Why CytRx Corporation Shares Are Soaring Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Source: CytRx Corporation

What: Shares in CytRx Corporation are surging higher by more than 10% today after Oppenheimer analysts initiated coverage on the company with a buy rating.

So What: Oppenheimer's bullish stance on CytRx includes a price target of $10 per share that is nearly double current levels.

The research firm's enthusiasm for CytRx stems from recently reported data showing that CytRx's clinical stage drug for the treatment of soft tissue sarcoma is outperforming an existing commonly used treatment.

Soft tissue sarcoma is a rare type of cancer that develops from tissues, including bone and muscle tissue. According to the American Cancer Society, 11,930 new cases of soft tissue sarcoma will be diagnosed in the U.S. this year, and 4,870 people with soft tissue sarcoma will pass away.

During phase 2b clinical trials, patients taking CytRx's Aldoxorubicin saw a 2-fold improvement in surviving two years and a 27% improvement in risk of death versus the old standard drug, doxorubicin. Importantly, it was a median 8.4 months before disease progression in the aldoxorubicin arm of the trial, and that was significantly better than the 4.7 months for the doxorubicin arm.

Now What: CytRx's study results were solid enough that the company is advancing into late stage phase 3 trials for this indication, but there are other indications that the company is researching too, including brain cancer and small cell lung cancer.

Developing new therapies for cancer is particularly challenging, and success rates are small. Historically, 93% of oncology drugs entering clinical trials fail to reach the market.

CytRx's aldoxorubicin, an improved formulation of doxorubicin, could stand a very good chance of displacing doxorubicin as a standard of care, but only if its phase 3 trials confirm the early stage trials findings. For that reason, CytRx is a high-risk play best left for risk-tolerant investors. But for those investors, it could be a very intriguing stock to own.

The article Why CytRx Corporation Shares Are Soaring Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.