Small Cap CytRx Corporation (CYTR) Surges: Now What? IBB & XBI

On Wednesday, small cap biopharmaceutical stock CytRx Corporation (NASDAQ: CYTR) soared 68.2% after reporting positive results from a Phase 2B cancer drug trial, meaning its probably time to figure out what investors should do next plus take a look at the performance of biotech ETF benchmarks like the iShares NASDAQ Biotechnology Index ETF (NASDAQ: IBB) and SPDR S&P Biotech ETF (NYSEARCA: XBI).

What is CytRx Corporation?

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

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

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

What You Need to Know or Be Warned About CytRx Corporation?

On Wednesday, CytRx Corporation announced that its potential treatment aldoxorubicin had fared much better than an established chemotherapy in mid-stage testing on patients with soft-tissue sarcoma (a cancer that occurs in muscle, fat, blood vessels, tendons and other tissue) with the median progression-free survival being 8.4 months verses 4.7 months for patients who just took the chemotherapy doxorubicin (which has been on the market for decades). Investigators also found that the disease had not progressed after six months for 67% of aldoxorubicin patients verses 36% for patients in the other group.

According to the American Cancer Society, about 11,410 new soft tissue sarcomas would have been diagnosed (6,290 cases in males and 5,120 cases in females) in the USA this year and 4,390 Americans (2,500 males and 1,890 females) are expected to have died from the disease at the end of this year. Those are not particularly big numbers, but that may not matter if the company can charge a premium for aldoxorubicin – should it gain FDA approval.

With that in mind, a look at CytRx Corporation's financials reveals revenues of $100k (2012), $250k (2011), $100k (2010) and $9.5M (2009) for the past four year plus net losses of $17.96M (2012) and $14.42M (2011), net income of $41k (2010) and a net loss of $4.80M (2009). For this year, CytRx Corporation has reported revenues of zero (3 months ending 2013-09-30), $200k (3 months ending 2013-06-30) and zero (3 months ending 2013-03-31) plus net losses of $9.98M (3 months ending 2013-09-30), $3.42M (3 months ending 2013-06-30) and $6.86M (3 months ending 2013-03-31). At the end of September, CytRx Corporation had $23.04 million in Cash and Short Term Investments covering $13.33M in current liabilities. So the company has enough cash for at least a few more quarters.    

Share Performance: CytRx Corporation vs. IBB & XBI

On Wednesday, small cap CytRx Corporation surged 68.2% to $4.02 (CYTR has a 52 week trading range of $1.80 to $4.38 a share) for a market cap of $168.74 million plus the stock is up 115% since the start of the year and up 55.2% over the past five years. Here is a look at the long term performance of CytRx Corporation verses potential benchmarks like the iShares NASDAQ Biotechnology Index ETF and the SPDR S&P Biotech ETF:

As you can see from the above chart, CytRx Corporation has been a very inconsistent performer verses the iShares NASDAQ Biotechnology Index ETF and the SPDR S&P Biotech ETF. It should also be mentioned that according to Market Watch, shares of CytRx Corporation hit a closing high of nearly $260 at one point in early 1992 – meaning the stock has been around a long time but it has also been all over the place:

Finally, here is a look at the latest technical charts for all three investments:

The Bottom Line. If you made some money on yesterday's surge by small cap biopharmaceutical stock CytRx Corporation, then congratulations. However and if you are not already an investor, I would not exactly be rushing out to get in right now.