CytRx shares holding up well despite CFO departures: key executives leave biotech firm in L.A. and Massachusetts subsidiary.

IN a skittish stock market, the sudden departure from a small company of just one top executive--let alone two--can send stock prices reeling, especially if they are accounting types.

Yet shares of Los Angeles-based biotech CytRx Corp. have held up surprisingly well, even though its chief financial officer and his counterpart at a high-profile subsidiary in Massachusetts were replaced within a week of each other this month.

On Sept. 7, subsidiary RXi Pharmaceuticals Corp., announced that CFO Jim Warren was leaving in a "planned departure," and would be replaced by Stephen DiPalma, a veteran of Massachusetts' large biotech community. Then on Sept. 12, CytRx announced that CFO Matthew Natalizio had resigned to "pursue other interests," and would be replaced by Mitchell Fogelman, who was CFO at Monterey Park's International Aluminum Corp. when it was taken private earlier this year.

CytRx shares did register a 6 percent drop over the two announcements, but have since recovered to a decline of less than 3 percent, closing at $3.37 on Sept. 19. Chief Executive Steven Kriegsman said the two staff changes not only were unrelated, but the timing also was a coincidence.

Warren actually had been acting more as an interim CFO, Kriegsman said, and Natalizio, who lives in La Canada Flintridge, had found a comparable position closer to home.

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"We had been working on the change at RXi for quite some time," Kriegsman said. "We're in a stage of growth at both companies where we had the opportunity to bring in some high-level people and we did."

CytRx has a drug in pill form to treat Lou Gehrig's disease in mid-stage clinical trials, plus therapies for diabetes, obesity and cancer in earlier stages of development. RXi Pharmaceuticals Corp., which was spun off earlier this year, is in early stages of developing technologies that can target the gene at the root of a disease like cancer and switch it off without affecting other genes or cells.

CytRx itself is growing. Just last month it relocated research and development and clinical-regulatory operations to a new laboratory in San Diego, where it expects to have 17 people on staff by the end of the year. The Los Angeles office, which has 15 employees and consultants, will continue to serve as corporate headquarters for administration, business development and eventual marketing activities.

"I really wish we had been able to keep our scientific here, but to attract the caliber of people we've now been able to hire from other parts of the country, San Diego's larger (biomedical) community had more synergies to offer," said Kriegsman. "I wish it wasn't the case, because I live in L.A."

Despite the decline this month, CytRx shares are up more than 76 percent for the year to date since the RXi spinoff was announced. Kriegsman, who is the second largest shareholder with 4.6 percent of shares, noted the other largest shareholders are institutional, with a subsidiary' of Fidelity Investment the largest at nearly 15 percent.

CytRx owns 86 percent of RXI, but it intends to reduce its stake to 49 percent by divesting shares to stockholders via a dividend, possibly in the coming year.