CytRx Corporation (NASDAQ:CYTR) Is A Top Contrarian Play

CytRx Corporation (NASDAQ:CYTR) has been the subject of some serious hit pieces over the last couple of months, on the back of the company announcing what was construed as disappointing results from an ongoing trial of its lead candidate, Aldoxorubicin. The company is trading at an 80% discount to its pre-release market capitalization, and a swarm of class-action lawsuit press releases make digging through to find any real news or information on any popular financial news portal pretty much impossible.The company just presented at ESMO, and so we went straight to the source to figure out exactly what is going on. In short, we liked what we saw.What follows is an explanation of how and why markets have misinterpreted the latest Aldoxorubicin data, and in turn, why the current discount might be an opportunity to pick up a cheap exposure.First, then, a quick introduction to the drug in question. It is a reformulation of a currently approved standard of care treatment called doxorubicin. The latter is an anticancer chemotherapy agent, and it's used widely in a host of different cancers in combination with other chemo agents. It has a limiting factor, however, and that is it is very toxic. Its toxicity can result in very low dose limiting toxicity, and can have serious impact from a cardiovascular perspective. Aldoxorubicin is essentially a trimmed down version of doxorubicin (chemically), targeting the same mechanism of action with a lower toxicity. A lower toxicity means a higher dose is possible, and a higher dose – should – translate to an improved efficacy.When the company released data back in July, the main sticking point was that the Aldoxyrubicin arm did not show any statistically significant improvement in progression free survival versus standard of care. It did improve objective response rate and seize control considerably, but markets chose to focus on the former point as indicative of their bias. The company pointed to the fact that the trial was subject to a clinical hold in its early stages, and this effectively invalidated the progression free survival data. Again, markets chose to ignore this.Fast-forward to ESMO, and we finally got some accurate insight into what happened. Median progression free survival was never met, and still hasn't been, so we can pretty much disregard that as a measurement point for now. If we did want to surrogate it with anything, perhaps as an indicator of what's to come, we could use this 2015 study, which concluded as follows:

"Single-agent Aldoxorubicin therapy showed superior efficacy over doxorubicin by prolonging progression-free survival and improving rates of 6-month progression-free survival and tumor response. Aldoxorubicin therapy exhibited manageable adverse effects, without unexpected events, and without evidence of acute cardiotoxicity"

Putting that to one side, however, and focusing on the company's presentation, we know that partial response and stable disease, which come together to form what's called a disease control rate, came in at 96% (61% stable disease and 36% partial response). That means that 96% of the patients who took Aldoxorubicin as an adjuvant to standard of care chemotherapy had no disease progression, and of the total population, 17% had tumors that shrunk more than 50% (in certain cases making them eligible for resection through surgery) and 56% had tumors that shrunk more than 20%.Furthermore, no significant cardiac problems were observed despite administration of median cumulative dose of doxorubicin equivalents of 631 mg/m2 – a dose that would put a patient at severe risk of a cardiac event if treated with doxorubicin, and not Aldoxorubicin.Now, there are people that will say this data is unreliable. That the fact that mPFS wasn’t reached is somehow a negative point, and it is these people that are likely the instigators behind the company's selloff as late. This just isn’t correct, however.Cash position is pretty strong ($56 million at June 30) and debt is more than serviceable. Yes, dilution is probably going to come in to play at some point, and yes, the company may need to RS to stay on the NASDAQ, but these drawbacks aside, the data looks solid and the drug, promising.Here's the ESMO poster. Subscribe below to get more objective interpretations of misunderstood data delivered direct to your inbox, totally free!Disclosure: We have no position in CYTR and have not been compensated for this article.