(SANTA ANA, CA) -- Donner Corp. International, a broker/dealer headquartered in Santa Ana, CA., today issued a Morning Call Note on CytRx Corp., Norcross, Georgia (Nasdaq: CYTR - news). CytRx is a biotechnology company with a phase III product, FLOCOR(TM), under development for the treatment of sickle cell disease patients suffering from vaso-occlusive crisis.

The Morning Call Notes is as follows:

Scientists at Merck & Co. (NYSE: MRK - news) developed 5 different formulations of vaccines against HIV: one using DNA inserted into a modified and non-replicating adenovirus, one using DNA inserted into a modified vaccinia virus, and three formulations of ``naked'' DNA, one of which included CytRx's CRL-1005, also known as TRANZFECT. (Source: Washington Post, April 2, 2001). The ``naked'' DNA used in the Merck program employed the naked DNA gene delivery technology developed by Vical, Inc. of San Diego, California (Nasdaq: VICL - news). (Source: Vical, Inc. press release, April 2, 2001). The DNA fragment used was the segment called ``gag,'' which encodes various internal group-specific antigens. Gag would get inserted into a host cell via a viral or non-viral vector, and the host cell's machinery would transcribe it so that the gag proteins are expressed. Because these gag proteins are foreign, they would elicit a cell mediated immune response in the form of killer cells (natural killer cells, killer T cells, macrophages), which would destroy cells that express the gag proteins: HIV-infected cells.

After two months, the monkeys that received the DNA vaccine delivered via the adenovirus exhibited undetectable HIV levels in the blood. Their CD4 cell (an immune response cell) count also returned to normal numbers. A similar, but less dramatic, response was seen in monkeys who were vaccinated with ``naked'' DNA + CRL-1005 (TRANZFECT). (Source: Washington Post, April 2, 2001). Dr. John W. Shiver, director of vaccine research at Merck & Co., said that the vaccine administered via the modified adenovirus did not prevent infection, but limited the number of viral copies to 100 to 1000 times less than the amount of HIV seen in the monkeys given the other vaccines prototypes, excluding the CRL-1005-coated DNA, which also resulted in undetectable HIV levels in the blood. (Source: USA Today, April 2, 2001). Merck & Co.'s strategy may be to prime people with the DNA vaccine + CRL-1005 and then boost their immune responses with the DNA vaccine in the adenovirus vector. (Source: WebMD, April 4, 2001; USA Today, April 2, 2001; The Wall Street Journal, April 2, 2001).

Such early data from a pharmaceutical giant like Merck suggest that the TRANZFECT (CRL-1005) platform has promising potential. It is interesting to note that this ``second best'' vaccine in this DNA vaccine program used the same ``naked'' DNA as the other two ``naked'' DNA vaccines, which were not as successful. Those other two ``naked'' DNA vaccines, which were constructed using Vical, Inc.'s patented ``naked'' DNA gene delivery technology, were not ``coated'' with CytRx's TRANZFECT (CRL-1005) technology. CRL-1005 comes from a family of poloxamers, which are synthetic polymer coats developed by CytRx. When applied to ``naked'' DNA fragments, these synthetic polymers coat the ``naked'' DNA to form microparticles that can fuse to the host cell's cell membrane and insert the DNA fragment. Other indications that CytRx is developing for these poloxamers are muscular dystrophy, spinal cord injury, and animal feed additives that enhance growth in animals. (The last indication is licensed to Ivy Animal Health, Inc. of Overland Park, Kansas). CytRx received $2 million from Merck & Co. for the exclusive, worldwide license to use CytRx's TRANZFECT technology in DNA-based vaccines targeted to 4 infectious diseases, one of which is HIV. CytRx will receive an additional $1 million if Merck takes its HIV DNA vaccine + CRL-1005 formulation into phase I of clinical trials. An additional $1 million would follow if this formulation enters phase IIb or phase III clinical trials.

Donner Corp. initiated coverage on CytRx Corp. on April 10, 2001 with a Speculative Buy rating.

Copies of the April 10, 2001 report on CytRx Corp. are available from Donner Corp. at www.donnercorp.com.

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