to find third parties to market any products that we might acquire.
We have focused our product development efforts on our oncology and neurodegenerative drug candidates, which we believe have
the greatest revenue potential. If we acquire additional technologies or product candidates, we may determine to make further changes
to our product development plans and business strategy to capitalize on opportunities presented by the new technologies and product
candidates.
21 We may determine to issue shares of our common stock to acquire additional technologies or products or in connection with a
merger or acquisition of another company. To the extent we do so, the ownership interest of our stockholders will be diluted
accordingly.
The impact and results of our exploration of any strategic alternatives are uncertain and may not be successful.
From time to time, we may consider strategic alternatives available to us to enhance shareholder value. Strategic alternatives could
include acquisition transactions and/or strategic partnerships with one or more parties, the licensing of some of our proprietary
technologies, or other possible transactions. Any strategic transaction that is completed ultimately may not deliver the anticipated
benefits or enhance shareholder value. Further, we may devote a significant amount of our management resources to such a
transaction, which could negatively impact our operations. We may incur significant costs in connection with seeking certain
acquisitions or other strategic opportunities regardless of whether the transaction is completed, which could materially and adversely
affect our liquidity and capital resources. In the event that we consummate an acquisition or strategic alternative in the future, there is
no assurance that we would fully realize the potential benefits of such a transaction. Integration may be difficult and unpredictable,
and acquisition-related integration costs, including certain non-recurring charges, could materially and adversely affect our results of
operations. Moreover, integrating assets and businesses may significantly burden management and internal resources, including the
potential loss or unavailability of key personnel. If we fail to successfully integrate any assets and businesses we acquire, we may not
fully realize the potential benefits we expect, and our operating results could be adversely affected. If we pay for an acquisition in
cash, it would reduce our cash available for operations or cause us to incur additional debt, and if we pay with our stock it could be
dilutive to our stockholders.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology,
including any cybersecurity incidents, could harm our ability to operate our business effectively.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology,
including any cybersecurity incidents, could harm our ability to operate our business effectively. We maintain sensitive data
pertaining to our Company on our computer networks, including information about our development activities, our intellectual
property and other proprietary business information. Our internal computer systems and those of third parties with which we contract
may be vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures, despite the implementation of security measures. System failures, accidents or security
breaches could cause interruptions to our operations, including material disruption of our development activities, result in significant
data losses or theft of our intellectual property or proprietary business information, and could require substantial expenditures to
remedy. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications or
inappropriate disclosure of confidential or proprietary information, we could incur liability and our development programs could be
delayed, any of which would harm our business and operations.
Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters could severely disrupt our operations or the operations of manufacturing facilities and have a material
adverse effect on our business, financial condition, results of operations and prospects. If a natural disaster, power outage or other
event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such
as manufacturing facilities, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue
our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited
and may not prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the
limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
You may experience future dilution as a result of future equity offerings or other equity issuances.
To raise additional capital, we may in the future offer additional shares of our common stock, preferred stock or other securities
convertible into or exchangeable for our common stock. We cannot assure you that we will be able to sell shares or other securities in
any other offering at a price per share that is equal to or greater than the price per share that you may pay for the shares of our
common stock offered hereby. The price per share at which we sell additional shares of our common stock or other securities
convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share that you
may pay for the shares of our common stock.
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Our outstanding options and warrants and the availability for resale of the underlying shares may adversely affect the
trading price of our common stock.
As of December 31, 2020, we had outstanding stock options to purchase 3,166,270 shares of our common stock at a weighted-
average exercise price of $7.43 per share and outstanding warrants to purchase 193,196 shares of common stock at a weighted-average
exercise price of $8.60 per share. Our outstanding options and warrants could adversely affect our ability to obtain future financing or
engage in certain mergers or other transactions, since the holders of options and warrants can be expected to exercise them at a time
when we may be able to obtain additional capital through a new offering of securities on terms more favorable to us than the terms of
outstanding options and warrants. For the life of the options and warrants, the holders have the opportunity to profit from a rise in the
market price of our common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding
options and warrants will also dilute the ownership interests of our existing stockholders. Many of our outstanding warrants contain
anti-dilution provisions pertaining to dividends with respect to our common stock. In the event that these anti-dilution provisions are
triggered by us in the future, we would likewise be required to reduce the exercise price, and increase the number of shares
underlying, those warrants, which would have a dilutive effect on our stockholders.
We have registered with the SEC the resale by the holders of all or substantially all shares of our common stock issuable upon
exercise of our outstanding options and warrants. The availability of these shares for public resale, as well as actual resales of these
shares, could adversely affect the trading price of our common stock.
We cannot assure investors that our internal controls will prevent future material weaknesses.
Section 404 of the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial
reporting and disclosure controls and procedures. We are required to furnish a report by management on, among other things, the
effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses
identified by our management in our internal control over financial reporting.
There can be no assurance that we will not suffer from material weaknesses in the future. If we fail to remediate these material
weaknesses or fail to otherwise maintain effective internal controls over financial reporting in the future, such failure could result in a
material misstatement of our annual or quarterly consolidated financial statements that would not be prevented or detected on a timely
basis and which could cause investors and other users to lose confidence in our consolidated financial statements, limit our ability to
raise capital and have a negative effect on the trading price of our common stock. Additionally, failure to remediate the material
weaknesses or otherwise failing to maintain effective internal controls over financial reporting may also negatively impact our
operating results and financial condition, impair our ability to timely file our periodic and other reports with the SEC, subject us to
additional litigation and regulatory actions and cause us to incur substantial additional costs in future periods relating to the
implementation of remedial measures.
We are subject to legal actions that could adversely affect our financial condition.
From time to time, we are involved in legal proceedings that arise in the ordinary course of business. Securities-related class
action and derivative lawsuits have often been brought against companies, including many biotechnology companies, which
experience volatility in the market price of their securities. This risk is especially relevant for biotechnology and biopharmaceutical
companies such as ours, which often experience significant stock price volatility in connection with their product development
programs.
Although we carry director’s and officer’s and other liability insurance, we must pay the first legal fees and other litigation
expenses incurred up to the application retention, or deductible, amounts under our insurance policies, and the insurance may not be
sufficient to cover all of the liabilities that we may incur in connection with the pending or possible future legal actions. As a result,
any future legal actions may adversely affect out financial condition.
Our anti-takeover measures may make it more difficult to change our management, or may discourage others from
acquiring us, and thereby adversely affect stockholder value.
We have a stockholder rights plan and provisions in our restated by-laws, as amended, that are intended to protect our
stockholders’ interests by encouraging anyone seeking control of our company to negotiate with our board of directors. These
provisions may discourage or prevent a person or group from acquiring us without the approval of our board of directors, even if the
acquisition would be beneficial to our stockholders.
23
We have a classified board of directors, which means that at least two stockholder meetings, instead of one, will be required to
effect a change in the majority control of our board of directors. This applies to every election of directors, not just an election
occurring after a change in control. The classification of our board increases the amount of time it takes to change majority control of
our board of directors and may cause potential acquirers to lose interest in a potential purchase of us, regardless of whether our
purchase would be beneficial to us or our stockholders. The additional time and cost to change a majority of the members of our board
of directors makes it more difficult and may discourage our existing stockholders from seeking to change our existing management in
order to change the strategic direction or operational performance of our company.
Our by-laws provide that directors may only be removed for cause by the affirmative vote of the holders of at least a majority of
the outstanding shares of our capital stock then entitled to vote at an election of directors. This provision prevents stockholders from
removing any incumbent director without cause. Our by-laws also provide that a stockholder must give us not fewer than 120 days but
not more than 150 days’ notice of a proposal or director nomination that such stockholder desires to present at any annual meeting or
special meeting of stockholders. Such provision prevents a stockholder from making a proposal or director nomination at a
stockholder meeting without us having advance notice of that proposal or director nomination. This could make a change in control
more difficult by providing our directors with more time to prepare an opposition to a proposed change in control. By making it more
difficult to remove or install new directors, these bylaw provisions may also make our existing management less responsive to the
views of our stockholders with respect to our operations and other issues such as management selection and management
compensation.
We are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which may also prevent
or delay a takeover of us that may be beneficial to our stockholders.
Our restated by-laws, as amended, designate the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our by-laws provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will
be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim
arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim that is governed by
the internal affairs doctrine. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be
deemed to have notice of and to have consented to this provision of our by-laws. This choice-of-forum provision may limit our
stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other
employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated by-
laws inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur
additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial
condition.
We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of our common
stock.
We are authorized to issue shares of preferred stock in one or more series. Our board of directors may determine the terms of
future preferred stock offerings without further action by our stockholders. If we issue preferred stock, it could affect your rights or
reduce the value of our outstanding common stock. In particular, specific rights granted to future holders of preferred stock may
include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and
restrictions on our ability to merge with or sell our assets to a third party.
We do not expect to pay any cash dividends on our common stock.
We have not declared or paid any cash dividends on our common stock or other securities, and we currently do not anticipate
paying any cash dividends in the foreseeable future. Because we do not anticipate paying cash dividends for the foreseeable future, our
stockholders will not realize a return on their investment in our common stock except to the extent of any appreciation in the value of
our common stock. Our common stock may not appreciate in value, or may decline in value.
24
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the
corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research and
development tax credits) to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there
is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period.
Similar rules may apply under state tax laws. As a result of a previous ownership change, our annual utilization of approximately
$69.3 million in federal net operating loss carryforwards will be substantially limited. If we experience ownership changes as a result
of future transactions in our stock, we may be further limited in our ability to use our net operating loss carryforwards and other tax
assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss
carryforwards and other tax assets could potentially result in increased future tax liability to us on any net income that we may earn in
the future.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
We lease our headquarters in Los Angeles, California. The lease covers approximately 2,771 square feet of office and storage
space and expires in February 2024, with a right to extend the term for an additional five-year period, subject to the terms and
conditions set forth in the lease agreement. Our monthly rent is $13,855, subject to annual increases of 3.5 percent. We also lease
additional storage space for approximately 540 square feet. This lease expires in February 2024, and requires us to make monthly
payments of $1,370, subject to annual increases of 2.5 percent.
Item 3. LEGAL PROCEEDINGS
We are occasionally involved in legal proceedings and other matters arising from the normal course of business. As of
December 31, 2020, we were not involved in any material pending legal proceedings.
We intend to vigorously defend against any complaint. We have directors’ and officers’ liability insurance, which will be
utilized in the defense of any matter involving our directors or officers.
We evaluate developments in legal proceedings and other matters on a quarterly basis. If an unfavorable outcome becomes
probable and reasonably estimable, we could incur charges that could have a material adverse impact on our financial condition and
results of operations for the period in which the outcome becomes probable and reasonably estimable.
Item 4. MINE SAFETY DISCLOSURES
Not Applicable.
25
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on The OTC Market under the symbol “CYTR.” The following table sets forth the high and low sale
prices for our common stock for the periods indicated as reported by The OTC Market:
Fiscal Year 2020:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal Year 2019:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Holders
High
Low
$ 1.90 $ 0.53
$ 0.72 $ 0.45
$ 0.81 $ 0.37
$ 0.83 $ 0.36
$ 0.32 $ 0.25
$ 0.38 $ 0.30
$ 0.68 $ 0.31
$ 0.76 $ 0.51
On March 23, 2021, there were approximately 222 holders of record of our common stock. The number of record holders does not
reflect the number of beneficial owners of our common stock for whom shares are held by brokerage firms and other nominees.
Dividends
We have not paid any cash dividends since our inception and do not contemplate paying any cash dividends in the foreseeable
future.
Equity Compensation Plans
The following table sets forth certain information as of December 31, 2020, regarding securities authorized for issuance under our
equity compensation plans:
(a)
(c)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(b)
Number of Issued
Shares of Restricted
Stock
Weighted-Average
Exercise Price of
Outstanding Options,
Restricted Stock,
Warrants and Rights
Number of Securities
Remaining Available for
issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Columns (a)
and (b)
Plan Category
Equity
approved by our security holders:
compensation
plans
2008 Stock Incentive Plan
2,316,270
—
$10.06
—
Equity compensation plans not
approved by our security holders:
26
2019 Stock Incentive Plan
Outstanding warrants (1)
850,000
193,196
—
—
$0.26
$8.60
Total
______________
3,359,466
—
$7.50
—
—
—
(1) The warrants shown were issued in discrete transactions from time to time as compensation for services rendered by
consultants, advisors or other third parties, and do not include warrants sold in capital-raising transactions. The material terms of such
warrants were determined based upon arm’s-length negotiations with the service providers. The warrant exercise prices approximate
the market price of our common stock at or about the date of grant, and the warrant terms range from two to ten years from the grant
date. The majority of warrants expire in February 2021. The warrants contain customary anti-dilution adjustments in the event of a
stock split, reverse stock split, reclassification or combination of our outstanding common stock and similar events and certain of the
warrants contain anti-dilution adjustments triggered by other corporate events, such as dividends.
Recent Issuances of Unregistered Securities
None.
Repurchase of Shares
We did not repurchase any of our shares during the year ended December 31, 2020.
Item 6. SELECTED FINANCIAL DATA
Not applicable
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the
discussion under “Selected Financial Data” and our consolidated financial statements included in this Annual Report. This discussion
contains forward-looking statements, based on current expectations and related to future events and our future financial performance,
that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of many important factors, including those set forth under the caption “Risk Factors” and elsewhere in this
Annual Report.
Overview
CytRx Corporation
CytRx Corporation (“CytRx”) is a biopharmaceutical research and development company specializing in oncology and rare
diseases. The Company’s focus has been 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. During
2017, CytRx’s discovery laboratory, located in Freiburg, Germany, synthesized and tested over 75 rationally designed drug conjugates
with highly potent payloads, culminating in the creation of two distinct classes of compounds. Four lead candidates (LADR-7 through
LADR-10) were selected based on in vitro and animal preclinical studies, stability, and manufacturing feasibility. In 2018, additional
animal efficacy and toxicology testing of these lead candidates was conducted. In addition, a novel albumin companion diagnostic,
ACDx™, was developed to identify patients with cancer who are most likely to benefit from treatment with these drug candidates.
On June 1, 2018, CytRx launched Centurion BioPharma Corporation (“Centurion”), a private 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,
27
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. On December 21, 2018, CytRx announced that Centurion had
concluded the pre-clinical phase of development for its four LADR drug candidates, and for its albumin companion diagnostic
(ACDx™). As a result of completing this work, operations taking place at the pre-clinical laboratory in Freiburg, Germany would no
longer be needed and, accordingly, the lab was closed at the end of January 2019.
We are a Delaware corporation, incorporated in 1985. Our corporate offices are located at 11726 San Vicente Boulevard, Suite
650, Los Angeles, California 90049, and our telephone number is (310) 826-5648. Our web site is located at http://www.cytrx.com.
We do not incorporate by reference into this Annual Report the information on, or accessible through, our website, and you should not
consider it as part of this Annual Report.
LADR Drug Discovery Platform and Centurion
Centurion’s LADR™ (Linker Activated Drug Release) technology platform is a discovery engine combining our 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. They have 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 cytotoxins) by
controlling the release of the drug payloads and improving drug-like properties.
Centurion’s efforts were focused on two classes of ultra-high potency albumin-binding drug conjugates. These drug
conjugates combine the proprietary LADR™ linkers with novel derivatives of the auristatin and maytansinoid drug classes. These
payloads historically have required a targeting antibody for successful administration to humans. Their drug conjugates eliminate the
need for a targeting antibody and provide a small molecule therapeutic option with potential broader applicability.
Centurion’s postulated mechanism of action for the albumin-binding drug conjugates is as follows:
•
•
•
•
after administration, the linker portion of the drug conjugate forms a rapid and specific covalent bond to the
cysteine-34 position of circulating albumin;
circulating albumin preferentially accumulates at the tumors, bypassing concentration in other non-tumor sites,
including the heart, liver and gastrointestinal tract due to a mechanism called “Enhanced Permeability and
Retention”;
once localized at the tumor, the acid-sensitive linker is cleaved due to the specific conditions within the tumor and in
the tumor microenvironment; and
free active drug is then released into the tumor.
Centurion’s novel companion diagnostic, ACDx™ (albumin companion diagnostic), was developed to identify patients with
cancer who are most likely to benefit from treatment with the four LADR lead assets.
CytRx and Centurion have been working on identifying partnership opportunities for LADR™ ultra-high potency drug
conjugates and its albumin companion diagnostic. However, no partnerships or any source of financing has become available after two
years of effort.
Business Strategy for LADR™ Platform
Currently the Company and Centurion continue to work on identifying partnership or financing opportunities for LADR™ ultra-
high potency drug conjugates and their albumin companion diagnostic. We have concluded all research and development on LADR
and its companion diagnostic and continue to focus on identifying these partnership or financing opportunities.
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Aldoxorubicin
Until July 2017, we were focused on the research and clinical development of aldoxorubicin, our modified version of the
widely-used chemotherapeutic agent, doxorubicin. Aldoxorubicin combines the chemotherapeutic agent doxorubicin with a novel
linker-molecule that binds specifically to albumin in the blood to allow for delivery of higher amounts of doxorubicin (3½ to 4 times)
without several of the major dose-limiting toxicities seen with administration of doxorubicin alone.
On July 27, 2017, we entered into an exclusive worldwide license with ImmunityBio, Inc. (formerly known as NantCell, Inc.)
(“ImmunityBio”), granting to ImmunityBio the exclusive rights to develop, manufacture and commercialize aldoxorubicin in all
indications, and our company is no longer working on development of aldoxorubicin (ImmunityBio has recently merged with
NantKwest, Inc.). As part of the license, ImmunityBio made a strategic investment of $13 million in CytRx common stock at $6.60
per share, a premium of 92% to the market price on that date. We also issued ImmunityBio a warrant to purchase up to 500,000 shares
of common stock at $6.60, which expired on January 26, 2019. We are entitled to receive up to an aggregate of $343 million in
potential milestone payments, contingent upon achievement of certain regulatory approvals and commercial milestones. We are 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.
Aldoxorubicin is a conjugate of the commonly prescribed cytotoxin agent doxorubicin that binds to circulating albumin in the
bloodstream and is believed to concentrate the drug at the site of the tumor. Aldoxorubicin has been tested in over 600 patients with
various types of cancer. Specifically, it is comprised of (6-maleimidocaproyl) hydrazine, an acid-sensitive molecule that is conjugated
to doxorubicin. The initial indication for aldoxorubicin is for patients with advanced soft tissue sarcomas (STS). ImmunityBio lists a
randomized Phase 2 and a randomized Phase 3 study, as well as an aldoxorubicin and ifosfamide Phase 1/2 study in its solid tumor
platform and is currently reviewing options in STS.
Aldoxorubicin has received Orphan Drug Designation (ODD) by the U.S. FDA for the treatment of 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.
In addition to STS, ImmunityBio has expanded aldoxorubicin’s use by combining it with immunotherapies and cell-based
treatments, in advanced and metastatic pancreatic cancer, in advanced squamous cell carcinoma of the head and neck, in triple
negative breast cancer and in colorectal cancer. ImmunityBio has submitted for a randomized metastatic pancreatic study with the
FDA.
In order to fund our business and operations, we have relied primarily upon sales of our equity securities, including proceeds
from the exercise of stock options and common stock purchase warrants and we recently secured long-term financing. We also have
received limited funding from our strategic partners and licensees.
Molecular Chaperone Assets (Orphayzme)
In 2011, CytRx sold the rights to arimoclomol and iroxanadine, based on molecular chaperone regulation technology, to
Orphazyme A/S (formerly Orphazyme ApS) in exchange for a one-time, upfront payment and the right to receive up to a total of $120
million (USD) in milestone payments upon the achievement of certain pre-specified regulatory and business milestones, as well as
royalty payments based on a specified percentage of any net sales of products derived from arimoclomol. Orphazyme is testing
arimoclomol in four indications, including Niemann-Pick disease Type C (NPC), Gaucher disease, Inclusion Body Myositis (IBM)
and Amyotrophic Lateral Sclerosis (ALS). Orphazyme has announced it expects read-outs for its registrational trials in IBM and ALS
in the first half of 2021. Orphazyme has highlighted positive Phase 2/3 clinical trial data in patients with NPC and have submitted a
New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA), which is currently under Priority Review by the
U.S. Food and Drug Administration (“FDA”) with a target action date of June 17, 2021. It also submitted a Marketing Authorization
Application (MAA) with the European Medicines Agency (EMA). Orphazyme has established an Early Access Program in the U.S. as
well as other select European countries. Orphazyme has also received FDA Breakthrough Therapy Designation for arimoclomol for
29
NPC. Orphazyme recently announced its intention that arimoclomol will be marketed globally under the tradename MIPLYFFA™.
CytRx will be entitled to a milestone payment of $6 million upon FDA approval, $4 million upon EMA approval and $2 million upon
approval in Japan, along with royalties from potential sales and potential additional milestone payments, although there can be no
assurance that such milestones will be achieved.
Research and Development
Expenditures for research and development activities related to continuing operations were $0.8 million in 2020 and $0.4 million
for the year ended December 31, 2019 or approximately 12% and 5%, respectively, of our total expenses.
Research and development expenses are further discussed below under “Critical Accounting Policies and Estimates” and “Results
of Operations.”
We do not currently project incurring any material research and development expenditures in 2021. Should the Company’s
subsidiary, Centurion BioPharma be successful in raising capital to further develop its LADR compounds along with a companion
diagnostic, only then would the Company incur research and development expenditures.
All of our product candidates in development must be approved by the FDA or corresponding foreign governmental agencies
before they can be marketed. The process for obtaining FDA and foreign government approvals is both time-consuming and costly,
with no certainty of a successful outcome. A discussion of these and other risks and uncertainties associated with our business is set
forth in the “Risk Factors” section of this Annual Report.
Discontinued Operations
On December 21, 2018, the Company announced that its pre-clinical lab operations had successfully completed its objectives –
namely, it has developed four lead compounds, LADR 7, LADR-8, LADR-9 and LADR 10 along with a companion diagnostic
(ACDx). Accordingly, the Company terminated the contracts of all its employees at its Freiburg location and closed the lab at the end
of January 2019. The results of these discontinued operations are presented separately on the Company’s Consolidated Statement of
Operations.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those related to stock options, impairment of long-lived assets, including accrued
liabilities and certain expenses. We base our estimates on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under
different assumptions or conditions.
Our significant accounting policies are summarized in Note 2 of the Notes to Consolidated Financial Statements included in this
Annual Report. We believe the following critical accounting policies are affected by our more significant judgments and estimates
used in the preparation of our consolidated financial statements:
Revenue Recognition
Revenue consists of license fees from strategic alliances with pharmaceutical companies, as well as service and grant revenues.
Service revenue consists of contract research and laboratory consulting. Grant revenues consist of government and private grants.
The Company accounts for revenue in accordance with Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (“ASC 606).
30
The guidance provides for a five-step analysis of transactions to determine when and how revenue is recognized. Other major
provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and
allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The
guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising
from an entity’s contracts with customers.
Additionally, CytRx is eligible to receive tiered high single to low double-digit royalties on product sales. The royalty term is
determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a
licensed product in a country and ends on the expiration of the last to expire of specified patents or regulatory exclusivity covering
such licensed product in such country or, with a customary royalty reduction, ten years after the first commercial sale if there is no
such exclusivity. These revenues will be recognized when earned.
Research and Development Expenses
Research and development expenses consist of costs incurred for direct and overhead-related research expenses and are expensed
as incurred. Costs to acquire technologies, including licenses, that are utilized in research and development and that have no
alternative future use are expensed when incurred. Technology developed for use in our product candidates is expensed as incurred
until technological feasibility has been established.
Clinical Trial Expenses
Clinical trial expenses, which are included in research and development expenses, include obligations resulting from our contracts
with various contract research organizations, or CROs, in connection with conducting clinical trials of our product candidates. We
recognize expenses for these activities based on a variety of factors, including actual and estimated labor hours, clinical site initiation
activities, patient enrollment rates, estimates of external costs and other activity-based factors. We believe that this method is the best
measure of the efforts expended on a clinical trial with the expenses we record. We adjust our rate of clinical expense recognition if
actual results differ from our estimates. If our estimates prove to be incorrect, clinical trial expenses recorded in any particular period
could vary.
Stock-based Compensation
The fair value of the Company's stock option and restricted stock grants is estimated using the Black-Scholes-Merton Option
Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options
or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-
Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing
model could materially affect compensation expense recorded in future periods.
Net Loss Per Share
Basic net loss per common share attributable to common shareholders is computed using the weighted-average number of common
shares outstanding. Diluted net loss per common share is computed using the weighted-average number of common shares and
common share equivalents outstanding. Potentially dilutive stock options and warrants to purchase approximately 3.4 million and 7.9
million at December 31, 2020 and 2019 respectively, were excluded from the computation of diluted net loss per share, because the
effect would be anti-dilutive.
Potential Strategic Alternatives
From time to time, we may consider strategic alternatives available to us to enhance shareholder value. Strategic alternatives could
include the acquisition of or strategic partnership with one or more parties or the licensing of some of our proprietary technologies.
See “Item 1A – Risk Factors – The impact and results of our exploration of strategic alternatives are uncertain and may not be
successful.”
31
Liquidity and Capital Resources
General
In order to fund our business and operations, we have relied primarily upon sales of our equity securities, including proceeds from
the exercise of stock options and common stock purchase warrants and long-term loan financing. We also have received limited
funding from our strategic partners and licensees. At December 31, 2020, we had cash and cash equivalents of approximately $10.0
million. Management believes that our current resources will be sufficient to fund our operations for the foreseeable future. This
estimate is based, in part, upon our currently projected expenditures for 2021 and the first three months of 2022 of approximately $6.1
million (unaudited) to fund operating activities. These projected expenditures are also based upon numerous other assumptions and
subject to many uncertainties, and actual expenditures may be significantly different from these projections. While these projections
represent our current expected expenditures, we have the ability to reduce the amounts and alter the timing of research and
development expenditures as needed to manage our liquidity needs while still advancing our research and development objectives. We
will ultimately be required to obtain additional funding in order to execute our long-term business plans, although we do not currently
have commitments from any third parties to provide us with long term debt or capital. We cannot assure that additional funding will
be available on favorable terms, or at all. If we fail to obtain additional funding when needed, we may not be able to execute our
business plans and our business may suffer, which would have a material adverse effect on our financial position, results of operations
and cash flows.
If ImmunityBio obtains marketing approval and successfully commercializes aldoxorubicin, we anticipate it will take two years,
and possibly longer, for us to generate significant recurring revenue, and we will be dependent on future financing until such time, if
ever, as we can generate significant recurring revenue. There are also no certainties that Orphazyme will be successful in obtaining
FDA and EMA approval for arimoclomol or choose to commercialize arimoclomol. We have no commitments from third parties to
provide us with any additional financing, and we may not be able to obtain future financing on favorable terms, or at all. Failure to
obtain adequate financing would adversely affect our ability to operate as a going concern. If we raise additional funds by issuing
equity securities, dilution to stockholders may result and new investors could have rights superior to holders of the shares issued in
this offering. In addition, debt financing, if available, may include restrictive covenants. If adequate funds are not available to us, we
may have to liquidate some or all of our assets or to delay or reduce the scope of or eliminate some portion or all of our development
programs or clinical trials.
Discussion of Operating, Investing and Financing Activities
Net loss for the year ended December 31, 2020 was $6.7 million, and cash used for operating activities for that period was $6.1
million. The net loss reflects $0.3 million of stock option and warrant expense.
Net loss for the year ended December 31, 2019 was $7.2 million, and cash used for operating activities for that period was $5.7
million. The net loss reflects $2.0 million of stock option and warrant expense.
For the year ended December 31, 2020, $25,900 was used for the purchase of equipment and furnishings.
For the year ended December 31, 2019, we received $0.5 million from the sale of fixed assets held for sale, and $24,700 was used
for the purchase of equipment and furnishings.
The Company received $39,000 from the exercise of stock options, which was the only financing activity for the year ended
December 31, 2020.
There were no financing activities for the year ended December 31, 2019.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material
future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources.
32
Contractual Obligations
We acquire assets still in development and enter into research and development arrangements with third parties that often require
milestone and royalty payments to the third-party contingent upon the occurrence of certain future events linked to the success of the
asset in development. Milestone payments may be required, contingent upon the successful achievement of an important point in the
development life-cycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). We also
typically have to make royalty payments based upon a percentage of the sales of the pharmaceutical product in the event that
regulatory approval for marketing is obtained. Because of the contingent nature of these payments, they are not included in the table of
contractual obligations.
These arrangements may be material individually, and in the event that multiple milestones are reached in the same period, the
aggregate charge to expense could be material to the results of operations in any one period. In addition, these arrangements often give
us the discretion to unilaterally terminate development of the product, which would allow us to avoid making the contingent
payments; however, we are unlikely to cease development if the compound successfully achieves clinical testing objectives.
Our current contractual obligations that will require future cash payments are as follows (in thousands):
Contractual Obligations
Operating lease obligations
Employment obligations
Total contractual obligations
Total
$ 629
7,666
$ 8,295
Payments due by periods as of December 31, 2020
Year 1
Years 2 and
3
Years 4 and
5
$ 199 $ 398
2,076
$ 1,635 $ 2,474
1,438
$ 34
2,076
$ 2,110
$
Years 6 and
beyond
—
2,076
$ 2,076
(1) Operating leases are primarily our facility lease obligations, as well as equipment and software lease obligations with
third party vendors.
(2) Employment agreements include management contracts that provide for minimum salary levels, adjusted periodically at the
discretion of our Compensation Committee, as well as minimum bonuses and employee benefits, in some cases.
We apply the disclosure provisions of ASC 460, Guarantees (“ASC 460”), to our contractual guarantees and indemnities. We have
provided contractual indemnities to other parties against possible losses suffered or incurred by the indemnified parties in connection
with various types of third-party claims, as well as indemnities to our officers and directors against third party claims arising from the
services they provide to us. To date, we have not incurred material costs as a result of these indemnities, and we do not expect to incur
material costs in the future; further, we maintain insurance to cover certain losses arising from these indemnities. Accordingly, we
have not accrued any liabilities related to these indemnities.
Results of Operations
We incurred a net loss of $6.7 million and $7.2 million for the years ended December 31, 2020 and 2019, respectively.
During 2020 and 2019, we recognized no service revenue and earned an immaterial amount of license fees and grant revenue. All
future licensing fees under our current licensing agreements are dependent upon successful development milestones being achieved by
our licensees
Due to the nature of research and development, our operating results may fluctuate from period to period, and the results of prior
periods should not be relied upon as predictive of the results in future periods.
Research and Development from Continuing Operations
Research expenses are expenses incurred by us in the discovery of new information that will assist us in the creation and the
development of new drugs or treatments. Development expenses are expenses incurred by us in our efforts to commercialize the
findings generated through our research efforts.
Research and development expenses during 2020 totaled $800,000. Research and development expenses incurred during 2019
totaled $403,000 and related primarily to licensing fees.
33
General and Administrative from Continuing Operations
General and administrative expenses
Stock, stock option and warrant expenses to non-employees and consultants
Employee stock and stock option expense
Total
Year Ended December 31,
2020
2019
(In thousands)
$ 5,673 $ 5,430
55
1,953
6,001 $ 7,438
—
328
General and administrative expenses include all administrative salaries and general corporate expenses, including legal expenses
associated with the prosecution of our intellectual property. Our general and administrative expenses, excluding common stock, stock
options and warrants issued, were $5.7 million and $5.4 million in 2020 and 2019, respectively. In 2020, the general and
administrative expenses increased marginally by just over 4%, due to an increase in professional fees and public company costs, offset
by a decrease in salaries due to a reduction in headcount, and an additional reduction in overall general and administrative expenses.
From time to time, we issue shares of our common stock or warrants or options to purchase shares of our common stock to
consultants and other service providers in exchange for services. For financial statement purposes, we value these shares of common
stock, stock options, and warrants at the fair value of the common stock, stock options or warrants granted, or the services received
whichever we can measure more reliably. In 2020, we had no such expense as compared to $0.1 million of such expenses in the 2019
year. We recorded employee stock option expense of $0.3 million and $2.0 million in 2020 and 2019, respectively.
Depreciation and Amortization
Depreciation and amortization expenses for the years ended December 31, 2020 and 2019 were approximately $29,000 and
$21,000, respectively. The depreciation expense reflects the depreciation of our equipment and furnishings.
Interest Income
Interest income was $0.1 million in 2020 and $0.4 million in 2019. The variance between years is attributable primarily to the
amount of funds available for investment each year and, to a lesser extent, changes in prevailing market interest rates.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments ("ASC
326"). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and
notes receivables. The standard will replace today's "incurred loss" approach with an "expected loss" model, under which companies
will recognize allowances based on expected rather than incurred losses. Entities will apply the standard's provisions as a cumulative-
effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard
is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2016-13 is not
expected to have a material impact on the Company's financial position, results of operations, and cash flows.
Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute
of Certified Public Accountants, and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material
impact on the Company’s consolidated financial statements and related disclosures.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Historically, our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in the
general level of U.S. interest rates, particularly because a significant portion of our investments are in short-term debt securities issued
by the U.S. government and institutional money market funds. The primary objective of our investment activities is to preserve
principal. Due to the short-term nature of our investments, we believe that we are not exposed to any material market risk. We do not
have any speculative or hedging derivative financial instruments or foreign currency instruments. If interest rates had varied by 10% in
the year ended December 31, 2020, it would not have had a material effect on our results of operations or cash flows for that period.
34
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and notes thereto as of December 31, 2020 and 2019, and for each of the two years ended
December 31, 2020 and 2019, together with the reports thereon of our independent registered public accounting firm, are set forth
beginning on page F-1 of this Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, performed an evaluation
of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rule
13a-15(e)) as of December 31, 2020, the end of the period covered by this Annual Report. Based on this evaluation, our principal
executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of
December 31, 2020, as described further below.
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020
that materially affected, or are reasonably likely to have a material effect, on our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of
December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013 Edition) (“the Framework”). Based upon
management’s assessment using the criteria contained in COSO, management has concluded that our internal control over financial
reporting was effective as of December 31, 2020.
35
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information concerning our directors and executive officers:
Class of
Director (1) Position
Name
Steven A. Kriegsman
Louis Ignarro, Ph.D.
Joel Caldwell
Earl Brien. M.D.
John Y. Caloz
____________
(1) Our Class I director serves until the 2022 annual meeting; our Class II director serves until the 2023 annual meeting of
Director, Chairman of the Board and Chief Executive Officer
Lead Director (2) (3)
Director (2) (3)
Director
Chief Financial Officer and Senior Vice-President
Age
79
79
65
60
69
II
I
III
III
—
stockholders, and our Class III directors serve until the 2021 annual meeting of stockholders.
(2) Members of our Audit Committee. Mr. Caldwell is Chairman of the Committee.
(3) Members of our Compensation Committee. Dr. Ignarro is Chairman of the Committee.
Steven A. Kriegsman has been CytRx’s Chief Executive Officer and a director since July 2002. In October 2014, he was elected
Chairman of the Board. Mr. Kriegsman served on the boards of directors of Galena Biopharma, Inc. from 2009 until 2016 and
Catasys, Inc. from November 2013 to August 2015. He previously served as Director and Chairman of Global Genomics from June
2000 until 2002. Mr. Kriegsman is an inactive Chairman and the founder of Kriegsman Capital Group LLC, a financial advisory firm
specializing in the development of alternative sources of equity capital for emerging growth companies in the healthcare industry.
During his career, he has advised such companies as SuperGen Inc., Closure Medical Corporation, Novoste Corporation, Miravant
Medical Technologies, and Maxim Pharmaceuticals. In the past, Mr. Kriegsman has also served on the Board of Directors of Bradley
Pharmaceuticals, Inc. and Hythiam, Inc. Mr. Kriegsman has a B.S. degree with honors from New York University in Accounting and
completed the Executive Program in Mergers and Acquisitions at New York University, The Management Institute. Mr. Kriegsman is
a graduate of the Stanford Law School Directors’ College.
Mr. Kriegsman was formerly a Certified Public Accountant with KPMG in New York City. In February 2006, Mr.
Kriegsman received the Corporate Philanthropist of the Year Award from the Greater Los Angeles Chapter of the ALS Association
and in October 2006, he received the Lou Gehrig Memorial Corporate Award from the Muscular Dystrophy Association. Mr.
Kriegsman has been a guest speaker and lecturer at various universities including California Institute of Technology (Caltech), Brown
University, and New York University. He also was an instructor at York College in Jamaica (Queens), NY, where he taught business
to a diverse group of students in York’s adult education program. Mr. Kriegsman has been active in various charitable organizations
including the Biotechnology Industry Organization, the California Health Institute, the ALS Association, the Los Angeles Venture
Association, the Southern California Biomedical Council, the American Association of Dance Companies and the Palisades-Malibu
YMCA. Mr. Kriegsman served in the US Army from 1963-1969.
Mr. Kriegsman’s extensive history as a member of management is vital to the board of directors’ collective knowledge of our day-
to-day operations. Mr. Kriegsman also provides great insight as to how CytRx grew as an organization and his institutional knowledge
is an invaluable asset to the board of directors in effecting its oversight of CytRx’s strategic plans. Mr. Kriegsman’s presence on the
board of directors also allows for a flow of information and ideas between the board of directors and management.
Louis Ignarro, Ph.D. has been a director since July 2002. He previously served as a director of Global Genomics from November
2000 until 2002. Dr. Ignarro received the Nobel Prize for Medicine in 1998. Dr. Ignarro serves as the Jerome J. Belzer, M.D.
Distinguished Professor of Pharmacology in the Department of Molecular and Medical Pharmacology at the UCLA School of
Medicine. Retired in 2013, Dr. Ignarro had been at the UCLA School of Medicine since 1985 as a professor, acting chairman and
assistant dean. Dr. Ignarro received a B.S. in pharmacy from Columbia University and his Ph.D. in Pharmacology from the University
of Minnesota. Dr. Ignarro is a Nobel Laureate and an esteemed medical researcher whose experience enables him to offer importance
scientific guidance to our Board of Directors. In December 2016, Dr. Ignarro was appointed Lead Director.
36
Joel Caldwell joined our Board of Directors on July 12, 2017. He brings more than 30 years of experience in tax matters, finance,
and internal auditing. He retired from Southern California Edison, one of the nation’s largest public utilities, where he had been
employed for 28 years in various executive-level accounting and finance positions covering Internal Audits, Executive Compensation,
Long Term Finance, Employee Benefits and, most recently prior to his retirement, Sarbanes-Oxley Internal Controls Compliance. He
also worked in public accounting at the firm of Arthur Andersen & Co. In 1980, Mr. Caldwell earned his MBA with a major in
finance from the University of California at Berkeley. Prior to that, he received a Bachelor of Science degree in Accounting and
Finance, also from the University of California at Berkeley. He has been a Certified Public Accountant in California since 1982 and a
Certified Internal Auditor since 1986. Mr. Caldwell volunteers his business skills, serving as a financial advisor on the board of
trustees of a charitable organization, and continues his involvement with track and field sports by volunteering as a meet official at
Pacific Palisades Charter High School. He is a member of both the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.
Mr. Caldwell’s diverse background in accounting, auditing and finance, along with his accreditation as a member of both the
American Institute of Certified Public Accountants and the California Society of Certified Public Accountants will provide the board
with a balanced perspective to enhance its stewardship and fulfill his role as the named financial expert on our Audit Committee.
Earl Brien, M.D. joined our board of directors in December 2016. He is a renowned orthopedic and sarcoma surgeon who has
served as a Professor of Orthopedic Surgery and as the Surgical Director of the Sarcoma Service at Cedars Sinai Medical Center in
Los Angeles, California since February 2008. After completing his matriculation as a Fellow at Memorial Sloan Kettering Cancer
Center and the Hospital for Special Surgery in musculoskeletal tumors and metabolic bone disease respectively, he became the
Director of the Musculoskeletal Tumor Program and Metabolic Bone Disease Center at Orthopedic Hospital. Dr. Brien is the recipient
of numerous grants, with an extensive bibliography of peer-reviewed articles spanning more than twenty years to his credit. He has
also presented annually at national and international meetings for the past twenty years. From 1993 until 2004, he served as the Cancer
Commission Chairman and Cancer Liaison Physician for the American College of Surgeons Commission on Cancer at Orthopedic
Hospital.
John Y. Caloz joined us in October 2007 as our Chief Accounting Officer. In January of 2009 Mr. Caloz was named Chief
Financial Officer and in August of 2020 was appointed Senior Vice-President. He has a history of providing senior financial
leadership in the life sciences sector, as Chief Financial Officer of Occulogix, Inc, a NASDAQ listed, medical therapy company. Prior
to that, Mr. Caloz served as Chief Financial Officer of IRIS International Inc., a Chatsworth, CA based medical device manufacturer.
He served as Chief Financial Officer of San Francisco-based Synarc, Inc., a medical imaging company, and from 1993 to 1999 he was
Senior Vice President, Finance and Chief Financial Officer of Phoenix International Life Sciences Inc. of Montreal, Canada, which
was acquired by MDS Inc. in 1999. Mr. Caloz was a partner at Rooney, Greig, Whitrod, Filion & Associates of Saint Laurent,
Quebec, Canada, a firm of Chartered Accountants specializing in research and development and high-tech companies, from 1983 to
1993. Mr. Caloz, a Chartered Professional Accountant and Chartered Accountant, holds a degree in Accounting from York University,
Toronto, Canada.
Diversity
Our board of directors is responsible for assembling for stockholder consideration director-nominees who, taken together, have
appropriate experience, qualifications, attributes, and skills to function effectively as a board. The Board periodically reviews its
composition in light of our changing requirements, its assessment of its performance, and the input of stockholders and other key
constituencies. The Board of Directors looks for certain characteristics common to all board members, including integrity, strong
professional reputation and record of achievement, constructive and collegial personal attributes, and the ability and commitment to
devote sufficient time and energy to board service. In addition, they seek to include on the board of directors a complementary mix of
individuals with diverse backgrounds and skills reflecting the broad set of challenges that the board of directors confronts. These
individual qualities can include matters such as experience in our company’s industry, technical experience (i.e., medical or research
expertise), experience gained in situations comparable to the company’s, leadership experience, and relevant geographical diversity.
Committees
Our business, property and affairs are managed by or under the direction of the board of directors. Members of the board are kept
informed of our business through informal discussions with our chief executive and financial officers and other officers, by reviewing
materials provided to them and by participating at meetings of the board and its committees.
37
Our board of directors currently has two committees. The Audit Committee consists of Mr. Caldwell and Dr. Ignarro. The
Compensation Committee consists of Dr. Ignarro and Mr. Caldwell. Such committees operate under formal charters that govern their
duties and conduct. Copies of the charters are available on our website at www.cytrx.com.
Our board of directors has determined that Mr. Caldwell, one of the independent directors serving on our Audit Committee, is an
“audit committee financial expert” as defined by the SEC’s rules. Our board of directors has determined that Dr. Ignarro, Mr. Caldwell
and Dr. Brien are “independent” under the current independence standards of both The OTC Market and the SEC.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of our executive officers and directors and persons who own more than 10% of our outstanding shares of common stock is
required under Section 16(a) of the Securities Exchange Act to file with the SEC initial reports of ownership and reports of changes in
ownership of our common stock and to furnish us with copies of those reports. Based solely on our review of copies of reports we
have received and written representations from certain reporting persons, we believe that our directors and executive officers and
greater than 10% shareholders for 2014 complied with all applicable Section 16(a) filing requirements.
Code of Ethics
We have adopted a Code of Ethics applicable to all employees, including our principal executive officer, principal financial officer
and principal accounting officer, a copy of which is available on our website at www.cytrx.com. We will furnish, without charge, a
copy of our Code of Ethics upon request. Such requests should be directed to Attention: Corporate Secretary, 11726 San Vicente
Boulevard, Suite 650, Los Angeles, California, or by telephone at 310-826-5648.
Board Leadership Structure
On October 15, 2014, our board of directors appointed Mr. Kriegsman as Chairman of the Board. The Chairman of the Board
presides at all meetings of our board of directors (but not at its executive sessions) and exercises and performs such other powers and
duties as may be assigned to him from time to time by the board or prescribed by our amended and restated bylaws.
Our board of directors has no established policy on whether it should be led by a Chairman who is also the Chief Executive
Officer, but periodically considers whether combining, or separating, the role of Chairman and Chief Executive Officer is appropriate.
At this time, our board is committed to the combined role given the circumstances of our company, including Mr. Kriegsman’s
knowledge of the pharmaceutical industry and our company’s strategy. Our board believes that having a Chairman who also serves as
the Chief Executive Officer allows timely communication with our board on company strategy and critical business issues, facilitates
bringing key strategic and business issues and risks to the board’s attention, avoids ambiguity in leadership within the company,
provides a unified leadership voice externally and clarifies accountability for company business decisions and initiatives. In
December 2016, Dr. Ignarro was appointed as an independent Lead Director to act as a liaison between the Chairman of the Board and
the independent directors. The board will continue to assess whether this leadership structure is appropriate and will adjust it as it
deems appropriate.
Board of Directors Role in Risk Oversight
In connection with its oversight responsibilities, our board of directors, including the Audit Committee, periodically assesses the
significant risks that we face. These risks include, but are not limited to, financial, technological, competitive, and operational risks.
Our board of directors administers its risk oversight responsibilities through our Chief Executive Officer and Chief Financial Officer
who review and assess the operations of our business, as well as operating management’s identification, assessment and mitigation of
the material risks affecting our operations.
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents summary information concerning all compensation paid or accrued by us for services rendered in all
capacities during 2020 and 2019 by Steven A. Kriegsman and John Y. Caloz, who are considered our “named executive officers”
during the year ended December 31, 2020.
38
Summary Compensation Table
Name and Principal Position
Steven A. Kriegsman
Chief Executive Officer
John Y. Caloz
Chief Financial Officer,
Treasurer and Senior
Vice-President
Year
Salary ($)
Bonus
($) (1)
Option
Awards
($) (2)
All Other
Compensation ($)
(3)
Total
($)
2020 850,000 150 ,000
2019 850,000 190 ,000
—
654,000
13,700
13,700
1,013,700
1,707,700
2020 400,000
2019 400,000
100,000
100,000
—
76,300
—
—
500,000
576,300
_____________________
(1) Bonuses to the named executive officers reported above were paid in December of the applicable year.
(2) The values shown in this column represent the aggregate grant date fair value of equity-based awards granted during the fiscal
year, inclusive of Mr. Kriegsman’s restricted stock award, in accordance with ASC 718, “Share Based-Payment.” The fair value
of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the assumptions
described in Note 8 of the Notes to Consolidated Financial Statements included in our 2020 Annual Report.
(3) Represents life insurance premiums.
39
2020 Grants of Plan-Based Awards
No stock options nor restricted stock were granted in 2020.
2008 Stock Incentive Plan and the 2019 Stock Incentive Plan
The purpose of our 2008 Stock Incentive Plan, or 2008 Plan, and our 2019 Stock Incentive Plan, or 2019 Plan, is to promote our
success and enhance our value by linking the personal interests of our employees, officers, consultants and directors to those of our
stockholders. The 2008 Plan was adopted by our board of directors on November 21, 2008 and by our stockholders on July 1, 2009
with certain amendments to that Plan having been subsequently approved by our board of directors and stockholders. The 2019 Plan
was adopted by our board of directors on November 15, 2019.
2008 Plan and the 2019 Plan Descriptions
The 2008 Plan and the 2019 Plan, or the Plans, are administered by the Compensation Committee of our board of directors. The
Compensation Committee has the power, authority and discretion to:
•
•
•
designate participants;
determine the types of awards to grant to each participant and the number, terms and conditions of any award;
establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; and
• make all other decisions and determinations that may be required under, or as the Compensation Committee deems necessary
or advisable to administer, the Plan.
Awards under the 2008 Plan
The 2008 Plan expired on November 20, 2018, and thus no shares are available for future grant under the 2008 Plan.
Awards under the 2019 Plan
The following is a summary description of financial instruments that may be granted to participants in our 2019 Plan by the
Compensation Committee of our board of directors.
Stock Options. The Compensation Committee is authorized to grant non-qualified stock options. The terms of any incentive stock
option must meet the requirements of Section 422 of the Internal Revenue Code. The exercise price of an option may not be less than
the fair market value of the underlying stock on the date of grant, and no option may have a term of more than 10 years from the grant
date.
Restricted Stock. The Compensation Committee may make awards of restricted stock, which will be subject to forfeiture to us and
other restrictions as the Compensation Committee may impose.
Stock Bonus Awards. The Compensation Committee may make awards of stock bonus awards in consideration for past services
actually rendered, which will be subject to repurchase by us and such other terms as the Compensation Committee may impose.
Limitations on Transfer; Beneficiaries. Stock Option awards under the 2019 Plan may generally not be transferred or assigned by
participants other than by will or the laws of descent and distribution. Awards of Restricted Stock or Stock Bonus awards may be
transferred or assigned only upon such terms and conditions as set forth in the award agreement or as determined by the Compensation
Committee in its discretion.
Acceleration Upon Certain Events. In the event of a “Corporate Transaction” as defined in the 2019 Plan, all outstanding options
will become fully vested, subject to the holder’s consent with respect to incentive stock options, and exercisable and all restrictions on
all outstanding awards will lapse. Unless the surviving or acquiring entity assumes the awards in the Corporate Transaction or the
stock award agreement provides otherwise, the stock awards will terminate if not exercised at or prior to the Corporate Transaction.
40
Termination and Amendment
Our board of directors or the Compensation Committee may, at any time and from time to time, terminate or amend the 2019 Plan
without stockholder approval; provided, however, that our board or the Compensation Committee may condition any amendment on
the approval of our stockholders if such approval is necessary or deemed advisable with respect to tax, securities or other applicable
laws, policies or regulations. No termination or amendment of the Plans may adversely affect any award previously granted without
the written consent of the participants affected. The Compensation Committee may amend any outstanding award without the
approval of the participants affected, except that no such amendment may diminish or impair the value of an award.
Holdings of Previously Awarded Equity
Equity awards held as of December 31, 2020 by each of our named executive officers were issued under our 2008 Plan and our
2019 Plan. The following table sets forth outstanding equity awards held by our named executive officers as of December 31, 2020:
2020 Outstanding Equity Awards at Fiscal Year-End
Option Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Name
Steven A. Kriegsman
President and Chief Executive Officer
John Y. Caloz
Chief Financial Officer, Treasurer
and Senior Vice-President
Exercisable
Unexercisable
Option Exercise
Price ($)
Option
Expiration Date
208,334
775,194
208,334
166,666
100,000
154,167
12,363
83,334
23,810
350,000
58,333
58,333
50,000
33,334
25,000
16,667
4,762
(2)
(1)
(1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1.75
n/a
2.58
14.64
12.90
27.96
14.76
10.98
13.02
0.26
1.75
2.58
14.64
12.90
27.96
10.98
13.02
12/14/27
n/a
12/14/26
12/14/25
12/09/24
12/09/23
3/07/23
12/10/22
12/11/21
12/12/29
12/14/27
12/14/26
12/14/25
12/14/24
12/09/23
12/10/22
12/11/21
____________
(1) The options were re-priced from $14.34 to $27.96 on June 1, 2015, with no change to the expiration date of the options.
(2) Represents restricted stock fully-vested at December 31, 2020. On December 15, 2017, Mr. Kriegsman was granted 387,597
shares of restricted stock, which vest over three years in equal annual amounts. On December 15, 2016, Mr. Kriegsman was
granted 387,597 shares of restricted stock, which vest over three years in equal annual amounts.
41
Employment Agreements and Potential Payment upon Termination or Change in Control
Employment Agreement with Steven A. Kriegsman
On December 13, 2019, CytRx entered into a First Amendment to Amended and Restated Employment Agreement with Mr.
Kriegsman pursuant to his continued employment as Chief Executive Officer. The employment agreement, as amended, will expire on
December 31, 2024 but will automatically renew following the expiration date for successive additional one-year periods, unless
either Mr. Kriegsman or we elect not to renew it.
Under his employment agreement, Mr. Kriegsman is currently entitled to receive a base salary of $850,000. Our board of directors
(or its Compensation Committee) reviews the base salary annually and may increase (but not decrease) it in its sole discretion. In
addition to his annual salary, Mr. Kriegsman is eligible to receive an annual bonus as determined by our board of directors (or its
Compensation Committee) in its sole discretion, but not to be less than $150,000, and Mr. Kriegsman received a grant of fully-vested
stock options to purchase 3,000,000 shares of Common Stock in connection with the First Amendment (Mr. Kriegsman exercised
these options in 2020). In addition, Mr. Kriegsman, during his lifetime, and thereafter to his heirs, is entitled to receive payments equal
to ten percent (10%) of the gross milestone and royalty payments received by the Company from Orphazyme A/S (or its successor or
assigns) in respect of Arimoclomol and certain covered diseases following the sale of certain assets relating to the Company’s
molecular chaperone regulation technology to Orphazyme pursuant to the Asset Purchase Agreement, dated May 13, 2011, less any
applicable tax withholdings.
Mr. Kriegsman is eligible to receive additional grants of options to purchase shares of our common stock. The number and terms
of those options, including the vesting schedule, will be determined by our board of directors (or its Compensation Committee) in its
sole discretion. In his employment agreement, however, we have agreed that all stock options held by Mr. Kriegsman will provide for
the extended exercisability for their full term of all vested options in the event of the termination of his employment by us without
“cause,” his resignation for “good reason,” due to his disability or his death.
In Mr. Kriegsman’s employment agreement, we have agreed that, if he is made a party, or threatened to be made a party, to a suit
or proceeding by reason of his service to us, we will indemnify and hold him harmless from all costs and expenses to the fullest extent
permitted or authorized by our certificate of incorporation or bylaws, or any resolution of our board of directors, to the extent not
inconsistent with Delaware law. We also have agreed to advance to Mr. Kriegsman such costs and expenses upon his request if he
undertakes to repay such advances if it ultimately is determined that he is not entitled to indemnification with respect to the same.
These employment agreement provisions are not exclusive of any other rights to indemnification to which Mr. Kriegsman may be
entitled and are in addition to any rights he may have under any policy of insurance maintained by us.
If his employment agreement is not renewed by us or by Mr. Kriegsman, or in the event we terminate Mr. Kriegsman’s
employment without “cause” (as defined), or if Mr. Kriegsman terminates his employment with “good reason” (as defined), in either
case whether during or following the term of his employment agreement (i) we have agreed to pay Mr. Kriegsman a lump-sum equal
to his salary and prorated minimum annual bonus through to his date of termination, plus his salary and minimum annual bonus for a
period of three years after his termination date, or until the expiration of the employment agreement, whichever is later, (ii) he will be
entitled to immediate vesting of all stock options or other awards based on our equity securities, and (iii) he will also be entitled to
continuation of his life insurance premium payments and continued participation in any of our health plans through to the later of the
expiration of the amended and restated employment agreement or three years following his termination date. Mr. Kriegsman will
have no obligation in such events to seek new employment or offset the severance payments to him by any compensation received
from any subsequent reemployment by another employer.
Under Mr. Kriegsman’s employment agreement, he and his affiliated company, The Kriegsman Group LLC, are to provide us
during the term of his employment with the first opportunity to conduct or take action with respect to any acquisition opportunity or
any other potential transaction identified by them within the biotech, pharmaceutical or health care industries and that is within the
scope of the business plan adopted by our board of directors. Mr. Kriegsman’s employment agreement also contains confidentiality
provisions relating to our trade secrets and any other proprietary or confidential information, which provisions shall remain in effect
for five years after the expiration of the employment agreement with respect to proprietary or confidential information and for so long
as our trade secrets remain trade secrets.
42
Potential Payment upon Termination or Change in Control for Steven A. Kriegsman
Mr. Kriegsman’s employment agreement contains no provision for payment to him upon the event of a change in control of the
company. If, however, a change in control (as defined in his employment agreement) occurs and within two years after the date on
which the change in control occurs, Mr. Kriegsman’s employment is terminated by us without “cause” or by him for “good reason”
(each as defined in his employment agreement), in either case, whether during or following the term of his employment agreement,
then, in addition to the severance benefits described above, Mr. Kriegsman would be entitled to continued participation, for a period of
thirty-six months that commences on the date of termination, of himself and his dependents in health plan benefits and with COBRA
benefits commencing thereafter. To the extent that any payment or distribution of any type by us to or for the benefit of Mr.
Kriegsman resulting from the termination of his employment is or will be subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, we have agreed to pay Mr. Kriegsman, prior to the time the excise tax is payable with
respect to any such payment (through withholding or otherwise), an additional amount that, after the imposition of all income,
employment, excise and other taxes, penalties and interest thereon, is equal to the sum of (i) the excise tax on such payments plus (ii)
any penalty and interest assessments associated with such excise tax.
Employment Agreement with John Y. Caloz
John Y. Caloz is employed as our Chief Financial Officer, Treasurer and Senior Vice-President pursuant to an employment
agreement dated as of January 8, 2021 that is to expire on December 31, 2021. Mr. Caloz is paid an annual base salary of $400,000
and is eligible to receive an annual bonus as determined by our board of directors (or our Compensation Committee) in its sole
discretion. In the event we terminate Mr. Caloz’s employment without cause (as defined), we have agreed to pay him a lump-sum
equal to his accrued but unpaid salary and vacation, plus an amount equal to six months’ salary under his employment agreement.
We agree in Mr. Caloz’s employment agreement that if we do not offer to renew or extend his employment agreement, and that his
employment had not theretofore been terminated, we will continue to pay him his annual salary thereunder during the period
commencing upon expiration of his employment agreement and ending on June 30, 2022.
Quantification of Termination Payments and Benefits
The table below reflects the amount of compensation to each of our named executive officers in the event of termination of such
executive’s employment without “cause” or his resignation for “good reason,” termination following a change in control and
termination upon the executive’s death of permanent disability. The named executive officers are not entitled to any payments other
than accrued compensation and benefits in the event of their voluntary resignation. The amounts shown in the table below assume that
such termination was effective as of December 31, 2020, and thus includes amounts earned through such time, and are estimates only
of the amounts that would be payable to the executives. The actual amounts to be paid will be determined upon the occurrence of the
events indicated.
Name
Steven A. Kriegsman
Chief Executive Officer
John Y. Caloz
Chief Financial Officer
Termination Payments and Benefits
Benefit
Severance Payment (4)
Stock Options (1)
Health Insurance (2)
Life Insurance (2)
Bonus
Tax Gross Up (3)
Severance Payment (4)
Stock Options (1)
Health Insurance
Termination w/o Cause or, for Mr.
Kriegsman, for Good Reason
Before Change in
Control ($)
5,950,000
—
188,000
95,700
1,050,000
—
200,000
—
—
After Change in
Control ($)
5,950,000
—
192,000
95,700
1,050,000
—
400,000
—
—
Death ($)
5,950,000
—
192,000
—
1,050,000
—
—
—
9,200
Disability ($)
5,950,000
—
192,000
95,700
1,050,000
—
—
—
9,200
Change in
Control ($)
—
—
—
—
—
—
—
—
—
____________
(1)
Represents the aggregate value of stock options that vest and become exercisable immediately upon each of the triggering
events listed as if such events took place on December 31, 2020, determined by the aggregate difference between the stock
price as of December 31, 2020 and the exercise prices of the underlying options.
43
(2)
(3)
Represents the cost as of December 31, 2020 for benefits provided to Mr. Kriegsman for a period of seven years.
This table reflects the terms of Mr. Kriegsman’s amended and restated employment agreement dated as of December 13,
2019. Mr. Kriegsman’s employment agreement provides that if a change in control (as defined in his employment agreement)
occurs during the term of the employment agreement, and if, during the term and within three years after the date on which
the change in control occurs, Mr. Kriegsman’s employment is terminated by us without “cause” or by him for “good reason”
(each as defined in their respective employment agreement), then, to the extent that any payment or distribution of any type
by us to or for the benefit of Mr. Kriegsman resulting from the termination of his respective employment is or will be subject
to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, we will pay Mr. Kriegsman
prior to the time the excise tax is payable with respect to any such payment (through withholding or otherwise), an additional
amount that, after the imposition of all income, employment, excise and other taxes, penalties and interest thereon, is equal to
the sum of (i) the excise tax on such payments plus (ii) any penalty and interest assessments associated with such excise tax.
Based on Mr. Kriegsman’s past compensation and the estimated payment that would result from a termination of
employment following a change in control, we have estimated that a gross-up payment would not be required. “Good reason”
as defined in Mr. Kriegsman’s employment agreement includes any change in Mr. Kriegsman’s duties or title, as applicable,
that are inconsistent with his respective positions. Mr. Kriegsman’s employment agreement provides that, if the employment
agreement is not renewed by us or by Mr. Kriegsman upon the expiration of its term on December 31, 2024, Mr. Kriegsman
will be entitled to the termination payments and benefits described above.
(4)
Severance payments are prescribed by our employment agreements with the named executive officer and represent a factor of
their annual base compensation of six months, except for Mr. Kriegsman, which is the later of December 2024, the expiration
of his agreement, plus three years.
Compensation of Directors
We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our board of
directors. Directors who also are employees of our company currently receive no compensation for their service as directors or as
members of board committees. In setting director compensation, we consider the significant amount of time that directors dedicate to
the fulfillment of their director responsibilities, as well as the competency and skills required of members of our board. The directors’
current compensation schedule has been in place since December 2013. The directors’ annual compensation year begins with the
annual election of directors at the annual meeting of stockholders. The annual retainer year period has been in place for directors since
2003. Periodically, our board of directors reviews our director compensation policies and, from time to time, makes changes to such
policies based on various criteria the board deems relevant.
Our non-employee directors receive a quarterly retainer of $6,000 (plus an additional $5,000 for the Chairmen of the Audit and
Compensation and Strategy Committees, and $1,500 for the Chairman of the Nomination and Governance Committee), a fee of
$4,000 for each board meeting attended ($750 for board actions taken by unanimous written consent) and $3,000 for each meeting of
the Audit Committee and Compensation Committee attended. Non-employee directors who serve as the chairman of a board
committee receive and an additional $2,500 for each meeting of the Audit or Compensation Committees attended.
The following table sets forth the compensation paid to our directors other than our Chief Executive Officer for 2020:
Director Compensation Table
Name (1)
Louis Ignarro, Ph.D., Lead Director
Earl Brien, M.D., Director
Joel Caldwell, Director
Fees Earned or
Paid in Cash ($)
(2)
87,750
40,000
78,000
Total ($)
87,250
40,000
78,000
____________
(1) Steven A. Kriegsman does not receive additional compensation for his role as Chairman of the Board. For information relating to
Mr. Kriegsman’s compensation as Chief Executive Officer, see the Summary Compensation Table above.
44
(2) The amounts in this column represent cash payments made to Non-Employee Directors for annual retainer fees, committee and/or
chairmanship fees and meeting fees during the year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Based solely upon information made available to us, the following table sets forth information with respect to the beneficial
ownership of our common stock as of March 23, 2021 by (1) each person who is known by us to beneficially own more than five
percent of our common stock; (2) each of our directors; (3) the named executive officers listed in the Summary Compensation Table
under Item 11 who were serving as named Executive Officers as of March 23, 2021; and (4) all of our executive officers and directors
as a group. Beneficial ownership is determined in accordance with the SEC rules. Shares of common stock subject to any warrants or
options that are presently exercisable, or exercisable within 60 days of March 23, 2021 (which are indicated by footnote) are deemed
outstanding for the purpose of computing the percentage ownership of the person holding the warrants or options, but are not treated
as outstanding for the purpose of computing the percentage ownership of any other person. The percentage ownership reflected in the
table is based on 36,480,038 shares of our common stock outstanding as of March 23, 2021. Except as otherwise indicated, the holders
listed below have sole voting and investment power with respect to all shares of common stock shown, subject to applicable
community property laws. An asterisk represents beneficial ownership of less than 1%.
Name of Beneficial Owner
Named Executive Officers and Directors
Louis Ignarro, Ph.D.
Steven A. Kriegsman
Joel Caldwell
Earl Brien, M.D.
John Y. Caloz
All executive officers and directors as a group (five persons)
5% Beneficial Owners
ImmunityBio, Inc.
Shares of
Common Stock
Number
Percent
599,594
3,667,541
335,373
590,247
597,186
5,789,942
1.6%
10.1%
*
1.6%
1.6%
15.9%
(1)
(2)
(3)
(4)
(5)
(6)
1,969,697
5.4%
____________
(1)
Includes 169,048 shares subject to options or warrants.
(2)
Includes 957,008 shares subject to options or warrants.
(3)
Includes 60,000 shares subject to options or warrants.
(4)
Includes 430,000 shares subject to options or warrants.
(5)
Includes 596,429 shares subject to options or warrants.
(6)
Includes 2,212,485 shares subject to options or warrants.
Equity Compensation Plans
The information required is incorporated herein by reference to Item 5 of this Annual Report relating to our Equity Compensation
Plans as set forth on page 27.
45
Item 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Director Independence
Although the Company is no longer listed on NASDAQ, our board of directors has determined that Messrs. Ignarro, Brien and
Caldwell are “independent” under the current independence standards of both The NASDAQ Capital Market and the SEC, and have
no material relationships with us (either directly or as a partner, shareholder or officer of any entity) that are inconsistent with a
finding of their independence as members of our board of directors. Our board has determined that Messrs. Ignarro and Caldwell also
are “independent” for purposes of service as the members of our Audit Committee. In making these determinations, our board of
directors has broadly considered all relevant facts and circumstances, recognizing that material relationships can include commercial,
banking, consulting, legal, accounting, and familial relationships, among others.
Transactions with Related Persons
General
Our Audit Committee is responsible for reviewing and approving, as appropriate, all transactions with related persons, in
accordance with its Charter.
Transactions between us and one or more related persons may present risks or conflicts of interest or the appearance of conflicts of
interest. Our Code of Ethics requires all employees, officers and directors to avoid activities or relationships that conflict, or may be
perceived to conflict, with our interests or adversely affect our reputation. It is understood, however, that certain relationships or
transactions may arise that would be deemed acceptable and appropriate so long as there is full disclosure of the interest of the related
parties in the transaction and review and approval by disinterested directors to ensure there is a legitimate business reason for the
transaction and that the transaction is fair to us and our stockholders.
As a result, the procedures followed by the Audit Committee to evaluate transactions with related persons require:
•
•
that all related person transactions, all material terms of the transactions, and all the material facts as to the related person’s
direct or indirect interest in, or relationship to, the related person transaction must be communicated to the Audit Committee;
and
that all related person transactions, and any material amendment or modification to any related person transaction, be
reviewed and approved or ratified by the Audit Committee, as required by OTC Market Rules.
Our Audit Committee will evaluate related person transactions based on:
•
•
•
•
information provided by members of our board of directors in connection with the required annual evaluation of director
independence;
pertinent responses to the Directors’ and Officers’ Questionnaires submitted periodically by our officers and directors and
provided to the Audit Committee by our management; and
any other relevant information provided by any of our directors or officers.
In connection with its review and approval or ratification, if appropriate, of any related person transaction, our Audit
Committee is to consider whether the transaction will compromise standards included in our Code of Ethics. In the case of
any related person transaction involving an outside director or nominee for director, the Audit Committee also is to consider
whether the transaction will compromise the director’s status as an independent director as prescribed in the OTC Market
Rules.
There were no related person transactions in 2020.
46
Applicable Definitions
For purposes of our Audit Committee’s review:
•
•
“related person” has the meaning given to such term in Item 404(a) of Securities and Exchange Commission Regulation S-K
(“Item 404(a)”); and
“related person transaction” means any transaction for which disclosure is required under the terms of Item 404(a) involving
us and any related persons.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Weinberg & Co, or Weinberg, served as our independent registered public accounting firm and audited our consolidated financial
statements for the years ended December 31, 2020 and 2019. They were appointed effective June 21, 2019.
Audit Fees
The fees for 2020 from Weinberg for professional services rendered in connection with the audit of our annual consolidated
financial statements and reviews of our unaudited consolidated financial statements and Form S-8 registration statements were
approximately $133,000. The fees from BDO for Form S-8 registration statements were $7,000. The fees from Weinberg for
professional services rendered in connection with the audit of our annual consolidated financial statements and reviews of our
unaudited consolidated financial statements for the periods ended June 30th and September 30th, 2019 were approximately $90,000.
The fees from BDO for the review of our unaudited consolidated financial statements for the period ended March 31, 2019 and for
transitional fees were $29,900.
Tax Fees
The aggregate fees billed by Weinberg for professional services for tax compliance were $4,300 for 2020. The aggregate fees
billed by BDO for professional services for tax compliance were $10,450 for 2019.
All Other Fees
No other services were rendered by either Weinberg or BDO in either 2020 or 2019.
Pre-Approval Policies and Procedures
It is the policy of our Audit Committee that all services to be provided by our independent registered public accounting firm,
including audit services and permitted audit-related and non-audit services, must be pre-approved by our Audit Committee. Our Audit
Committee pre-approved all services, audit and non-audit, provided to us by Weinberg and BDO for 2020 and 2019.
47
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this 10-K:
(1) Consolidated Financial Statements
Our consolidated financial statements and the related report of the independent registered public accounting firm thereon are set
forth on pages F-1 to F-22 of this Annual Report. These consolidated financial statements are as follows:
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
(2) Financial Statement Schedule
All schedules are omitted because they are not required, not applicable, or the information is provided in the consolidated financial
statements or notes thereto.
(b) Exhibits
See Exhibit Index to this Annual Report, which is incorporated herein by reference.
48
CytRx Corporation
Form 10-K Exhibit Index
Incorporated By Reference to
Description
Form
Exhibit Filing Date
Filed /
Furnished
Herewith
8-K
2.1
6/9/2008
Agreement and Plan of Merger, dated as of June 6, 2008, among
CytRx Corporation, CytRx Merger Subsidiary, Inc., Innovive
Pharmaceuticals, Inc., and Steven Kelly
Restated Certificate of Incorporation of CytRx Corporation, as
amended
Certificate of Amendment of Restated Certificate of Incorporation
Certificate of Amendment of Restated Certificate of Incorporation
Certificate of Elimination of Designation of Series A Junior
Participating Preferred Stock
10-K
8-K
8-K
8-K
Certificate of Elimination of Series B Convertible Preferred Stock
8-K
Amended and Restated Certificate of Designation of Preferences,
Rights and Limitations of Series B Convertible Preferred Stock
8-K
3.1
3.1
3.1
3.2
3.3
3.1
3/13/2012
5/15/2012
11/1/2017
12/19/2019
12/19/2019
11/17/2020
Amended and Restated By-Laws of CytRx Corporation, effective
November 12, 2020
8-K
3.2
11/17/2020
Amended and Restated Rights Agreement, dated as of November
16, 2020, by and between CytRx Corporation and American Stock
Transfer & Trust Company, LLC, as rights agent
Warrant, dated as of July 27, 2017, issued by CytRx Corporation
to NantCell, Inc.
CytRx Corporation Amended and Restated 2008 Stock Incentive
Plan
8-K
4.1
11/17/2020
8-K
10.3
8/1/2017
10-K
10.6
3/13/2012
Eighth Amendment to Amended and Restated CytRx Corporation
2008 Stock Incentive Plan
14A
(proxy)
Annex B
5/20/2016
Form of Non-qualified Stock Option for grants to non-employee
directors under Amended and Restated 2008 Stock Incentive Plan.
10-K
10.11
3/11/2016
Form of Non-qualified Stock Option for grants to executive
officers under Amended and Restated 2008 Stock Incentive Plan.
10-K
10.12
3/11/2016
Form of Non-qualified Stock Option for grants to Steven A.
Kriegsman and Daniel J. Levitt, M.D., Ph.D., under Amended and
Restated 2008 Stock Incentive Plan.
10-K
10.13
3/11/2016
Amendment No. 1 to Stock Option Agreements of Daniel J. Levitt,
M.D., Ph.D., dated December 31, 2015.
10-K
10.14
3/11/2016
Amendment No. 1 to Stock Option Agreements (2000 Long-Term
Incentive Plan) of Steven A. Kriegsman, dated March 8, 2016.
10-K
10.15
3/11/2016
Amendment No. 1 to Stock Option Agreements (2008 Stock
Incentive Plan) of Steven A. Kriegsman, dated March 8, 2016
License Agreement, dated December 7, 2001, by and between
CytRx Corporation and Vical Incorporated
10-K
10.16
3/11/2016
8-K
99
12/21/2001
Exhibit
Number
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
10.1*
10.1.2*
10.1.3*
10.1.4*
10.1.5*
10.1.6*
10.1.7*
10.1.8*
10.2†
49
Incorporated By Reference to
Description
Form
Exhibit Filing Date
Office Lease between The Kriegsman Capital Group, LLC and
Douglas Emmett Joint Venture, dated April 13, 2000
10-K
10.63
5/14/2004
Assignment, Assumption and Consent, effective July 1, 2003, by
and among CytRx Corporation, The Kriegsman Capital Group,
LLC and Douglas Emmett Joint Venture, concerning Office Lease
dated April 13, 2000
Fifth Amendment to Office Lease dated January 13, 2020 by and
between CytRx Corporation and Douglas Emmett 1993, LLC
10-K
10.64
5/14/2004
License Agreement dated April 17, 2006 between Innovive
Pharmaceuticals, Inc. and KTB Tumorforschungs GmbH
10-Q
10.15
11/14/2006
Amendment dated March 14, 2014 to License Agreement between
CytRx Corporation and KTB Tumorforschungs GmbH
8-K
1.1
3/17/2014
10-Q
10.1
5/17/2011
8-K
10.1
8/1/2017
10-K
10.18
3/29/2019
8-K
10.1
12/19/2019
8-K
8-K
10.1
1/8/2021
10.1
11/15/2019
Asset Purchase Agreement dated May 13, 2011 between CytRx
Corporation and Orphazyme ApS
Exclusive License Agreement, dated as of July 27, 2017, by and
between CytRx Corporation and NantCell, Inc.
Amended and Restated Employment Agreement, dated March 26,
2019, by and between CytRx Corporation and Steven A.
Kriegsman
First Amendment, dated December 19, 2019, to Amended and
Restated Employment Agreement, dated March 26, 2019, by and
between CytRx Corporation and Steven A. Kriegsman
Employment Agreement, dated January 8, 2021, by and between
CytRx Corporation and John Y. Caloz
CytRx Corporation 2019 Stock Incentive Plan
Consent of Weinberg & Co
Certification of Chief Executive Officer Pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
XBRL Instance Document.
XBRL Taxonomy Extension Schema Document.
Exhibit
Number
10.3
10.3.1
10.3.2
10.4†
10.4.1
10.5
10.6
10.7
10.7.1
10.8
10.9
23.1
31.1
31.2
32.1
32.2
101.INS
++
101.SC
H++
Filed /
Furnished
Herewith
**
**
**
**
***
***
**
**
50
Incorporated By Reference to
Description
Form
Exhibit Filing Date
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
Filed /
Furnished
Herewith
**
**
**
**
Exhibit
Number
101.CA
L++
101.DE
F++
101.LA
B++
101.PR
E++
Indicates a management contract or compensatory plan or arrangement.
_______________
*
** Filed herewith.
*** Furnished herewith.
† Confidential treatment has been requested or granted for certain portions which have been blanked out in the copy of the exhibit
filed with the Securities and Exchange Commission. The omitted information has been filed separately with the Securities and
Exchange Commission.
++ Pursuant to applicable securities laws and regulations, the Registrant is deemed to have complied with the reporting obligation
relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of
the federal securities laws as long as the Registrant has made a good faith attempt to comply with the submission requirements and
promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission
requirements. These interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of
Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.
Item 16. FORM 10-K SUMMARY
None
51
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 24, 2021
CYTRX CORPORATION
By: /s/ STEVEN A. KRIEGSMAN
Steven A. Kriegsman
Chairman and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant in the capacities and on the dates indicated.
Signature
Title
/s/ STEVEN A. KRIEGSMAN
Steven A. Kriegsman
/s/ JOHN Y. CALOZ
John Y. Caloz
/s/ LOUIS IGNARRO
Louis Ignarro, Ph.D.
/s/ EARL BRIEN
EARL Brien, M.D.
/s/ JOEL CALDWELL
Joel Caldwell
Chairman of the Board and Chief Executive
Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Date
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
March 24, 2021
52
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CytRx Corporation
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-2
F-4
F-5
F-6
F-7
F-8
F-1 Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
CytRx Corporation
Los Angeles, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of CytRx Corporation (the “Company”) and
subsidiary as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’
equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company and its subsidiary as of December 31, 2020 and 2019, and the results of its
operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Critical Audit Matter Description - Accounting for Leases
As described further in Note 7 to the consolidated financial statements, the Company recognized a right-of-use asset
(“ROU asset”) and a lease liability for operating leases (other than leases that meet the definition of a short-term
lease), at the commencement date of the respective lease term. The Company concluded that the leases were
operating leases which requires a lease liability to be recorded at the present value of future lease payments, and also
F-2
requires the establishment of a right to use asset measured at the value of the initial lease liability with adjustments
for any payments at or before the lease commencement date and any direct costs incurred by the Company.
We identified the accounting for these leases as a critical audit matter because it requires significant auditor
judgment in obtaining sufficient appropriate audit evidence related to management’s determination of the lease
liability and right of use asset, including the selection of an appropriate discount rate to be applied to future lease
payments.
Our audit procedures included the following, among others.
• We obtained an understanding of the controls over the Company’s process for determining the
classification, valuation and completeness of the right-of-use asset and the lease liability, including the
determination of whether the leases were operating or financing leases. Such controls related to ensuring
the completeness of the population of leases, and the accuracy of the computation of the lease liability and
right-of-use asset, including the determination of the incremental borrowing rate.
• We evaluated management’s assessment of whether the leases were operating or financing leases, including
assessing the reasonableness of the judgements used by management in making the determination.
• We tested the accuracy of the data used in the calculation of the right-of-use asset and the lease liability by
agreeing the underlying inputs, such as possession date, lease term and payment terms, to source
documents, such as lease contracts.
• We recalculated the right-of-use asset and the lease liability and evaluated the key assumptions and
methodologies used in the Company’s selection of the incremental borrowing rate by developing a
comparative calculation.
• We evaluated the sufficiency and appropriateness of the financial statement disclosures related to the leases
to assess whether they were accurate and complete.
/s/ Weinberg & Company
We have served as the Company’s auditor since 2019.
Los Angeles, California
March 24, 2021
F-3
CYTRX CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Insurance claim receivable
Prepaid expenses and other current assets
Total current assets
Equipment and furnishings, net
Other assets
Operating lease right-of-use assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Current portion of operating lease obligations
Total current liabilities
Operating lease liabilities, net of current portion
Total liabilities
Commitments and contingencies
Stockholders’ equity:
December 31,
2020
2019
$
$
$
10,003,375 $
325,105
1,094,675
11,423,155
39,758
16,836
580,478
12,060,227 $
16,130,410
7,628
1,066,497
17,204,535
42,893
7,590
—
17,255,018
1,402,054 $
1,190,910
181,103
2,774,067
887,835
1,162,471
2,050,306
415,200
—
3,189,267
2,050,306
Preferred Stock, $0.01 par value, 833,333 shares authorized, including 50,000 shares of Series
B Junior Participating Preferred Stock; no shares issued and outstanding at December 31,
2020 and 2019, respectively
Common stock, $0.001 par value, 41,666,666 shares authorized; 36,480,038 and 33,637,501
shares issued and outstanding at December 31, 2020 and 2019, respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
—
36,480
479,561,860
(470,727,380)
8,870,960
12,060,227 $
33,637
479,197,849
(464,026,774)
15,204,712
17,255,018
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CYTRX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue:
Licensing revenue
Expenses:
Research and development
General and administrative
Depreciation and amortization
Loss from operations
Other income (expense):
Interest income
Other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Loss from continuing operations
Years Ended December 31,
2019
2020
$
—
$
—
799,577
6,000,537
29,037
6,829,151
(6,829,151)
403,006
7,437,809
20,659
7,861,474
(7,861,474)
119,274
10,071
351,968
(12,516)
(6,699,806)
(800)
(7,522,022)
(800)
(6,700,606) (7,522,822)
Income from Discontinued operations (Note 3)
— 360,133
Net loss
$(6,700,606) (7,162,689)
Basic and diluted earnings (loss) per share
Continuing operations
Discontinued operations
Total basic and diluted loss per share
Basic and diluted weighted average shares outstanding
$ (0.19) $ (0.23)
$ 0.01
$ —
$ (0.19) $ (0.22)
34,651,334 33,261,938
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CYTRX CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Series B
Preferred
Shares
Issued
Common Shares
Issued
Preferred
Stock
Amount
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
—
33,637,501
—
$33,637
477,192,747 $(456,864,085) $ 20,362,299
—
—
—
—
—
—
—
—
—
—
——
—
2,005,102
—
—
(7,162,689)
2,005,102
(7,162,689)
33,637,501
—
$33,637
$479,197,849
$(464,026,774)
$15,204,712
—
2,842,537
—
—
—
—
—
327,854
—
327,854
2,843
—
36,157
—
—
(6,700,606)
39,000
(6,700,606)
36,480,038
—
$36,480
$479,561,860
$(470,727,380)
$8,870,960
The accompanying notes are an integral part of these consolidated financial statements.
Balance at January
1, 2019
Issuance of stock
options/restricted
stock for
compensation and
services
Net loss
Balance at
December 31, 2019
Issuance of stock
options/restricted
stock for
compensation and
services
Exercise of stock
options
Net loss
Balance at
December 31, 2020
F-6
CYTRX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net loss
Income from discontinued operations
Loss from continuing operations
Adjustments to reconcile loss from continuing operations to net cash used in
$
(6,700,606) $
—
(6,700,606)
(7,162,689)
360,133
(7,522,822)
Years Ended December 31,
2019
2020
operating activities:
Depreciation and amortization
Loss on retirement of equipment and furnishings
Stock-based compensation expense
Changes in assets and liabilities:
Receivable
Prepaid expenses and other current assets
Amortization of right of-use assets
Accounts payable
Other assets
Decrease in lease liabilities
Accrued expenses and other current liabilities
Net cash used in continuing operations
Net cash used in discontinued operations
Net cash used in operating activities
Cash flows from investing activities:
Purchases of equipment and furnishings for continuing operations
Sale of fixed assets held for sale from discontinued operations
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from the exercise of stock options
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of Cash Flow Information:
Recognition of operating lease right-of-use assets and obligations under ASC
Topic 842
Reclassification of right-of-use assets, from prepaid expenses
Insurance claims to offset accounts payable
29,037
—
327,854
7,628
(94,449)
201,103
189,114
(9,246)
(119,007)
20,659
5,432
2,007,774
140,899
(153,335)
—
(346,927)
33,052
28,439
(6,140,133)
—
(6,140,133)
436,280
(5,378,988)
(339,359)
(5,718,347)
(25,902)
—
(25,902)
(24,658)
500,142
475,484
39,000
39,000
—
—
(6,127,035)
16,130,410
$ 10,003,375
(5,242,863)
21,373,273
$ 16,130,410
$
$
$
715,310
$
66,271
325,105
$
$
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-7
CYTRX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
CytRx Corporation (“CytRx”) is a biopharmaceutical research and development company specializing in
oncology and rare diseases. The Company’s focus has been 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. During 2017, CytRx’s discovery laboratory, located in Freiburg, Germany,
synthesized and tested over 75 rationally designed drug conjugates with highly potent payloads, culminating in the
creation of two distinct classes of compounds. Four lead candidates (LADR-7 through LADR-10) were selected
based on in vitro and animal preclinical studies, stability, and manufacturing feasibility. In 2018, additional animal
efficacy and toxicology testing of these lead candidates was conducted. In addition, a novel albumin companion
diagnostic, ACDx™, was developed to identify patients with cancer who are most likely to benefit from treatment
with these drug candidates.
On June 1, 2018, CytRx launched Centurion BioPharma Corporation (“Centurion”), a private 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. On December 21, 2018, CytRx announced that
Centurion had concluded the pre-clinical phase of development for its four LADR drug candidates, and for its
albumin companion diagnostic (ACDx™). As a result of completing this work, operations taking place at the pre-
clinical laboratory in Freiburg, Germany were no longer needed and, accordingly, the lab was closed at the end of
January 2019.
LADR Drug Discovery Platform and Centurion
Centurion’s LADR™ (Linker Activated Drug Release) technology platform is a discovery engine
combining our 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. They have
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 cytotoxins) by controlling the release of the
drug payloads and improving drug-like properties.
Their efforts were focused on two classes of ultra-high potency albumin-binding drug conjugates. These
drug conjugates combine the proprietary LADR™ linkers with novel derivatives of the auristatin and maytansinoid
drug classes. These payloads historically have required a targeting antibody for successful administration to
humans. Their drug conjugates eliminate the need for a targeting antibody and provide a small molecule therapeutic
option with potential broader applicability.
Centurion’s postulated mechanism of action for the albumin-binding drug conjugates is as follows:
•
•
after administration, the linker portion of the drug conjugate forms a rapid and specific covalent
bond to the cysteine-34 position of circulating albumin;
circulating albumin preferentially accumulates at the tumors, bypassing concentration in other
non-tumor sites, including the heart, liver and gastrointestinal tract due to a mechanism called
“Enhanced Permeability and Retention”;
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•
•
once localized at the tumor, the acid-sensitive linker is cleaved due to the specific conditions
within the tumor and in the tumor microenvironment; and
free active drug is then released into the tumor.
Centurion’s novel companion diagnostic, ACDx™ (albumin companion diagnostic), was developed to
identify patients with cancer who are most likely to benefit from treatment with the four LADR lead assets.
CytRx and Centurion have been working on identifying partnership opportunities for LADR™ ultra-high
potency drug conjugates and its albumin companion diagnostic. However no partnership or any source of financing
has become available after two years of effort.
Aldoxorubicin
Until July 2017, the Company was focused on the research and clinical development of aldoxorubicin, their
modified version of the widely used chemotherapeutic agent, doxorubicin. Aldoxorubicin combines the
chemotherapeutic agent doxorubicin with a novel linker-molecule that binds specifically to albumin in the blood to
allow for delivery of higher amounts of doxorubicin (3½ to 4 times) without several of the major dose-limiting
toxicities seen with administration of doxorubicin alone.
On July 27, 2017, the Company entered into an exclusive worldwide license with ImmunityBio, Inc.
(formerly known as NantCell, Inc. (“ImmunityBio”)), granting to ImmunityBio the exclusive rights to develop,
manufacture and commercialize aldoxorubicin in all indications. As a result, our company is no longer directly
working on development of aldoxorubicin (ImmunityBio has recently merged with NantKwest, Inc.). As part of the
license, ImmunityBio made a strategic investment of $13 million in CytRx common stock at $6.60 per share
(adjusted to reflect our 2017 reverse stock split), a premium of 92% to the market price on that date. The Company
also issued ImmunityBio a warrant to purchase up to 500,000 shares of common stock at $6.60, which expired 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. The Company
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. There can be no assurance that ImmunityBio will achieve such
milestones, approvals or sales with respect to aldoxorubicin. ImmunityBio has initiated a Phase 2, randomized, two-
cohort, open-label registrational-intent study for first-line and second-line treatment of locally advanced or
metastatic pancreatic cancer, which includes aldoxorubicin.
Molecular Chaperone Assets (Orphazyme)
In 2011, CytRx sold the rights to arimoclomol and iroxanadine, based on molecular chaperone regulation
technology, to Orphazyme A/S (formerly Orphazyme ApS) in exchange for a one-time, upfront payment and the
right to receive up to a total of $120 million (USD) in milestone payments upon the achievement of certain pre-
specified regulatory and business milestones, as well as single- and double-digit royalty payments based on a
specified percentage of any net sales of products derived from arimoclomol. Orphazyme A/S is testing arimoclomol
in three additional indications beyond ALS, including Niemann-Pick disease Type C (NPC), Gaucher disease and
Inclusion Body Myositis (IBM). CytRx received a milestone payment of $250,000 in September 2018. Orphazyme
has announced it expects read-outs for its registrational trials in IBM and ALS in the first half of 2021. Orphazyme
has highlighted positive Phase 2/3 clinical trial data in patients with NPC and have submitted a New Drug
Application (NDA) with the U.S. Food and Drug Administration (FDA), which is currently under Priority Review
by the U.S. Food and Drug Administration (“FDA”) with a target action date of June 17, 2021. They also submitted
a Marketing Authorization Application (MAA) with the European Medicines Agency (EMA). Orphazyme has
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established an Early Access Program in the U.S. as well as other select European countries. They also have
established an Early Access Program in the U.S. as well as other select European countries. Orphazyme has also
received FDA Breakthrough Therapy Designation for arimoclomol for NPC. They recently announced arimoclomol
will be marketed globally under the tradename MIPLYFFA™. CytRx will be entitled to a milestone payment of $6
million upon FDA approval and $4 million upon EMA approval, along with royalties and potential additional
milestones.
Current Business Strategy
Currently, the Company is working on identifying partnership or financing opportunities for LADR™
ultra-high potency drug conjugates and their albumin companion diagnostic. We have concluded all research and
development on LADR and its companion diagnostic and continue to focus on identifying these partnership or
financing opportunities.
Liquidity
At December 31, 2020, we had cash and cash equivalents of approximately $10.0 million. Management
believes that our current resources will be sufficient to fund our operations for the foreseeable future. This estimate
is based, in part, upon our currently projected expenditures for 2021 and the first three months of 2022 of
approximately $6.1 million (unaudited) to fund operating activities. These projected expenditures are also based
upon numerous other assumptions and subject to many uncertainties, and actual expenditures may be significantly
different from these projections. While these projections represent our current expected expenditures, we have the
ability to reduce the amounts and alter the timing of research and development expenditures as needed to manage
our liquidity needs while still advancing our research and development objectives. We will ultimately be required to
obtain additional funding in order to execute our long-term business plans, although we do not currently have
commitments from any third parties to provide us with long term debt or capital. We cannot assure that additional
funding will be available on favorable terms, or at all. If we fail to obtain additional funding when needed, we may
not be able to execute our business plans and our business may suffer, which would have a material adverse effect
on our financial position, results of operations and cash flows.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation — The accompanying Consolidated Financial Statements
are prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and
accounting principles generally accepted in the United States (“GAAP”). The Consolidated Financial Statements
include the accounts of CytRx Corporation and its subsidiary. All intercompany accounts are eliminated.
Revenue Recognition — Revenue consists of license fees from strategic alliances with pharmaceutical
companies. During the years ended December 31, 2020 and 2019, no revenue was earned from license fees.
Cash Equivalents — The Company considers all highly liquid debt instruments with an original maturity of 90
days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in certificates of deposit
and money market accounts.
Equipment and Furnishings — Equipment and furnishings are stated at cost and depreciated using the straight-
line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the
related assets. Whenever there is a triggering event that might suggest impairment, management evaluates the
realizability of recorded long-lived assets to determine whether their carrying values have been impaired. The
Company records impairment losses on long-lived assets used in operations when events and circumstances indicate
that the assets might be impaired and the non-discounted cash flows estimated to be generated by those assets are
less than the carrying amount of those assets. Any impairment loss is measured by comparing the fair value of the
asset to its carrying amount. There is an impairment loss of $7,000 recognized in 2019 as a result of the discontinued
operations (see Note 3).
F-10
Insurance recoveries — The Company has several policies with insurance underwriters that provide for the
recovery of certain costs incurred by the Company. The Company’s policy is to record any liability as incurred, and
then to record the estimated recovery from the insurance company for that cost as a receivable in accordance with
terms of its existing policies. As of December 31, 2020, management has estimated that $325,105 is recoverable
from its insurance carriers under the terms of its policies.
Fair Value Measurements — Assets and liabilities recorded at fair value on the consolidated balance sheets are
categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs
are as follows:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market
data at the measurement date.
Level 3 – significant unobservable inputs that reflect management’s best estimate of what market
participants would use to price the assets or liabilities at the measurement date.
The Company had no assets and liabilities measured as at December 31, 2020 at fair value on a recurring basis.
The following table summarizes fair value measurements by level at December 31, 2019 for assets and
liabilities measured at fair value on a recurring basis:
Cash equivalents
Level I
$ 10,995,383
Level II
$
—
Level III
$
—
Total
$ 10,995,383
There were no transfers between Levels I, II and III during 2020 or 2019.
The Company considers carrying amounts of accounts receivable, accounts payable and accrued expenses to
approximate fair value due to the short-term nature of these financial instruments.
Patents and Patent Application Costs — Although the Company believes that its patents and underlying
technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent
costs are therefore expensed as incurred.
Net Income (Loss) Per Common Share — Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is
computed by dividing the net income applicable to common stockholders by the weighted average number of
common shares outstanding plus the number of additional common shares that would have been outstanding if all
dilutive potential common shares had been issued using the treasury stock method. Potential common shares are
excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities
is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of
common shares during the reporting period.
Potentially dilutive stock options and warrants to purchase approximately 3.4 million and 7.9 million shares at
December 31, 2020 and 2019, respectively, were excluded from the computation of diluted net income (loss) per
share, because the effect would be anti-dilutive.
Stock-based Compensation — The Company accounts for share-based awards to employees and nonemployees
directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation., and
under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and
applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is
recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-
Scholes option pricing model, and accounts for forfeitures when they occur.
F-11
Research and Development Expenses — Research and development expenses consist of costs incurred for direct
and overhead-related research expenses and are expensed as incurred. Costs to acquire technologies, including
licenses and drugs, that are utilized in research and development and that have no alternative future use are expensed
when incurred. Technology developed for use in its products is expensed as incurred until technological feasibility
has been established.
Income Taxes — The Company accounts for income taxes in accordance with the provisions of FASB ASC 740-
10, Income Taxes, (“ASC 740”) which requires the recognition of deferred tax assets and liabilities for taxable
temporary differences and deferred tax assets for deductible temporary differences and operating loss carry-forwards
using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit or
expense is recognized as a result of changes in net deferred tax assets or deferred tax liabilities. A valuation
allowance is recorded when it is more likely than not that some or all of any deferred tax assets will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the
tax position will be sustained upon examination by the taxing authorities based on the technical merits of the
position. The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a
component of income tax expenses.
Concentrations of Risks — Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents and short-term investments. The Company
maintains cash and cash equivalents in large well-capitalized financial institutions and the Company’s investment
policy disallows investment in any debt securities rated less than “investment-grade” by national ratings services.
The Company has not experienced any losses on its deposits of cash or cash equivalents or its short-term
investments. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed
federally insured limits. The Company has never experienced any losses related to these balances.
Use of Estimates — Preparation of the Company’s consolidated financial statements in conformance with U.S.
GAAP requires the Company’s management to make estimates and assumptions that impact the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in the Company’s
consolidated financial statements and accompanying notes. The significant estimates in the Company’s consolidated
financial statements relate to the valuation of equity awards, recoverability of deferred tax assets, insurance claims
and estimated useful lives of fixed assets. The Company bases estimates and assumptions on historical experience,
when available, and on various factors that it believes to be reasonable under the circumstances. The Company
evaluates its estimates and assumptions on an ongoing basis, and its actual results may differ from estimates made
under different assumptions or conditions.
New Accounting Pronouncements — In June 2016, the FASB issued ASU No. 2016-13, Credit Losses -
Measurement of Credit Losses on Financial Instruments ("ASC 326"). The standard significantly changes how
entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard
will replace today's "incurred loss" approach with an "expected loss" model, under which companies will recognize
allowances based on expected rather than incurred losses. Entities will apply the standard's provisions as a
cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the
guidance is effective. The standard is effective for interim and annual reporting periods beginning after December
15, 2019. The adoption of ASU 2016-13 is not expected to have a material impact on the Company's financial
position, results of operations, and cash flows.
Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the
American Institute of Certified Public Accountants, and the Securities and Exchange Commission (“SEC”) did not,
or are not expected to, have a material impact on the Company’s consolidated financial statements and related
disclosures.
3. Discontinued Operations
On December 21, 2018, the Company announced that its pre-clinical lab operations had successfully completed
its objectives – namely, it has developed four lead compounds, LADR 7, LADR-8, LADR-9 and LADR 10 along
F-12
with a companion diagnostic (ACDx). Accordingly, the Company terminated the contracts of all its employees at
this location.
The Company terminated its lease in Freiburg Germany on April 30, 2019 with no penalty. The Company sold
its analytical equipment in March 2019 and accordingly has classified these assets as current assets held for sale and
has written down these assets by $7,000. On April 30, 2019 the Company also sold its German office furniture and
German leasehold improvements for $0.3 million. The net book value of the assets held for sale is $0 at December
31, 2019. The value of the assets sold in April 2019 are greater than their net book value and so no write-down was
recorded in the period. The results of these discontinued operations are presented separately on the Company’s
Consolidated Statement of Operations.
The results of these discontinued operations for the year ended December 31, 2019 are presented separately on
the Company’s Consolidated Statement of Operations.
Loss on impairment of equipment and furnishings
Research and development recovery
Employee stock option recovery
Gain on sale of equipment
Other income
Income from discontinued operations
4. Foreign Currency Remeasurement
Year Ended
December 31,
2019
(7,100)
154,397
2,672
186,691
23,473
$360,133
The U.S. dollar has been determined to be the functional currency for the net assets of the Company’s German
operations. The transactions are recorded in the local currencies and are remeasured at each reporting date using the
historical rates for nonmonetary assets and liabilities and current exchange rates for monetary assets and liabilities at
the balance sheet date. Exchange gains and losses from the remeasurement of monetary assets and liabilities are
recognized in other income (loss). The Company recognized a gain (loss) of approximately $26,800 and $(3,400) for
the years ended December 31, 2020 and 2019, respectively.
5. Equipment and Furnishings
Equipment and furnishings at December 31, 2020 and 2019 consist of the following:
Equipment and furnishings
Less — accumulated depreciation
Equipment and furnishings, net
2020
$137,924
(98,166)
$ 39,758
2019
$114,820
(71,927)
$ 42,893
Depreciation and amortization expense for the years ended December 31, 2020 and 2019 were $29,037 and
$20,659, respectively.
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities at December 31, 2020 and 2019 are summarized below.
Professional fees
Research and development costs
Wages, bonuses and employee benefits
Royalties and milestones
Other
Total
2020
$234,700
9,296
215,191
716,155
15,568
$1,190,910
2019
$165,160
9,296
267,737
716,155
4,123
$ ,162,471
F-13
7. Leases
We lease office space and office copiers related primarily to the Company’s administrative activities. The
Company accounts for leases under ASC 842, Leases, which requires an entity to recognize a right-of-use asset and
a lease liability for virtually all leases.
In January 2020, the Company signed a new four-year office lease which covers approximately 2,771
square feet of office and storage space. This lease is effective March 1, 2020 and extends through February 29,
2024, with a right to extend the term for an additional five-year period, subject to the terms and conditions set forth
in the lease agreement. The monthly rent is $13,855, subject to annual increases of 3.5 percent. In February 2020,
the Company renewed its additional storage space lease, which requires us to make monthly payments of $1,370,
subject to a 2.5 percent annual increase. The Company recorded a right of use asset and lease liability obligation of
$715,310 upon inception of these leases. The Company also reclassified a previously existing right-of-use asset of
$66,271 from other assets to right-of-use asset.
As of December 31, 2020, the balance of right-of-use assets was approximately $580,000, and the balance
of total lease liabilities was approximately $596,000.
Future minimum lease payments under non-cancelable operating leases under ASC 842 as of December 31,
2020 are as follows:
Jan 2021 – Dec 2021
Jan 2022 – Dec 2022
Jan 2023 – Dec 2023
Jan 2024 – Dec 2024
Total future minimum lease payments
Less: present value adjustment
Operating lease liabilities at December
31, 2020
Less: current portion of operating lease
liabilities
Operating lease liabilities, net of current
portion
Operating
Lease Payments
$
199,275
197,152
200,927
33,672
631,026
34,723
596,303
181,103
$
415,200
F-14
The components of rent expense and supplemental cash flow information related to leases for the period are
as follows:
Lease Cost
Year Ended
December 31,
2020
Operating lease cost (included in General and administrative expenses in the Company’s
condensed Consolidated Statements of Operations)
$
177,481
Other information
Cash paid for amounts included in the measurement of lease liabilities for the year ended
December 31, 2020
$
185,265
Weighted average remaining lease term – operating leases (in years)
Average discount rate
8. Stock Compensation
Stock Options
3. 1
3.6 %
The Company has a 2008 Stock Incentive Plan under which 5 million shares of common stock are reserved for
issuance. As of December 31, 2020, there were approximately 2.3 million shares subject to outstanding stock
options and approximately 0.8 million shares outstanding related to restricted stock grants issued from the 2008
Plan. This plan expired on November 20, 2018 and thus no further shares are available for future grant under this
plan.
In November 2019, the Company adopted a 2019 Stock Incentive Plan under which 5.4 million shares of
common stock are reserved for issuance. As of December 31, 2020, there were 0.9 million shares subject to
outstanding stock options. This Plan expires on November 14, 2029.
There were no stock options issued to employees and directors in 2020. For the year ended December 31, 2019
the fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model,
based on the following assumptions:
Risk-free interest rate
Expected volatility
Expected lives (years)
Expected dividend yield
2019
1.82%
85%
10
0.00%
The Company’s computation of expected volatility is based on the historical daily volatility of its publicly traded
stock. For option grants issued during year ended December 31, 2019, the Company used a calculated volatility for
each grant. The Company lacks adequate information about the exercise behavior at this time and has determined
the expected term assumption under the simplified method provided for under ASC 718, which averages the
contractual term of the Company’s options of ten years with the average vesting term of three years for an average
of six years. In 2019, since all of the issued options immediately vested, the Company used the full term of ten
years. The dividend yield assumption of zero is based upon the fact the Company has never paid cash dividends and
presently has no intention of paying cash dividends. The risk-free interest rate used for each grant is equal to the
U.S. Treasury rates in effect at the time of the grant for instruments with a similar expected life. The Company
accounts for forfeitures as they occur. No amounts relating to stock-based compensation have been capitalized. No
amounts relating to employee stock-based compensation have been capitalized.
F-15
During the year ended December 31, 2020, the Company issued an aggregate of approximately 2.8 million
shares of its common stock upon the exercise of 4.55 million options. Of the 4.55 million option shares, holders of
4.4 million options exercised their shares on a cashless basis into approximately 2.69 million shares of the
Company’s common stock. The Company received $39,000 for the exercise of the remaining 150,000 options shares
in exchange for 150,000 shares of its common stock.
The following table sets forth the total stock-based compensation expense resulting from stock options and
restricted stock included in our Consolidated Statements of Operations for the years ended December 31, 2020 and
2019:
Research and development – employee
General and administrative – employee
Total employee stock-based compensation
General and administrative – non-employee
Total non-employee stock-based compensation
Years Ended December 31,
2020
2019
$— $ (2,672)
327,854 1,953,274
$ 327,854 $1,950,602
$—
$54,500
$—
$ $54,500
There were no options granted to employees and directors during the year ended December 31, 2020. Presented
below is the Company’s stock option activity for employees and directors:
Outstanding — beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding — end of year
Exercisable at end of year
Weighted average fair value of stock options granted during the
Stock Options
2020
7,126,340
—
(4,300,000)
—
(25,070)
2,801,270
2,801,270
Weighted Average
Exercise Price
2019
2020
2019
2,190,826 $ 11.55 $ 11.55
0.26 0.26
5,150,000
0.26 —
—
9.49 9.49
(186,512)
(27,974) 41.03 43.30
7.68 3.32
7,126,340
7,034,242 $ 7.68 $ 3.34
year:
$
—
$
0.22
Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting
period. At the end of each financial reporting period prior to performance, the value of these options, as calculated
using the Black-Scholes option pricing model, is determined, and compensation expense recognized or recovered
during the period is adjusted accordingly. Since the fair market value of options granted to non-employees is subject
to change in the future, the amount of the future compensation expense is subject to adjustment until the common
stock options are fully vested.
The Company recorded expenses related to the issuance of stock options to certain consultants in exchange for
services of $54,500 for 2019. No such options were issued to consultants in 2020.
F-16
At December 31, 2020, there was no unrecognized compensation expense related to unvested non-employee
stock options. Presented below is the Company’s non-employee stock option activity:
Outstanding — beginning of year
Granted
Exercised
Expired/Forfeited
Outstanding — end of year
Exercisable at end of year
Weighted average fair value of stock options granted during the
2020
615,000
—
(250,000)
—
365,000
365,000
Stock Options
Weighted Average
Exercise Price
2019
2020
2019
365,000 $ 3.36 $ 5.49
— 0.26
250,000
—
—
0.26
—
—
0
5.49 3.36
615,000
365,000 $ 5.49 $3.36
year:
$
—
$
0.22
For the year ended December 31, 2019 the fair value of the stock options granted to non-employees at the date of
grant was estimated using the Black-Scholes option-pricing model, based on the following assumptions:
Risk-free interest rate
Expected volatility
Expected lives (years)
Expected dividend yield
2020
—
—
—
—
2019
1.82%
85%
10
—
The following table summarizes significant ranges of outstanding stock options under the two plans at December
31, 2020:
Range of Exercise
Prices
$0.26 - $1.00
$1.01 – $3.00
$3.01 – $15.00
$15.01 –$42.42
Number of
Options
850,000
1,050,673
852,360
413,237
3,166,270
Weighted-Average
Remaining
Contractual Life
(years)
8.95
6.60
3.97
3.09
6.07
Weighted-Average
Exercise Price
$ 0.26
$ 2.04
$ 12.56
$ 25.29
$ 7.43
Number of
Options
Exercisable
850,000
1,050,673
852,360
413,237
3,166,270
Weighted-Average
Remaining
Contractual Life
(years)
8.95
6.60
3.97
3.09
6.07
Weighted-Average
Exercise Price
$ 0.26
$ 2.04
$ 12.56
$ 25.29
$ 7.43
The aggregate intrinsic value of the outstanding options and options vested as of December 31, 2020 was $1.3
million.
Restricted Stock
In December 2017, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares of
restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over
three years. The fair value of the restricted stock is based on the market price of the Company’s shares on the grant
date less the par value received as consideration. The fair value of the restricted stock on the grant date was
$679,000. In December 2016, the Company granted to Steven Kriegsman, Chief Executive Officer, 387,597 shares
of restricted common stock, pursuant to the 2008 Plan. This restricted stock vests in equal annual instalments over
three years. The Company recorded an employee stock-based compensation expense for restricted stock of
approximately $216,000 and $544,000 for the years ended December 31, 2020 and 2019, respectively. No
restricted stock was granted in 2020 nor 2019.
F-17
Equity-Classified Warrants
A summary of the Company’s warrant activity and related information for the years ended December 31, 2020
and 2019 are shown below.
Warrants
2020
2019
Weighted Average
Exercise Price
2019
2020
Outstanding — beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding — end of year
Exercisable at end of year
Weighted average fair value of warrants granted during the
year:
—
193,916
—
—
—
193,916
193,916
$8.60 $ 7.16
693,916
—
—
—
—
—
—
—
6.60
(500,000)
8.60 8.60
193,916
193,916 $ 8.60 $ 8.60
—
—
—
$—
$—
The following table summarizes additional information concerning warrants outstanding and exercisable at
December 31, 2020:
Weighted
Average
Remaining
Contractual
Life
(years)
0.10
0.11
0.10
3.21
Weighted
Average
Exercise
Price
$
4.62
10.44
12.30
33.60
Number of
Shares
84,554
83,335
21,140
4,167
Exercise Prices
4.62
$
10.44
12.30
33.60
$
$
$
193,196
0.17
$
8.60
The outstanding warrants as of December 31, 2020 had no intrinsic value.
9. Stockholder Protection Rights Plan
On December 13, 2019, the Board of Directors of the Company, authorized and declared a dividend of one right
(a “Right”) for each of the Company’s issued and outstanding shares of common stock, par value $0.001 per share .
The dividend was paid to the stockholders of record at the close of business on December 23, 2019. Each Right
entitled the registered holder, subject to the terms of the Original Rights Agreement (as defined below), to purchase
from the Company one one-thousandth of a share of the Company’s Series B Junior Participating Preferred Stock,
par value $0.01 per share (the “Preferred Stock”), at a price of $5.00 (the “Purchase Price”), subject to certain
adjustments. The description and terms of the Rights were set forth in the Rights Agreement, dated as of December
13, 2019 (the “Original Rights Agreement”), by and between the Company and American Stock Transfer & Trust
Company, LLC, as Rights Agent (the “Rights Agent”).
On November 12, 2020, the Board approved an amendment and restatement of the Original Rights Agreement
(as amended and restated, the “Amended and Restated Rights Agreement”) to effect certain changes to the Original
Rights Agreement, including (i) reducing the duration to a term of three years, subject to certain earlier expiration as
described in more detail below, and (ii) lowering the beneficial ownership threshold at which a person or group of
persons becomes an Acquiring Person (as defined below) to 4.95% or more of the Company’s outstanding shares of
Common Stock, subject to certain exceptions. The Amended and Restated Rights Agreement is designed to
F-18
discourage (i) any person or group of persons from acquiring beneficial ownership of more than 4.95% of the
Company’s shares of Common Stock and (ii) any existing stockholder currently beneficially holding 4.95% or more
of the Company’s shares of Common Stock from acquiring additional shares of the Company’s Common Stock.
The purpose of the Amended and Restated Rights Agreement is to protect value by preserving the Company’s
ability to utilize its net operating losses and certain other tax attributes (collectively, the “Tax Benefits”) to offset
potential future income tax obligations. The Company’s ability to use its Tax Benefits would be substantially limited
if it experiences an “ownership change,” as such term is defined in Section 382 of the Internal Revenue Code of
1986, as amended (the “Tax Code”). A corporation generally will experience an ownership change if the percentage
of the corporation’s stock owned by its “5-percent shareholders,” as defined in Section 382 of the Tax Code,
increases by more than 50 percentage points over their lowest ownership percentage within a rolling three-year
period. The Amended and Restated Rights Agreement is intended to reduce the likelihood the Company would
experience an ownership change under Section 382 of the Tax Code.
The Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business
day after a public announcement or filing that a person or group of affiliated or associated persons has become an
“Acquiring Person,” which is defined as a person or group of affiliated or associated persons that, at any time after
the date of the Amended and Restated Rights Agreement, has acquired, or obtained the right to acquire, beneficial
ownership of 4.95% or more of the Company’s outstanding shares of Common Stock, subject to certain exceptions
or (ii) the close of business on the tenth business day after the commencement of, or announcement of an intention
to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an
Acquiring Person (the earlier of such dates being called the “Distribution Date”) (provided, however, that if such
tender or exchange offer is terminated prior to the occurrence of the Distribution Date, then no Distribution Date
shall occur as a result of such tender or exchange offer).
The Rights, which are not exercisable until the Distribution Date, will expire at or prior to the earliest of (i) the
close of business on November 16, 2023; (ii) the time at which the Rights are redeemed pursuant to the Amended
and Restated Rights Agreement; (iii) the time at which the Rights are exchanged pursuant to the Amended and
Restated Rights Agreement; (iv) the time at which the Rights are terminated upon the occurrence of certain mergers
or other transactions approved in advance by the Board; and (v) the close of business on the date set by the Board
following a determination by the Board that (x) the Amended and Restated Rights Agreement is no longer necessary
or desirable for the preservation of the Tax Benefits or (y) no Tax Benefits are available to be carried forward or are
otherwise available (the earliest of (i), (ii), (iii), (iv) and (v) is referred to as the “Expiration Date”).
Each share of Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly
dividend payment equal to the greater of (i) $1.00 per share or (ii) an amount equal to 1,000 times the dividend
declared per share of Common Stock. Each share of Preferred Stock will entitle the holder thereof to 1,000 votes on
all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or
other transaction in which shares of Common Stock are converted or exchanged, each share of Preferred Stock will
be entitled to receive 1,000 times the amount received per one share of Common Stock.
The Purchase Price payable, and the number of shares of Preferred Stock or other securities or property
issuable, upon exercise of the Rights are each subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or reclassification of the Preferred Stock, (ii) upon the
grant to holders of the Preferred Stock of certain rights or warrants to subscribe for or purchase Preferred Stock or
convertible securities at less than the then-current market price of the Preferred Stock or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or
dividends payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above). The
number of outstanding Rights and the number of one one-thousandths of a share of Preferred Stock issuable upon
exercise of each Right are also subject to adjustment in the event of a stock split, reverse stock split, stock dividends
and other similar transactions involving the Common Stock.
In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each
holder of a Right, other than the Rights beneficially owned by the Acquiring Person, affiliates and associates of the
Acquiring Person and certain transferees thereof (which will thereupon become null and void), will thereafter have
F-19
the right to receive upon exercise of a Right that number of shares of Common Stock having a market value of two
times the Purchase Price.
In the event that, after a person or a group of affiliated or associated persons has become an Acquiring Person,
the Company is acquired in a merger or other business combination transaction, or 50% or more of the Company’s
assets or earning power are sold, proper provision will be made so that each holder of a Right will thereafter have
the right to receive, upon the exercise thereof at the then-current purchase price of the Right, that number of shares
of common stock of the acquiring company having a market value at the time of that transaction equal to two times
the Purchase Price.
With certain exceptions, no adjustment in the Purchase Price will be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase Price. No fractional shares of Preferred
Stock will be issued (other than fractions which are integral multiples of one one-thousandth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary receipts) and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred Stock on the trading day immediately
prior to the date of exercise.
At any time after any person or group of affiliated or associated persons becomes an Acquiring Person and prior
to the acquisition of beneficial ownership by such Acquiring Person of 50% or more of the outstanding shares of
Common Stock, the Board, at its option, may exchange each Right (other than Rights owned by such person or
group of affiliated or associated persons which will have become void), in whole or in part, at an exchange ratio of
one share of Common Stock per outstanding Right (subject to adjustment).
In connection with any exercise or exchange of the Rights, no holder of a Right will be entitled to receive shares
of Common Stock if receipt of such shares would result in such holder, together with such holder’s affiliates and
associates, beneficially owning more than 4.95% of the then-outstanding Common Stock (such shares, the “Excess
Shares”) and the Board determines that such holder’s receipt of Excess Shares would jeopardize or endanger the
value or availability of the Tax Benefits or the Board otherwise determines that such holder’s receipt of Excess
Shares is not in the best interests of the Company. In lieu of such Excess Shares, such holder will only be entitled to
receive cash or a note or other evidence of indebtedness with a principal amount equal to the then-current market
price of the Common Stock multiplied by the number of Excess Shares that would otherwise have been issuable.
At any time before the Distribution Date, the Board may redeem the Rights in whole, but not in part, at a price
of $0.001 per Right (subject to certain adjustments) (the “Redemption Price”). The redemption of the Rights may be
made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.
Immediately upon the action of the Board electing to redeem or exchange the Rights, the Company shall make a
public announcement thereof, and upon such election, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the
Company, including, without limitation, the right to vote or to receive dividends.
The Board may amend or supplement the Amended and Restated Rights Agreement without the approval of any
holders of Rights, including, without limitation, in order to (a) cure any ambiguity, (b) correct inconsistent
provisions, (c) alter time period provisions, including the Expiration Date, or (d) make additional changes to the
Amended and Restated Rights Agreement that the Board deems necessary or desirable. However, from and after the
date any person or group of affiliated or associated persons becomes an Acquiring Person, the Amended and
Restated Rights Agreement may not be supplemented or amended in any manner that would adversely affect the
interests of the holders of Rights.
10. Income Taxes
At December 31, 2020, the Company had federal and state net operating loss carryforwards (“NOLs”) of $327.6
million and $252.6 million, respectively, available to offset against future taxable income. Of this amount, $310.3
F-20
million of federal NOLs expire in 2024 through 2037. The federal operating losses from 2018, 2019 and 2020
totaling $17.0 million carry forward indefinitely but are only able to offset 80% of taxable income in future years.
The California NOLs expire in 2029 through 2039.
As a result of a change in-control that occurred in the CytRx shareholder base, approximately $69.3 million in
federal net operating loss carryforwards became substantially limited in their annual availability. Management
currently believes that the remaining $258.3 million in federal net operating loss carryforwards, and the $252.66
million in state net operating loss carryforwards, are unrestricted.
As of December 31, 2020, CytRx also had research and development tax credits for federal and state purposes of
approximately $16.0 million and $22.0 million, respectively, available for offset against future income taxes, which
expire in 2022 through 2036. The credits are subject to change-in-control limitations, which may affect their
utilization in future years. Based on an assessment of all available evidence including, but not limited to, the
Company’s limited operating history in its core business and lack of profitability, uncertainties of the commercial
viability of its technology, the impact of government regulation and healthcare reform initiatives, and other risks
normally associated with biotechnology companies, the Company has concluded that it is more likely than not that
these net operating loss carryforwards and credits will not be realized and, as a result, a 100% deferred tax valuation
allowance has been recorded against these assets.
Deferred income taxes reflect the net effect of temporary differences between the financial reporting carrying
amounts of assets and liabilities and income tax carrying amounts of assets and liabilities. The components of the
Company’s deferred tax assets and liabilities, all of which are long-term, are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Equipment, furnishings and other
Total deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Valuation allowance
2020
2019
December 31,
$ 72,509
37,901
4,174
114,584
—
114,584
(114,584)
—
$
$ 63,002
37,901
4,178
105,081
—
105,081
(105,081)
—
$
For all years presented, the Company did not recognize any deferred tax assets or liabilities. The net change in
valuation allowance for the years ended December 31, 2020 and 2019 was $9.5 million and $2.4 million,
respectively.
The provision for income taxes differs from the provision computed by applying the Federal statutory rate to net
loss before income taxes as follows (in thousands):
Federal benefit at statutory rate
State income taxes, net of Federal taxes
State credits
Warrant liabilities
Other permanent differences
Provision related to change in valuation allowance
Federal rate adjustment
NQ Options
Current year tax credit
NOL Adjustments
Termination/Cancellation of Equity Compensation Awards
Return to provision
Other, net
Years ended December
31,
2020
2019
$ (1,407) $ (1,504)
(500)
2
—
45
2,409
(592)
—
—
7
1,996
— —
—
—
— —
— —
—
(4)
—
—
(452)
—
$ — $ —
F-21
There have been no changes to the Company’s liability for unrecognized tax benefits during the year ended
December 31, 2020.
The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. As of the
year ended December 31, 2020, the tax returns for 2017 through 2020 remain open to examination by the Internal
Revenue Service and for 2016 to 2020 for various state tax authorities.
The Company’s policy is to recognize any interest and penalties related to unrecognized tax benefits as a
component of income tax expense. As of the date of adoption of ASC 740 and the years ended December 31, 2020
and 2019, the Company had accrued no interest or penalties related to uncertain tax positions.
11. Commitments and Contingencies
Commitments
Aldoxorubicin
The agreement relating to our worldwide rights to aldoxorubicin provides for our payment of up to an aggregate
of $7.5 million upon meeting specified clinical and regulatory milestones up to and including the product’s second,
final marketing approval. We also will be obliged to pay:
•
•
commercially reasonable royalties based on a percentage of net sales (as defined in the agreement);
a percentage of any non-royalty sub-licensing income (as defined in the agreement); and
• milestones of $1,000,000 for each additional final marketing approval that we might obtain.
Arimoclomol
The agreement relating to our worldwide rights to arimoclomol provides for our payment of up to an aggregate
of $3.65 million upon receipt of milestone payments from Orphayzme A/S.
Innovive
Under the merger agreement by which we acquired Innovive, we agreed to pay the former Innovive stockholders
a total of up to approximately $18.3 million of future earnout merger consideration, subject to our achievement of
specified net sales under the Innovive license agreements. The earnout merger consideration, if any, will be payable
in shares of our common stock, subject to specified conditions, or, at our election, in cash or by a combination of
shares of our common stock and cash. Our common stock will be valued for purposes of any future earnout merger
consideration based upon the trading price of our common stock at the time the earnout merger consideration is paid.
As of December 31, 2020, no amounts are due under the above agreements.
F-22
Contractual obligations
CytRx’s current contractual obligations that will require future cash payments for the following Employment
Agreements as follows (in thousands):
2021
2022
2023
2024
Thereafter
Total
____________
Employment
Agreements (1)
1,438
1,038
1,038
1,038
3,114
$ 7,666
(1) Employment agreements include management contracts which have been revised from time to time. The
employment agreement for the Company’s executive officers provide for minimum salaries, which are adjusted
annually at the discretion of the Company’s Compensation Committee, and in some cases provide for minimum
annual bonuses and employee benefits, as well. New employment agreements for the Company’s other
executive officers are usually entered into annually.
Contingencies
The Company applies the disclosure provisions of ASC 460, Guarantees (“ASC 460”) to its agreements that
contain guarantees or indemnities by the Company. The Company provides (i) indemnifications of varying scope
and size to certain investors and other parties for certain losses suffered or incurred by the indemnified party in
connection with various types of third-party claims; and (ii) indemnifications of varying scope and size to officers
and directors against third party claims arising from the services they provide to the Company.
The Company evaluates developments in legal proceedings and other matters on a quarterly basis. The Company
records accruals for loss contingencies to the extent that the Company concludes that it is probable that a liability
has been incurred and the amount of the related loss can be reasonably estimated.
In December 2019, a novel strain of coronavirus, COVID-19, was first identified in China and has surfaced in
several regions across the world. In March 2020, the disease was declared a pandemic by the World Health
Organization. As the situation with Covid-19 continues to evolve, the companies which are working to further
develop and commercialize our products, ImmunityBio and Orphazyme, could be materially and adversely affected
by the risks, or the public perception of the risks, related to this pandemic. Among other things, the active and
planned clinical trials by ImmunityBio and Orphazyme and their regulatory approvals, if any, may be delayed or
interrupted, which could delay or adversely affect the Company’s potential receipt of milestone and royalty
payments within the disclosed time periods and increase expected costs. As of the date of this filing, senior
management and administrative staff are working primarily remotely and will return to their offices at a yet to be
determined date.
F-23
EXHIBIT 23.1
CytRx Corporation
Los Angeles, California
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-208803,
333-215252 and 333-217184 and 333-223808) and Form S-8 (Nos. 333-68200, 333-93305, 333-123339, 333-
163212 and 333-212934) of CytRx Corporation of our report dated March 24, 2021, relating to the consolidated
financial statements, which appears in this Form 10-K.
/s/ Weinberg & Co.
Los Angeles, California
March 24, 2021
Exhibit 31.1
CERTIFICATIONS
I, Steven A. Kriegsman, Chief Executive Officer of CytRx Corporation, certify that:
1.
I have reviewed this annual report on Form 10-K of CytRx Corporation;
2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the periods covered by this annual report;
3.
Based on my knowledge, the consolidated financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant, is
made known to us by others within those entities, particularly during the period in which this annual report is being
prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes in accordance with
generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
periods covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 24, 2021
By: /s/ STEVEN A. KRIEGSMAN
Steven A. Kriegsman
Chairman and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, John Y. Caloz, Chief Financial Officer of CytRx Corporation, certify that:
1.
I have reviewed this annual report on Form 10-K of CytRx Corporation;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the periods covered by this annual report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in
this annual report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant, is
made known to us by others within those entities, particularly during the period in which this annual report is being
prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes in accordance with
generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
periods covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 24, 2021
By: /s/ JOHN Y. CALOZ
John Y. Caloz
Chief Financial Officer
Certification of Chief Executive Officer
Exhibit 32.1
Pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of
CytRx Corporation (the “Company”) hereby certifies that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (the
“Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 24, 2021
By: /s/ STEVEN A. KRIEGSMAN
Steven A. Kriegsman
Chairman and Chief Executive Officer
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (Section
906), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement required by Section 906, has been provided to CytRx
Corporation and will be retained by CytRx Corporation and furnished to the Securities and Exchange Commission
or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an Exhibit to the Form
10-K and shall not be considered filed as part of the Form 10-K.
Certification of Chief Financial Officer
Exhibit 32.2
Pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of
CytRx Corporation (the “Company”) hereby certifies that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (the
“Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: March 24, 2021
By: /s/ JOHN Y. CALOZ
John Y. Caloz
Chief Financial Officer
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (Section
906), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement required by Section 906, has been provided to CytRx
Corporation and will be retained by CytRx Corporation and furnished to the Securities and Exchange Commission
or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an Exhibit to the Form
10-K and shall not be considered filed as part of the Form 10-K.
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OFFICERS AND DIRECTORS
Board of Directors
Steven A. Kriegsman
Chairman of the Board
Louis J. Ignarro, Ph.D.
Nobel Laureate
Lead Director
Chairman of the Compensation Committee
Joel K. Caldwell, CPA
Chairman of the Audit Committee
Officers
Steven A. Kriegsman
Chief Executive Officer
John Y. Caloz
Chief Financial Officer and
Senior Vice President
Website
www.cytrx.com
Form 10-K
The Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2020 contained herein
is not accompanied by the exhibits which were filed
with the Securities and Exchange Commission. The
Company will furnish any such exhibits to those
stockholders who request the same upon payment to the
Company of its reasonable expenses. Request for
exhibits should be made to:
CytRx Corporation
11726 San Vicente Boulevard, Suite 650
Los Angeles, CA 90049
Attn: Corporate Secretary
Tel: (310) 826-5648
Fax: (310) 826-6139
Legal Counsel
Loeb & Loeb, LLP
10100 Santa Monica Blvd., Suite 2200
Los Angeles, CA 90067
Auditors
Weinberg & Company, P.A.
1925 Century Park East, Suite 1925
Los Angeles, CA 90067
Registrar & Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10007
Annual Meeting
July 29, 2021 10 A.M. PDT
11726 San Vicente Boulevard,
Suite 650
Los Angeles, CA 90049
This annual report includes certain forward-looking statements that are based on current expectations and are subject
to a number of risks and uncertainties. Please reference “Risk Factors” located on page 8 in the enclosed Form 10-K.
BR232828-0621-10K