Cytos Biotechnology – QuickView

Cytos has been transformed, having faced a funding crunch. It now has cash of $37m, sufficient to fund a large Phase IIb trial on CYT003 in asthma, and has until February 2015 to repay outstanding convertible bonds (previously due February 2012). Phase IIa results on CYT003 are due to be published in a peer review journal later this year. We will initiate full coverage on Cytos shortly.

Focus on CYT003
Results from a 60-patient Phase IIa trial on CYT003 in asthma showed a significant improvement in symptoms already at two weeks, plus longer-term improvement in lung function and asthma control. A 360-patient Phase IIb global placebo-controlled is planned for Q412 with results due Q214, funded by the recent capital raising.

Strengthened balance sheet
Cytos was restructured and refinanced between August 2011 and May 2012, reducing workforce from 80 to 15, and closing R&D and production. The company has raised CHF23.75m in equity, CHF13.5m in convertible loan notes (half due on milestones being reached the in the phase IIb trial) and CHF3.2m via a rights issue. Issued warrants could also yield CHF28.5m within four years if exercised.

Confidence from investors
Key stakeholders now include Amgen, venBio, Abingworth Bioventures and Aisling Capital. In addition Cytos has two compounds partnered with Novartis, in smoking cessation and Alzheimer’s disease, plus one in allergic disease with Pfizer.

Valuation: Minimal technology value
Given the crisis over funding in the past year, the market is assigning little value (CHF23m) to Cytos’s technology. Phase IIa results on CYT003 in asthma have been enough to encourage an impressive array of financial investors plus Amgen. Publication of CYT003 data and further positive trial results should focus investors’ attention back on to the science within Cytos and away from the financing troubles.

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