Healthcare Penny Stock CytRx Corporation in Financial Advisors’ Spotlight Following Major Deal with Biotech Billionaire
As more than 80% of the companies in the S&P 500 have posted their second-quarter earnings, some trends can already be established. According to FactSet, 72% of the companies posted EPS above the mean estimates, while 70% managed to beat the mean sales. What’s more important is that the blended earnings growth rate is slightly above 10%, which suggests that the companies are on a path to register the second consecutive double-digit growth rate, for the first time since 2011. Three main sectors that contributed to the increase in earnings are Healthcare, Financials, and Technology, which account for 74% of the $9.7 billion increase in earnings among the S&P 500 companies.
The market has reacted positively to the strong earnings. Since June 30, S&P 500 has gained over 2%, while Dow Jones Industrial Average advanced by 3.75%. In fact, Dow Jones had had a 10-day winning streak (with nine consecutive days of record closes), which ended on June 8, following President Trump’s remarks about North Korea. The comments were made shortly after it had been reported that Pyongyang managed to build a nuclear weapon small enough to fit inside its missiles that could potentially reach mainland USA. Trump said that the threats will be “met with fire and fury”.
Meanwhile, TrackStar, the official newsletter of Investing Channel’s Intuition, analyzed the tickers that were the most searched by financial advisors in the week between July 30 and August 5. What’s unusual about the last week’s list is that it looks like financial advisors paid more attention to penny stocks (SEC defines a “penny stock” as a security that trades under $5 per share). In fact, the two most searched tickers were CytRx Corporation (NASDAQ:CYTR) and Delcath Systems, Inc. (NASDAQ:DCTH), with the former trading at slightly over $0.60 and the latter at just $0.09.
Delcath Systems, Inc. (NASDAQ:DCTH) most likely caught the attention of financial advisors in connection with its second-quarter results, although its popularity might have also been affected by the developments surrounding CytRx Corporation (NASDAQ:CYTR). On July 28, CytRx’s stock jumped by over 40% following the announcement that a subsidiary of billionaire Patrick Soon-Shiong’s NantWorks, NantCell, had acquired $13 million worth of CytRx’s stock at $1.10 per share and agreed to invest up to $343 million more in milestone payments in exchange for licensing rights to its orphan cancer drug aldoxorubicin. Delcath Systems, Inc. (NASDAQ:DCTH) is also engaged in the treatment of liver cancer and given NantWorks’ small acquisition spree, it’s possible that financial advisors might have been looking at other potential targets, including Delcath.
CytRx Corporation (NASDAQ:CYTR) is a $106 million biotech company, whose only pipeline product currently under development is aldoxorubicin. It is a modified form of doxorubicin, which is a chemotherapeutic agent. In November 2016, the company posted updated results from its Phase 3 clinical trial, which showed a statistically significant improvement in progression-free survival between aldoxorubicin and investigator’s choice therapy. In June, CytRx said it plans to file for a New Drug Application to the FDA for aldoxorubicin as a treatment of soft tissue sarcomas in the fourth quarter.
Under its terms of the deal with NantCell, CytRx is also set to receive double-digit royalties from sales of aldoxorubicin for soft tissue sarcomas and mid to high single digit royalties for other indications. NantCell, a clinical stage immuno-oncology company focused on developing novel molecularly targeted therapeutics for patients with cancer, will be responsible for all future development, manufacturing and commercialization expenses. In May, Patrick Soon-Shiong said in an interview that he plans to open several cancer treatment clinics, which would use his proprietary immune-oncology assessment and treatment tools. In July, NantWorks acquired hospital chain operator Integrity Healthcare.
Even though, CytRx Corporation (NASDAQ:CYTR)’s stock surged on the back of the announcement about its NantCell deal, it lost over 20% in the following week and is currently trading over 13% in the green since July 28. On August 3, the company posted its financial results, which included a net loss of $14.36 million or $0.10 per share for the second quarter. CytRx didn’t register any revenue.