As filed with the Securities and Exchange Commission on July 11, 2008

Reg. No.                     

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

CYTRX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		58-1642750
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

Benjamin S. Levin, Esq.		Dale E. Short, Esq.		Alexander M. Donaldson, Esq.
CytRx Corporation		TroyGould PC		Wyrick Robbins Yates & Ponton LLP
11726 San Vicente Boulevard, Suite 650		1801 Century Park East, Suite 1600		4101 Lake Boone Trail, Suite 300
Los Angeles, California 90049		Los Angeles, California 90067		Raleigh, North Carolina 27607
Fax: (310) 826-6139		Fax: (310) 201-4746		Fax: (919) 781-4865

          Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed proxy statement/prospectus.

     If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company o

CALCULATION OF REGISTRATION FEE

	Title of each class of securities to be registered			Proposed maximum aggregate offering price			Amount of registration fee
	Common Stock, par value $.001 per share(1)			$21,253,462(2)			$	835.27

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

 

 

The information in this proxy statement/prospectus is not complete and may be changed. CytRx may not issue the shares of CytRx common stock described herein until the registration statement of which this proxy statement/prospectus is a part has been declared effective by the Securities and Exchange Commission. This proxy statement/prospectus is not an offer to sell, or solicitation of an offer to buy, these securities, or the solicitation of a proxy, in any jurisdiction where such offer or solicitation is not permitted.

SUBJECT TO COMPLETION, July __2008

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

Dear Stockholders:

     We cordially invite you to attend a special meeting of stockholders of Innovive Pharmaceuticals, Inc., a Delaware corporation, at our offices located at 555 Madison Avenue, 25^th Floor, New York, New York, on                     , 2008, at 10:00 a.m., local time.

     At the special meeting, we will ask you to consider and vote upon a proposal to approve an Agreement and Plan of Merger, dated as of June 6, 2008, pursuant to which CytRx Corporation, a Delaware corporation, has agreed to acquire Innovive as a wholly owned subsidiary. The acquisition will be effected by the merger of Innovive with CytRx Merger Subsidiary, Inc., with Innovive as the surviving corporation. CytRx Merger Subsidiary, Inc. was formed by CytRx solely for purposes of entering into the merger agreement and completing the transactions contemplated by the merger agreement.

     A copy of the merger agreement is attached as Appendix A to the accompanying proxy statement/prospectus. Pursuant to the terms of the merger agreement, Merger Subsidiary will merge with and into Innovive with Innovive to be the surviving corporation in the merger. As a result of the merger, Innovive will become a wholly owned subsidiary of CytRx and will change its corporate name to CytRx Oncology Corporation. Shares of Innovive common stock will no longer be publicly traded after the merger.

     In the merger, CytRx will pay initial merger consideration of $3,000,000 in the form of shares of CytRx common stock valued at $0.94 per share, which equals the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the 10 trading days prior to the signing of the merger agreement. CytRx also will pay future earnout merger consideration of up to $18,253,462, subject to the achievement of specified net sales under Innovive’s existing license agreements. Subject to specified conditions, any earnout merger consideration will be payable in shares of CytRx common stock or, at CytRx’s election, in cash, or by a combination of shares of CytRx common stock and cash. CytRx common stock will be valued for purposes of any earnout merger consideration based upon the average of the daily market price during the 10-trading day period ending on the second trading day prior to payment of the earnout merger consideration. If Innovive’s stockholders approve the merger agreement and the merger is completed, all of the outstanding shares of Innovive common stock immediately prior to the effective time of the merger (other than shares held by Innovive, CytRx and Merger Subsidiary and by Innovive stockholders, if any, who properly exercise their rights as dissenting stockholders under Delaware law) will be converted into the right to receive an allocable portion of the merger consideration based upon the fully diluted shares of Innovive at the effective time of the merger.

     After careful consideration, Innovive’s board of directors, by a unanimous vote of the directors, has determined that the merger agreement is advisable, fair to, and in the best interests of the stockholders of Innovive, has approved and authorized in all respects the merger agreement, and recommends that you vote “FOR” the approval of the merger agreement.

     The accompanying proxy statement/prospectus provides you with detailed information about the proposed merger and the special meeting. Please give this material your careful attention. You may also obtain more information about Innovive and CytRx from documents filed with the Securities and Exchange Commission. We encourage you to obtain current market quotations for CytRx common stock, which is traded on The Nasdaq Capital Market under the symbol “CYTR.”

     We would like you to attend the special meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly, please sign, date, and return the enclosed proxy card in the postage-paid envelope or submit your proxy by the Internet prior to the special meeting. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If your shares are held in “street name,” you must instruct your broker in order to vote. Remember, failing to vote has the same effect as a vote against the approval of the merger agreement.

     We look forward to seeing you on                     , 2008.

		Sincerely,
		Steven Kelly
		President and Chief Executive Officer

     See “Risk Factors” on page 11 for a discussion of important factors that you should consider before you return your proxy or vote at the special meeting.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or of the securities to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

     This proxy statement/prospectus is dated                     , 2008 and is first being mailed to Innovive stockholders on or about                     , 2008.

INNOVIVE PHARMACEUTICALS, INC.
555 Madison Avenue, 25^th Floor
New York, New York 10022

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on                     , 2008

     To our Stockholders:

     Notice is hereby given that a special meeting of stockholders of Innovive Pharmaceuticals, Inc., a Delaware corporation, will be held on                     , 2008, at 10:00 a.m., local time, at our offices located at 555 Madison Avenue, 25^th Floor, New York, New York, in order to:

     (1) Consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of June 6, 2008, among Innovive, CytRx Corporation, a Delaware corporation, CytRx Merger Subsidiary, Inc., a Delaware corporation and a wholly owned subsidiary of CytRx, which we refer to as Merger Subsidiary, and Steven Kelly, as stockholder representative. A copy of the merger agreement is attached as Appendix A to the accompanying proxy statement/prospectus. Pursuant to the terms of the merger agreement, Merger Subsidiary will merge with and into Innovive, with Innovive to be the surviving corporation in the merger. As a result of the merger, Innovive will become a wholly owned subsidiary of CytRx and will change its corporate name to CytRx Oncology Corporation. Shares of Innovive common stock will no longer be publicly traded after the merger.

     In the merger, CytRx will pay initial merger consideration of $3,000,000 in the form of shares of CytRx common stock valued at $0.94 per share, which equals the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the 10 trading days prior to the signing of the merger agreement. CytRx also will pay future earnout merger consideration of up to $18,253,462, subject to the achievement of specified net sales under Innovive’s existing license agreements. Subject to specified conditions, any earnout merger consideration will be payable in shares of CytRx common stock or, at CytRx’s election, in cash, or by a combination of shares of CytRx common stock and cash. CytRx common stock will be valued for purposes of any earnout merger consideration based upon the average of the daily market price during the 10-trading day period ending on the second trading day prior to payment of the earnout merger consideration. If Innovive’s stockholders approve the merger agreement and the merger is completed, all of the outstanding shares of Innovive common stock immediately prior to the effective time of the merger (other than those shares held by Innovive, CytRx and Merger Subsidiary and by Innovive stockholders, if any, who properly exercise their rights as dissenting stockholders under Delaware law) will be converted into the right to receive an allocable portion of the merger consideration based upon the fully-diluted shares of Innovive at the effective time of the merger; and

     (2) Approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement; and

     (3) Transact such other business that may properly come before the special meeting or any adjournment or postponement of the special meeting.

     Only stockholders of record of our common stock at the close of business on ___, 2008 are entitled to notice of and to vote at the special meeting and at any adjournment or postponement of the special meeting. All stockholders of record are cordially invited to attend the special meeting in person.

     The approval of the merger agreement requires the approval of the holders of a majority of the outstanding shares of Innovive common stock entitled to vote, with each share having a single vote for this purpose. Directors and officers of Innovive and their affiliates who own beneficially an aggregate of approximately 22% of the shares of Innovive common stock entitled to vote at the special meeting have agreed to vote all shares that they control in favor of the merger agreement.

     Whether or not you plan to attend the special meeting, we urge you to vote your shares by completing, signing, dating, and returning the proxy card as promptly as possible in the postage-paid envelope and thus ensure that your shares will be

represented at the special meeting if you are unable to attend. If you sign, date, and mail your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the approval of the merger agreement. If you fail to return your proxy card or fail to submit your proxy by the Internet and do not vote in person at the special meeting, it will have the same effect as a vote against the approval of the merger agreement. Any stockholder attending the special meeting may vote in person even if he or she has returned a proxy card; such vote by ballot will revoke any proxy previously submitted. If, however, you hold your shares through a bank or broker or other custodian, you must obtain a legal proxy issued from such custodian in order to vote your shares in person at the special meeting.

     Each Innovive stockholder who does not vote in favor of the approval of the merger agreement will have the right to require Innovive to purchase his or her shares, in cash, for the fair value of the shares, but only if (i) the merger is completed and (ii) the stockholder complies with the requirements of Delaware law for the exercise of dissenters’ rights that are summarized in the accompanying proxy statement/prospectus. The completion of the merger is subject to the condition, among others, that the holders of not more than 5% of Innovive’s common stock properly exercise their rights as dissenting stockholders.

		By Order of the Board of Directors
		Eric Poma, Ph.D. Corporate Secretary

                    , 2008

     Please do not send your stock certificates at this time. If the merger is completed, the disbursing agent will provide you with instructions regarding the surrender of your stock certificates

TABLE OF CONTENTS

		Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER			v
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS			1
The Parties to the Merger			1
The Merger			1
The Special Meeting of Stockholders			2
Board Recommendation			2
Fairness Opinion			3
Shares Held by Directors and Officers; Support Agreements			3
Material United States Federal Income Tax Consequences			3
Stock Exchange Listing of CytRx Common Stock			4
Comparative Market Prices of Common Stock			4
Regulatory Requirements			4
Dissenters’ or Appraisal Rights			4
Interests of Certain Persons in the Merger			4
Comparison of Rights of Innovive Stockholders and CytRx Stockholders			5
Procedure for Receiving the Merger Consideration			5
Stock Options			5
Warrants			5
No Solicitation by Us of Alternative Acquisition Transactions			5
Conditions to the Merger			6
Termination of the Merger Agreement			7
Termination Fee			7
Indemnification and Offset			7
Stockholder Representative			8
Loan and Security Agreement			8
Selected Historical Financial Information Of CytRx			9
Selected Historical Financial Information Of Innovive			10
RISK FACTORS			11
Risks Associated with the Merger			11
Risks Associated with CytRx’s Common Stock			14
Risks Associated With CytRx’s Business			17
Risks Associated With CytRx’s Investment in RXi			27
Risks Associated With Innovive’s Business			29
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION			39
THE MERGER			40
Background of the Merger			40
Innovive’s Reasons for the Merger			43
Recommendation of the Board of Directors			46
CytRx’s Reasons for the Merger			46
Effects of the Merger			47
Management and Operations After the Merger			47
Interests of Certain Persons in the Merger			47
Stock Exchange Listing of CytRx Common Stock			49
Comparative Market Prices of Common Stock			49
Regulatory Requirements			49
OPINION OF INNOVIVE’S FINANCIAL ADVISOR			49
Considerations Underlying Chartered Fairness Opinion			51
Miscellaneous			53
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES			55
U.S. Holders			55
Non-U.S. Holders			57

		Page
Backup Withholding			58
THE SPECIAL MEETING OF STOCKHOLDERS			58
Time, Place, and Purpose of the Special Meeting			58
Who Can Vote at the Special Meeting			58
Vote Required for Approval of the Merger Agreement			58
Voting By Proxy			59
Adjournments and Postponements			60
Stockholder Representative			60
THE MERGER AGREEMENT			60
Effective Time of the Merger			60
Structure of the Merger			61
Merger Consideration			61
Fractional Shares			61
Treatment of Stock, Options and Warrants in the Merger			61
Exchange and Payment Procedures			62
Representations and Warranties			63
Conduct of Our Business Prior to the Merger			66
No Solicitation by Us of Alternative Acquisition Proposals			67
Merger Subsidiary’s Activities			69
Stockholders’ Meeting			69
Cooperation by the Parties			69
Indemnification of Our Directors and Officers			70
Other Agreements			70
Conditions to the Merger			70
Termination of the Merger Agreement			71
Termination Fee			72
Indemnification and Offset			73
Amendment and Waiver			73
Stockholder Representative			73
Accounting Treatment			75
ANCILLARY AGREEMENTS			76
Support Agreements			76
Loan And Security Agreement			76
COMPARATIVE MARKET PRICES AND DIVIDEND INFORMATION			78
Market Prices			78
Dividends			79
BUSINESS OF CYTRX			79
Overview			79
CytRx’s Molecular Chaperone Amplification Platform			80
CytRx’s Product Candidate Pipeline			80
CytRx’s Clinical Development Programs			80
CytRx’s Research Programs and Other Technologies			83
CytRx’s Separation from RXi Pharmaceuticals Corporation			84
Manufacturing			85
Patents and Proprietary Technology			85
Competition			85
Government Regulation			86
Employees			88
Properties			88
Legal Proceedings			88
CYTRX MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			89
Overview			89
Research and Development			91
Critical Accounting Policies and Estimates			92
Quarterly Financial Data			95
Fourth Quarter Adjustment			95

		Page
Liquidity and Capital Resources			95
Discussion of Operating, Investing and Financing Activities			97
Results of Operations			100
Recent Accounting Pronouncements			104
Off-Balance Sheet Arrangements			105
Quantitative And Qualitative Disclosures About Market Risk			105
CYTRX DIRECTORS AND EXECUTIVE OFFICERS			106
CYTRX EXECUTIVE COMPENSATION			109
Compensation Discussion and Analysis			109
Compensation Committee Interlocks and Insider Participation in Compensation Decisions			113
Summary Compensation Table			114
2007 Grants of Plan-based Awards			115
2000 Long-term Incentive Plan			115
Holdings of Previously Awarded Equity			118
Option Exercises and Stock Vested			120
Employment Agreements and Potential Payment Upon Termination or Change in Control			120
Quantification of Termination Payments and Benefits			122
Compensation of Directors			124
CERTAIN CYTRX RELATIONSHIPS AND RELATED TRANSACTIONS			125
Director Independence			125
Transactions with Related Persons			125
Recent and Proposed Transactions			126
BUSINESS OF INNOVIVE			127
Overview			127
The Oncology Therapeutics Market			128
INNO-406			129
Tamibarotene			131
INNO-206			133
INNO-305			134
INNO-406			139
INNO-206			141
INNO-305			141
Clinical Research Organizations			142
Manufacturing and Marketing			142
Employees			143
Scientific Advisory Board			143
Properties			144
Legal Proceedings			144
INNOVIVE MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION			145
Overview			145
Results of Operations			146
Contractual Obligations and Commitments			148
Off-Balance Sheet Arrangements			148
Market Risk			148
Liquidity and Capital Resources			148
Immediate and Future Financing Needs			150
Critical Accounting Policies			150
New Accounting Pronouncements			152
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CYTRX			154
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF INNOVIVE			155
DISSENTERS’ RIGHTS			157
DESCRIPTION OF CYTRX CAPITAL STOCK			160

		Page
Authorized Capitalization			160
Common Stock			161
Preferred Stock			161
Shareholder Rights Protection Agreement			162
Options and Warrants			163
Transfer Agent and Registrar			164
Certain Anti-Takeover Provisions			164
COMPARISON OF RIGHTS OF HOLDERS OF CYTRX COMMON STOCK AND INNOVIVE COMMON STOCK			165
Authorized Stock			165
Stockholder’s Rights Plan			165
Terms of Preferred Stock			165
Size of Board of Directors			166
Classes of Directors			166
Cumulative Voting			166
Director Nominations			166
Removal of Directors			167
Filling Vacancies of the Board of Directors			167
Calling Special Meetings of Stockholders			167
Submission of Stockholder Proposals			168
Voting Rights			168
Quorum for Meeting of Stockholders			168
Notice of Stockholder Meetings			168
Indemnification			168
Limitation on Liability			169
Insurance			169
Bylaw Amendments			169
Derivative Suits			170
Agreements with Creditors			170
OTHER MATTERS			170
Other Business at the Special Meeting			170
Multiple Stockholders Sharing One Address			170
LEGAL MATTERS			171
EXPERTS			171
INNOVIVE 2008 ANNUAL MEETING STOCKHOLDER PROPOSALS			171
WHERE YOU CAN FIND MORE INFORMATION			171
APPENDIX A — Agreement and Plan of Merger			A-1
APPENDIX B — Form of Support Agreements			B-1
APPENDIX C — Opinion of Chartered Capital Advisers, Inc.			C-1
APPENDIX D — Section 262 of the Delaware General Corporation Law			D-1
APPENDIX E — CytRx Financial Statements and Financial Statement Schedule			E-1
APPENDIX F — Innovive Financial Statements			F-1
EXHIBIT 3.2
EXHIBIT 5.1
EXHIBIT 23.2
EXHIBIT 23.3
EXHIBIT 99.1

QUESTIONS AND ANSWERS ABOUT
THE SPECIAL MEETING AND THE MERGER

     The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you. Please refer to the more detailed information contained elsewhere in this proxy statement/prospectus, the appendices to this proxy statement/prospectus, and the documents referred to in this proxy statement/prospectus. References in this proxy statement/prospectus to “you” refer to Innovive stockholders and references to “we,” “us,” or “our” mean Innovive. References in this proxy statement/prospectus to “CytRx” mean CytRx before the merger, or CytRx and its subsidiaries, including Innovive, after the merger, as the context requires.

Q:		What is the proposed transaction?
A:		We are proposing that Innovive be acquired by CytRx pursuant to the merger agreement. If the merger agreement is approved by Innovive’s stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Subsidiary, a wholly owned subsidiary of CytRx, will merge with and into Innovive, with Innovive to be the surviving corporation in the merger. As a result of the merger, Innovive will become a wholly owned subsidiary of CytRx and will change its corporate name to CytRx Oncology Corporation. Shares of Innovive’s common stock will no longer be publicly traded after the merger.
Q:		What is the consideration payable in the merger?
A:		In the merger, CytRx will pay initial merger consideration of $3,000,000 in the form of shares of CytRx common stock valued at $0.94 per share, which equals the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the 10 trading days prior to the signing of the merger agreement. CytRx also will pay future earnout merger consideration of up to $18,253,462, subject to the achievement of specified net sales under Innovive’s existing license agreements, as follows:

Net Sales		Earnout Merger Consideration
$  2,000,000		$	2,000,000
$15,000,000		$	5,000,000
$30,000,000		$	5,000,000
$40,000,000		$	6,253,462

		Subject to specified conditions, any earnout merger consideration will be payable in shares of CytRx common stock or, at CytRx’s election, in cash, or by a combination of shares of CytRx common stock and cash. CytRx common stock will be valued for purposes of any earnout merger consideration based upon the average of the daily market price during the 10-trading day period ending on the second trading day prior to payment of the earnout merger consideration.
Q:		What is my share of the merger consideration?
A:		In the merger, you will be entitled to receive for each share of Innovive common stock you hold immediately prior to the effective time of the merger an amount equal to the quotient determined by dividing the sum of the initial merger consideration and the earnout merger consideration (to the extent the earnout merger consideration becomes payable) by the “fully diluted shares” immediately prior to the effective time of the merger. For purposes of the merger agreement, “fully diluted shares” means the sum of all issued and outstanding shares (including any dissenting shares) of Innovive common stock and all shares of Innovive common stock issuable upon the exercise, in full,

		of all outstanding Innovive warrants that, by their terms, will remain outstanding following the merger. As of the date of this proxy statement/prospectus, there were 19,509,833 fully diluted shares. The initial merger consideration and any earnout merger consideration paid or payable for each share of Innovive common stock are sometimes collectively referred to in this proxy statement/prospectus as the “merger consideration.” Your right to receive any earnout merger consideration will not be transferable, except by operation of law. No fractional shares of CytRx common stock will be issued in the merger. In lieu of any fractional share, you will receive cash equal to the value in the merger of such fractional share, less any applicable withholding.
Q:		What is this document?
A.		This document constitutes a proxy statement and a notice of meeting with respect to the special meeting of Innovive stockholders at which you will be asked to consider and vote on the proposal to approve the merger agreement. This document also constitutes a prospectus of CytRx with respect to the shares of CytRx common stock to be issued to you pursuant to the merger agreement.
Q:		Where and when is the special meeting?
A:		The special meeting will be held at 10:00 a.m., local time, on                     , 2008, at our offices located at 555 Madison Avenue, 25th Floor, New York, New York.
Q:		Are all Innovive stockholders as of the record date entitled to vote at the special meeting?
A:		Yes. All stockholders who own Innovive common stock at the close of business on                     , 2008, the record date for the special meeting, are entitled to receive notice of the special meeting and to vote the shares of Innovive common stock that they held on that date at the special meeting, or at any adjournments or postponements of the special meeting.
Q:		Are all Innovive stockholders as of the record date entitled to attend the special meeting?
A:		Yes. Innovive stockholders as of the record date, or their legally authorized proxies named in the proxy card, may attend the special meeting. Seating, however, is limited. Cameras, recording devices, and other electronic devices will not be permitted at the meeting. If your shares are held in the name of a broker, trust, bank, or other nominee, you should bring a proxy or letter from the broker, trustee, bank, or nominee confirming your beneficial ownership of the shares.
Q:		What vote of Innovive’s stockholders is required to approve the merger agreement?
A:		For us to complete the merger, stockholders holding a majority of the outstanding shares of Innovive common stock at the close of business on the record date must vote “FOR” the approval of the merger agreement, with each share having a single vote for these purposes. Accordingly, failure to vote or abstaining from voting will have the same effect as a vote against the merger agreement.
Q.		How do the Innovive insiders intend to vote their shares?
		Steven Kelly, Neil Herskowitz, J. Jay Lobell and Eric Poma, M.D., each of whom is a director or officer of Innovive, and their affiliates, Lindsay A. Rosenwald, M.D., and Lester Lipshutz, as investment manager or trustee of trusts established for the benefit of Dr. Rosenwald and his family, along with Angelo De Caro, who recently resigned as a director, have agreed pursuant to support agreements that they have entered into with CytRx and Merger Subsidiary to vote all Innovive shares that they control in favor of the merger agreement. These directors and officers and their affiliates own beneficially an aggregate of approximately 22% of the shares of common stock entitled to vote at

		the special meeting. To facilitate the support agreements, these beneficial owners also granted CytRx proxies to vote their shares with respect to the merger and the merger agreement.
Q:		Does our board of directors recommend that our stockholders vote “FOR” the approval of the merger agreement?
A:		Yes. After careful consideration, the board of directors, by a unanimous vote of the directors, recommends that you vote “FOR” the approval of the merger agreement. You should read “The Merger—Innovive’s Reasons for the Merger” beginning on page 49 of this proxy statement/prospectus for a discussion of the factors that our board of directors considered in deciding to recommend the approval of the merger agreement.
		In considering the recommendation of the board of directors with respect to the merger agreement, you should be aware that some of Innovive’s directors and executive officers who participated in meetings of the board of directors have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. See “The Merger — Interests of Certain Persons in the Merger” beginning on page 47.
Q:		What do I need to do now?
A:		We urge you to read this proxy statement/prospectus carefully, including its appendices, and to consider how the merger affects you. If you are a stockholder as of the record date, then you can ensure that your shares are voted at the special meeting by completing, signing, dating, and returning each proxy card in the postage-paid envelope provided or submitting your proxy by the Internet prior to the special meeting.
Q:		If my shares are held in “street name” by my broker, will my broker vote my shares for me?
A:		Your broker will vote your shares on your behalf only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting against the merger.
Q:		How do I change or revoke my vote?
A:		You can change your vote at any time before your proxy is voted at the special meeting. You may revoke your proxy prior to the special meeting by notifying us in writing or by submitting a later-dated new proxy by the Internet or by mail to Innovive Pharmaceuticals, Inc., 555 Madison Avenue, 25th Floor, New York, New York 10022, Attention: Corporate Secretary. You also may revoke your proxy by attending the special meeting and voting in person. Simply attending the special meeting, however, will not be sufficient to revoke your proxy. If you have instructed a broker to vote your shares, these options for changing your vote do not apply, and instead you must follow the instructions received from your broker to change your vote.
Q:		What does it mean if I get more than one proxy card or vote instruction card?
A:		If your shares are registered differently and are in more than one account, you will receive more than one proxy card. Please sign, date, and return all of the proxy cards you receive (or submit your proxy by the Internet) to ensure that all of your shares are voted.

Q:		When do you expect the merger to be completed?
A:		We are working toward completing the merger as quickly as possible, and we anticipate that it will be completed in September 2008, assuming satisfaction or waiver of all of the conditions to the merger described under “The Merger Agreement — Conditions to the Merger” beginning on page 70 of this proxy statement/prospectus. However, because the merger is subject to certain conditions, the exact timing of the completion of the merger and the likelihood of the consummation of the merger cannot be predicted with certainty. If any of the conditions in the merger agreement is not satisfied, the merger agreement may terminate as a result.
Q.		Are there risks associated with the merger?
A.		Yes. The merger involves risks, including the following:

	•		the merger is subject to a number of conditions, and there is no assurance that the merger will be completed;
	•		the expected benefits of the merger to the combined company are subject to post-merger challenges, including maintaining the listing of CytRx common stock on The Nasdaq Capital Market to promote liquidity for stockholders of the combined company and potentially greater access to capital and using the assets and resources of the combined company to successfully develop the existing product candidates of the combined company, and these and benefits may not be realized;
	•		if the costs associated with the merger exceed the benefits, the combined company may experience adverse financial results, including increased losses;
	•		CytRx expects to continue to incur operating losses, and the combined company will need to raise additional funds to cover the cost of operating or it may have to reduce or stop operations;
	•		the merger agreement limits our ability to pursue alternatives to the merger, and CytRx will be entitled to exercise its option to purchase Innovive common stock if we do so, which would be materially dilutive to our stockholders;
	•		the support agreements may deter competing bids;
	•		because the market price of CytRx common stock may fluctuate, you cannot be sure of the market value of CytRx common stock that you will receive in the merger;
	•		you cannot be sure when you will receive any earnout merger consideration, and you may never receive any earnout merger consideration;
	•		the merger may be a taxable transaction for U.S. federal income tax purposes, in which case you will recognize taxable gain or loss to the extent that the value of the merger consideration you receive is greater or less than your tax basis in your Innovive shares, and even if the merger otherwise qualifies as a tax-free reorganization for U.S. federal income tax purposes, you will recognize taxable income or gain to the extent of any earnout merger consideration characterized as imputed interest and to the extent the balance of any earnout merger consideration received in the form of cash is greater than your tax basis in your Innovive shares allocable to that earnout merger consideration;

	•		if the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the merger and will have to repay CytRx for advances under the loan and security agreement, which we may not to be able to do;
	•		our officers and directors have financial interests in the merger that may be different from, or in addition to, the interests of our stockholders, generally;
	•		if the merger is not consummated by September 30, 2008, either we or CytRx may choose not to proceed with the merger;
	•		the fairness opinion obtained by us from our financial advisor will not reflect changes in circumstances subsequent to the date of the merger agreement; and
	•		the shares of CytRx common stock to be received in the merger will have different rights from the shares of Innovive common stock that you now hold.

Q:		Who will bear the cost of this solicitation?
A:		The expenses of preparing, printing, and mailing this proxy statement/prospectus and the proxies solicited hereby will be borne by Innovive. Additional solicitation may be made by telephone, facsimile, or other contact by certain directors, officers, employees, or agents of Innovive, none of whom will receive additional compensation for those activities. Innovive will, upon request, reimburse brokerage houses and other custodians, nominees, and fiduciaries for their reasonable expenses for forwarding material to the beneficial owners of shares held of record by others.
Q:		Will a proxy solicitor be used?
A:		No. However, the directors, officers, employees, and other agents of Innovive may solicit proxies on our behalf from stockholders by telephone, by other electronic means, or in person.
Q:		Should I send in my stock certificates now?
A:		No. Shortly after the merger is completed, you will receive a letter of transmittal with instructions informing you how to surrender your stock certificates or book-entry shares to the disbursing agent in order to receive the merger consideration. Please do not send in your stock certificates with your proxy card.
Q:		Who can help answer my other questions?
A:		If you have more questions about the merger, need assistance in submitting your proxy or voting your shares, or need additional copies of the proxy statement/prospectus or the enclosed proxy card, you can call our Chief Financial Officer, J. Gregory Jester, at (212) 716-1814. If your broker holds your shares, you should also call your broker for additional information.

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RISK FACTORS

     In addition to the other information contained in this proxy statement/prospectus, we urge you to consider the following factors before deciding how to vote on the approval and adoption of the merger agreement.

Risks Associated with the Merger

     There is no guarantee that the merger will be completed.

     The merger is subject to a number of conditions, including approval by Innovive stockholders. There is no assurance that the merger will be approved or that the other conditions to the completion of the merger will be satisfied. If the merger is not completed, we will either need to complete another strategic transaction or file for bankruptcy protection.

     Innovive and CytRx may not achieve the benefits they expect from the merger, which may have a material adverse effect on the combined company’s business, financial, and operating results.

     Innovive and CytRx entered into the merger agreement with the expectation that the merger will result in benefits to the combined company. Post-merger challenges include the following:

	•		maintaining the listing of CytRx common stock on The Nasdaq Capital Market to promote liquidity for stockholders of the combined company and potentially greater access to capital; and
	•		using the assets and resources of the combined company to successfully develop the existing product candidates of the combined company.

     If the combined company is not successful in addressing these and other challenges, then the benefits of the merger may not be realized and, as a result, the combined company’s operating results and the market price of CytRx’s common stock may be adversely affected.

     If the costs associated with the merger exceed the benefits, the combined company may experience adverse financial results, including increased losses.

     Innovive and CytRx will incur significant transaction costs as a result of the merger, including legal and accounting fees that may exceed their current estimates. In addition, Innovive and CytRx expect that the combined company will incur integration expenses, which cannot be precisely estimated at this time. Actual transaction costs may substantially exceed the current estimates of Innovive and CytRx and may adversely affect the combined company’s financial condition and operating results. If the benefits of the merger do not exceed the costs associated with the merger, the combined company’s financial results could be adversely affected, resulting in, among other things, increased losses, and decreased trading prices for CytRx common stock.

     CytRx expects to continue to incur operating losses, and the combined company will need to raise additional funds to cover the cost of operation. If the combined company is not able to raise necessary additional funds, it may have to reduce or stop operations.

     CytRx has had no commercial revenues to date and cannot predict when it will. CytRx had an accumulated deficit of approximately $170.5 million as of March 31, 2008. CytRx cannot be certain that the combined company after the merger will achieve or sustain profitability in the future. Until the combined company begins generating significant revenue, it will be required to obtain funding through the sale of equity securities, which may result in dilution to CytRx’s then-existing stockholders, or other means. Additional funding may not be available to the combined company on acceptable terms, or at all. If the combined

company is unable to obtain adequate financing on a timely basis, it may be required to delay, reduce or stop operations, any of which would have a material adverse effect on its business.

     The merger agreement limits our ability to pursue alternatives to the merger, and if we do so, CytRx would be entitled to exercise its option to purchase Innovive common stock granted in the loan and security agreement, which would be dilutive to our stockholders.

     The merger agreement contains “no-shop” provisions that, subject to specified exceptions, limit our ability to discuss, facilitate or commit to competing acquisition transactions. In addition, a termination fee of $1,500,000 is payable by us if we terminate the merger agreement to pursue a superior proposal. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Innovive from considering or proposing that acquisition even if it were prepared to pay consideration greater than the merger consideration proposed in the merger, or might result in a potential competing acquirer proposing to pay less consideration to acquire Innovive than it might have been willing to pay absent these no-shop provisions.

     If we were to terminate the merger agreement to pursue a superior proposal, CytRx would be entitled to exercise its option granted in the loan and security agreement to purchase up to 2,000,000 shares of our common stock at an exercise price of $0.01 per share. CytRx would be likely to exercise its option in connection with the completion of a superior proposal transaction, which would materially reduce the amount of the consideration that otherwise would be received in the transaction by our other stockholders.

     The support agreements may deter competing bids.

     Our directors and officers and their affiliates who are entitled to vote approximately 22% of the shares of Innovive common stock entitled to vote at the special meeting have agreed in the support agreements to vote their shares in favor of the merger agreement and against any competing acquisition transaction. The support agreements may discourage other potential acquirers and would make it more difficult for a competing acquirer to obtain approval of its bid.

     Because the market price of CytRx common stock may fluctuate, you cannot be sure of the market value of CytRx common stock that you will receive in the merger.

     Upon completion of the merger, CytRx will pay initial merger consideration of $3,000,000 in the form of shares of CytRx common stock valued at $0.94 per share, which equals the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the ten trading days prior to the signing of the merger agreement, and is not subject to change. The market price of CytRx common stock will likely be different, and may be lower, than $0.94 on the date that this proxy statement/prospectus is mailed to you, or the date of the special meeting, and on the date you receive shares of CytRx common stock in the merger. Differences in CytRx’s stock price may result from a variety of factors, including factors beyond CytRx’s control. For a discussion of factors that may affect CytRx’s stock price, see “Risk Factors Associated with CytRx’s Business,” “Risk Factors Associated with CytRx’s Investment in RXi” and “Risk Factors Associated with CytRx Common Stock” below in this section.

     You cannot be sure when you will receive any earnout merger consideration, and you may never receive any earnout merger consideration.

     In addition to the initial merger consideration, CytRx will pay future earnout merger consideration of up to $18,253,462, subject to the achievement of specified net sales under Innovive’s existing license agreements. No Innovive products have been approved for marketing, and we believe that we are at least two years away from obtaining marketing approval for any products under our existing license agreement. CytRx may be unable to obtain marketing approval for any Innovive products. Even if CytRx obtains such approvals, there is no assurance that it will be able to achieve sufficient net sales to require payment of all or any portion

of the earnout merger consideration, so you may never receive any earnout merger consideration. The earnout merger consideration also is subject to possible offset by CytRx for indemnification claims under the merger agreement.

     The merger might be a taxable transaction for U.S. federal income tax purposes, in which event you will recognize gain or loss to the extent that the value of the merger consideration you receive is greater or less than your tax basis in your Innovive shares.

     The merger might constitute a fully taxable exchange, in which case each U.S. holder of Innovive common stock will recognize income, gain or loss for U.S. federal income tax purposes measured by the difference between the fair market value of the merger consideration received in the merger and the holder’s tax basis in the Innovive common stock. Even if the merger constitutes a tax-free reorganization, each U.S. holder of Innovive common stock will recognize (i) taxable income on the portion of any earnout merger consideration characterized as imputed interest and (ii) taxable gain on the receipt of any earnout merger consideration received in the form of cash, to the extent it exceeds the U.S. holder’s adjusted tax basis in the Innovive common stock allocable to such earnout merger consideration.

     If the merger is not completed, we will have incurred substantial expenses without realizing the expected benefits of the merger. We also will have to repay CytRx for advances under the loan and security agreement, and may not to be able to do so.

     We have incurred substantial expenses in connection with the merger described in this proxy statement/prospectus, the payment of all or substantially all of which was funded by our borrowings from CytRx under the loan and security agreement. We expect to borrow additional amounts prior to the special meeting and the completion of the merger. The completion of the merger depends on the approval of our stockholders and the satisfaction of the other conditions to the merger. If the merger is not completed, we would not have realized the expected benefits of the merger.

     If the merger is not completed, our borrowings under the loan and security agreement, plus accrued interest, will become immediately due and payable to CytRx. As of June 30, 2008, CytRx had advanced to us under the loan and security agreement a total of approximately $2,290,000, and we may request additional advances of up to $3,210,000 under the loan and security agreement. We have no commitments and arrangements for any financing to repay such advances, so we expect that we would be unable to repay such advances if the merger agreement is not approved at the special meeting or the merger is not completed. In this event, CytRx would be entitled to pursue all of its remedies under the loan and security agreement, including the possible foreclosure sale of all or substantially all of our assets.

     Our officers and directors may have financial interests in the merger that may be different from, or in addition to, the interests of our stockholders, generally.

     Some of our officers may receive severance benefits under their existing employment agreements, and our officers and directors may have other financial interests in the merger that may be different from, or in addition to, the interests of our stockholders, generally. Our board of directors was aware of these interests and took them into account in its decision to approve and adopt the merger agreement. For information concerning these interests, please see the discussion under the caption “The Merger – Interests of Innovive’s Directors and Officers in the Merger.”

     If the merger is not consummated by September 30, 2008, either we or CytRx may choose not to proceed with the merger.

     Either we or CytRx may terminate the merger agreement if the merger has not been completed by September 30, 2008, unless the failure of the merger to be completed by such date has resulted from the failure

of the party seeking to terminate the merger agreement to perform its obligations or the failure of the condition regarding effectiveness of the registration statement of which this proxy statement/prospectus is a part.

     The fairness opinion obtained by us from our financial advisor will not reflect changes in circumstances subsequent to the date of the merger agreement.

     We have obtained a fairness opinion dated as of June 6, 2008 from our financial advisor, Chartered Capital Advisers, Inc. We did not seek or obtain from Chartered an updated opinion as of the date of this proxy statement/prospectus. Changes in the operations and prospects of CytRx or us, general market and economic conditions and other factors that may be beyond the control of CytRx and us, and on which the fairness opinion was based, may alter our value or the price of shares of our common stock or of CytRx common stock by the time the merger is completed. Chartered’s opinion does not speak to the time the merger will be completed or to any other date other than the date of such opinion. As a result, the opinion will not address the fairness of the merger consideration, from a financial point of view, at the time the merger is completed. For a description of the opinion that we received from Chartered, please refer to “Opinion of Innovive’s Financial Advisor ” beginning on page 49 of this proxy statement/prospectus.

     The shares of CytRx common stock to be received in the merger will have different rights from the shares of Innovive common stock.

     Upon completion of the merger, our stockholders will become CytRx stockholders. Your rights as CytRx stockholders will be governed by the restated certificate of incorporation and restated bylaws of CytRx and the CytRx rights agreement, which are different from the rights associated with Innovive common stock. See “Comparison of Rights of Holders of CytRx Common Stock and Innovive Common Stock” beginning on page 165 for a discussion of the different rights associated with CytRx common stock.

Risks Associated with CytRx’s Common Stock

     CytRx common stock may be delisted from The Nasdaq Capital Market if the stock price does not increase.

     CytRx received notice from The Nasdaq Stock Market on May 28, 2008, that CytRx common stock had closed below $1.00 per share for 30 consecutive business days, and CytRx was therefore not in compliance with the minimum bid price required by Nasdaq Marketplace Rule 4310(c)(4). In accordance with Marketplace Rule 4310(c)(8)(D), CytRx may regain compliance if at any time by November 24, 2008, CytRx common stock closes at or above $1.00 for 10 consecutive business days and CytRx otherwise meets the Nasdaq’s continuing listing requirements. Nasdaq also informed CytRx that if CytRx does not regain compliance by November 24, 2008, CytRx will be granted up to an additional 180 calendar days to regain full compliance while continuing to trade during this time on The Nasdaq Capital Market if at that time CytRx meets the Nasdaq’s initial listing requirements other than the minimum bid price rule. If CytRx eventually fails to comply with this condition for continued listing and CytRx common stock is delisted from The Nasdaq Small Capital Market, there is no assurance that CytRx common stock will be listed for trading or quoted elsewhere and an active trading market for CytRx common stock may cease to exist, which would materially and adversely impact the market value of CytRx common stock.

     CytRx’s outstanding options and warrants and the availability for resale of CytRx’s shares issued in CytRx’s private financings may adversely affect the trading price of CytRx’s common stock.

     As of June 30, 2008, there were outstanding stock options and warrants to purchase approximately 18.2 million shares of CytRx’s common stock at a weighted-average exercise price of $1.73 per share. CytRx’s outstanding options and warrants could adversely affect CytRx’s ability to obtain future financing or engage in certain mergers or other transactions, since the holders of options and warrants can be expected to exercise them at a time when CytRx may be able to obtain additional capital through a new

offering of securities on terms more favorable to CytRx than the terms of outstanding options and warrants. For the life of the options and warrants, the holders have the opportunity to profit from a rise in the market price of CytRx’s common stock without assuming the risk of ownership. The issuance of shares upon the exercise of outstanding options and warrants will also dilute the ownership interests of CytRx’s existing stockholders. Many of CytRx’s outstanding warrants contain anti-dilution provisions pertaining to dividends or distributions with respect to CytRx’s common stock. CytRx’s outstanding warrants to purchase approximately 800,000 shares also contain anti-dilution provisions that are triggered upon any issuance of securities by CytRx below the prevailing market price of CytRx’s common stock, and CytRx’s outstanding warrants to purchase approximately 11.5 million shares contain anti-dilution provisions that are triggered upon any dividend of cash or property. CytRx’s recent distribution to CytRx’s stockholders of shares of RXi common stock triggered a reduction in the exercise price and an increase in the number of shares underlying these warrants. In the event that these anti-dilution provisions are triggered by CytRx in the future, CytRx would be required to further reduce the exercise price and increase the number of shares underlying these warrants, which would have a dilutive effect on CytRx’s stockholders.

     CytRx has registered with the SEC the resale by the holders of all or substantially all shares of CytRx common stock issuable upon exercise of its outstanding options and warrants. The availability of these shares for public resale, as well as actual resales of these shares, could adversely affect the trading price of CytRx’s common stock.

     CytRx may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of CytRx’s common stock.

     CytRx is authorized to issue shares of preferred stock in one or more series. CytRx’s board of directors may determine the terms of future preferred stock offerings without further action by CytRx’s stockholders. If CytRx issues preferred stock, it could affect the rights of CytRx stockholders at that time or reduce the value of CytRx common stock. In particular, specific rights granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on CytRx’s ability to merge with or sell CytRx’s assets to a third party.

     CytRx may experience volatility in its stock price, which may adversely affect the trading price of CytRx’s common stock.

     The market price of CytRx’s common stock has ranged from $0.45 to $5.49 per share since January 1, 2007, and it may continue to experience significant volatility from time to time. Factors such as the following may affect such volatility:

	•		announcements of regulatory developments or technological innovations by CytRx or CytRx’s competitors;
	•		changes in CytRx’s relationship with CytRx’s licensors and other strategic partners;
	•		changes in CytRx’s stock holdings or other relationships with RXi;
	•		CytRx’s quarterly operating results;
	•		litigation involving or affecting CytRx;
	•		shortfalls in CytRx’s actual financial results compared to CytRx’s guidance or the forecasts of stock market analysts;
	•		developments in patent or other technology ownership rights;

	•		acquisitions or strategic alliances by CytRx or CytRx’s competitors;
	•		public concern regarding the safety of CytRx’s products; and
	•		government regulation of drug pricing.

     Other factors which may affect CytRx’s stock price are general changes in the economy, the financial markets or the pharmaceutical or biotechnology industries.

     CytRx’s anti-takeover provisions may make it more difficult to change CytRx’s management, or may discourage others from acquiring CytRx, and thereby adversely affect stockholder value.

     CytRx’s rights plan and provisions in CytRx’s bylaws are intended to protect CytRx’s stockholders’ interests by encouraging anyone seeking control of CytRx to negotiate with CytRx’s board of directors. These provisions may discourage or prevent a person or group from acquiring CytRx without the approval of CytRx’s board of directors, even if the acquisition would be beneficial to CytRx’s stockholders.

     CytRx has a classified board of directors, which means that at least two stockholder meetings, instead of one, will be required to effect a change in the majority control of CytRx’s board of directors. This applies to every election of directors, not just an election occurring after a change in control. The classification of CytRx’s board increases the amount of time it takes to change majority control of CytRx’s board of directors and may cause potential acquirers to lose interest in a potential purchase of CytRx, regardless of whether such purchase would be beneficial to CytRx or its stockholders. The additional time and cost to change a majority of the members of CytRx’s board of directors makes it more difficult and may discourage CytRx’s existing stockholders from seeking to change CytRx’s existing management in order to change the strategic direction or operational performance of CytRx’s company.

     CytRx’s restated bylaws provide that directors may only be removed for cause by the affirmative vote of the holders of at least a majority of the outstanding shares of CytRx’s capital stock then entitled to vote at an election of directors. This provision prevents stockholders from removing any incumbent director without cause. CytRx’s bylaws also provide that a stockholder must give CytRx at least 120 days notice of a proposal or director nomination that such stockholder desires to present at any annual meeting or special meeting of stockholders. Such provision prevents a stockholder from making a proposal or director nomination at a stockholder meeting without CytRx having advance notice of that proposal or director nomination. This could make a change in control more difficult by providing CytRx’s directors with more time to prepare an opposition to a proposed change in control. By making it more difficult to remove or install new directors, these bylaw provisions may also make CytRx’s existing management less responsive to the views of CytRx’s stockholders with respect to CytRx’s operations and other issues such as management selection and management compensation.

     CytRx does not intend to pay cash dividends on its common stock in the foreseeable future.

     CytRx has not declared or paid any cash dividends on CytRx’s common stock or other securities, and CytRx currently does not anticipate paying any cash dividends in the foreseeable future. Because CytRx does not anticipate paying cash dividends for the foreseeable future, CytRx’s stockholders will not realize a return on their investment in CytRx’s common stock except to the extent of any appreciation in the value of CytRx’s common stock. CytRx’s common stock may not appreciate in value, or may decline in value.

Risks Associated With CytRx’s Business

     CytRx has operated at a loss and will likely continue to operate at a loss for the foreseeable future.

     CytRx has operated at a loss due to its substantial expenditures for research and development of its product candidates and for general and administrative purposes and its lack of significant recurring revenue. CytRx incurred net losses of $21.9 million, $16.8 million and $15.1 million, respectively, for the years ended December 31, 2007, 2006 and 2005 and a net loss of $5.4 million for the three months ended March 31, 2008. CytRx had an accumulated deficit as of March 31, 2008 of approximately $170.5 million. CytRx is likely to continue to incur losses unless and until it is able to commercialize one or more of its product candidates. These losses, among other things, have had and will continue to have an adverse effect on CytRx’s stockholders’ equity and working capital. Because of the numerous risks and uncertainties associated with its product development efforts, CytRx is unable to predict when CytRx may become profitable, if at all. If CytRx is unable to achieve and maintain profitability, the market value of its common stock will likely decline.

     Because CytRx has no source of significant recurring revenue, CytRx must depend on financing to sustain its operations.

     Developing products and conducting clinical trials require substantial amounts of capital. To date, CytRx has relied primarily upon proceeds from sales of its equity securities and the exercise of options and warrants, and to a much lesser extent, upon payments from its strategic partners and licensees, to generate funds needed to finance its business and operations. CytRx will need to raise additional capital to, among other things:

	•		fund CytRx’s clinical trials and pursue regulatory approval of CytRx’s existing and possible future product candidates;
	•		expand CytRx’s research and development activities;
	•		finance CytRx’s general and administrative expenses;
	•		acquire or license other technologies;
	•		prepare, file, prosecute, maintain, enforce and defend CytRx’s patent and other proprietary rights; and
	•		develop and implement sales, marketing and distribution capabilities to successfully commercialize any product for which CytRx obtains marketing approval and which CytRx chooses to market itself.

     CytRx’s revenues were approximately $7.5 million, $2.1 million and $0.2 million, respectively, for years ended December 31, 2007, 2006 and 2005, and approximately $2.2 million for the three months ended March 31, 2008. CytRx’s revenues for the years ended December 31, 2007 and 2006 and the three months ended March 31, 2008 included approximately $7.2 million, $1.9 million, and $2.2 million, respectively, of deferred revenue recognized from CytRx’s sale in August 2006 of a one percent royalty interest in worldwide sales of arimoclomol for the treatment of amoyotrophic lateral sclerosis, which is commonly known as ALS, or Lou Gehrig’s disease. CytRx will have no significant recurring revenue unless it is able to commercialize one or more of its product candidates in development, which may require CytRx to first enter into license or other strategic arrangements with third parties.

     At March 31, 2008, CytRx had cash, cash equivalents and short-term investments of approximately $43.5 million. CytRx believes that its current resources will be sufficient to support its currently planned level

of operations into the second half of 2009. This estimate is based, in part, upon CytRx’s currently projected expenditures for the remainder of 2008 and the first three months of 2009 of approximately $23.9 million, including approximately $1.5 million of direct expenditures for CytRx’s planned clinical program for arimoclomol for ALS and related studies, approximately $0.5 million of direct expenditures for its planned clinical program for arimoclomol for stroke recovery and related studies, approximately $6.1 million of direct expenditures for its planned Phase II clinical trial of iroxanadine for diabetic ulcers, approximately $7.7 million for the operations of its research laboratory in San Diego, California, and approximately $8.1 million for other general and administrative expenses. CytRx’s projected expenditures are based on CytRx’s recently announced plan to conduct additional animal toxicology studies prior to the resumption of its Phase II clinical program for arimoclomol for ALS that currently is on clinical hold by the FDA and prior to any initiation of its Phase II clinical trial for arimoclomol for stroke recovery. Those animal toxicology studies are expected to take approximately one year. As described in the risk factor that follows below in this section, these projected expenditures are based upon numerous other assumptions and subject to many uncertainties, and CytRx’s actual expenditures may be significantly different from these projections. These projected expenditures also do not consider the effects of the merger on CytRx’s operations and financial condition. However, CytRx will need additional funds to advance any of Innovive’s product candidates.

     If CytRx obtains marketing approval as currently planned and successfully commercializes its current product candidates, CytRx anticipates it will take a minimum of three years, and possibly longer, for CytRx to generate significant recurring revenue, and CytRx will be dependent on future financing until such time, if ever, as it can generate significant recurring revenue. CytRx has no commitments from third parties to provide CytRx with any additional financing, and CytRx may not be able to obtain future financing on favorable terms, or at all. If CytRx raises additional funds by issuing equity securities, dilution to CytRx’s then-existing stockholders may result and new investors could have rights superior to holders of CytRx common stock, including holders who receive shares in the merger. In addition, debt financing, if available, may include restrictive covenants. If adequate funds are not available to CytRx, it may have to liquidate some or all of its assets or to delay or reduce the scope of or eliminate some portion or all of its development programs or clinical trials. CytRx also may have to license to other companies its product candidates or technologies that it would prefer to develop and commercialize on its own.

     If CytRx does not achieve its projected development goals in the time frames CytRx announces and expects, or if CytRx’s financial projections prove to be materially inaccurate, the commercialization of its products may be delayed and CytRx’s stock price may significantly decline.

     From time to time, CytRx estimates the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which CytRx sometimes refers to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. For example, CytRx has disclosed elsewhere in this proxy statement/prospectus the expected timing of certain milestones relating to CytRx’s arimoclomol and iroxanadine clinical development program.

     CytRx also may disclose projected expenditures or other forecasts for future periods. For example, CytRx has stated above in this section that it currently projects that its total expenditures for the remainder of 2008 and the first three months of 2009 will be approximately $23.9 million, without considering the effects of the merger. CytRx’s financial projections are based on CytRx management’s current expectations and do not contain any “cushion” for any specific uncertainties, or for the uncertainties inherent in all financial forecasting. The assumptions CytRx management has used to produce these projections may change significantly or prove to be inaccurate. Accordingly, you should not unduly rely on any of these projections.

     The actual timing of milestones and actual expenditures or other financial results of CytRx can vary dramatically compared to CytRx’s estimates, in some cases for reasons beyond CytRx’s control. If CytRx does not meet milestones or financial projections as announced from time to time, the development and commercialization of CytRx’s products may be delayed and CytRx’s stock price may decline significantly.

     If CytRx’s products are not successfully developed and approved by the FDA, CytRx may be forced to reduce or curtail its operations.

     All of CytRx’s product candidates in development must be approved by the U.S. Food and Drug Administration, or FDA, or corresponding foreign governmental agencies before they can be marketed. The process for obtaining FDA and foreign government approvals is both time-consuming and costly, with no certainty of a successful outcome. This process typically includes the conduct of extensive pre-clinical and clinical testing, including post-approval testing, which may take longer or cost more than CytRx or its licensees, if any, anticipate, and may prove unsuccessful due to numerous factors. Product candidates that may appear to be promising at early stages of development may not successfully reach the market for a number of reasons. The results of preclinical and initial clinical testing of these product candidates may not necessarily be predictive of the results that will be obtained from later or more extensive testing. Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials.

     Numerous factors could affect the timing, cost or outcome of CytRx’s product development efforts, including the following:

	•		difficulty in securing centers to conduct trials;
	•		difficulty in enrolling patients in conformity with required protocols or projected timelines;
	•		unexpected adverse reactions by patients in trials;
	•		difficulty in obtaining clinical supplies of the product;
	•		changes in or CytRx’s inability to comply with FDA or foreign governmental product testing, manufacturing or marketing requirements;
	•		regulatory inspections of clinical trials or manufacturing facilities, which may, among other things, require CytRx or CytRx’s manufacturers or licensees to undertake corrective action or suspend or terminate the affected clinical trials if investigators find them not to be in compliance with applicable regulatory requirements;
	•		inability to generate statistically significant data confirming the safety and efficacy of the product being tested;
	•		modification of the product during testing; and
	•		reallocation of CytRx’s limited financial and other resources to other clinical programs.

     In addition, the FDA and other regulatory agencies may lack experience in evaluating product candidates to treat ALS. For example, CytRx is aware of only one drug that the FDA has approved to treat ALS, and that no new drug application, or NDA, based upon molecular chaperone amplification has ever been approved by the FDA. This inexperience may lengthen the regulatory review process, increase CytRx’s development costs and delay or prevent commercialization of arimoclomol or CytRx’s other product candidates. It is possible that none of the product candidates CytRx develops will obtain the regulatory approvals necessary for it to begin selling them. The time required to obtain FDA and foreign governmental approvals is unpredictable, but often can take years following the commencement of clinical trials, depending upon the complexity of the product candidate. Any analysis CytRx performs on data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Furthermore, even if CytRx obtain regulatory approvals, CytRx’s products and the manufacturing facilities used to produce them will be subject to continual review, including periodic

inspections and mandatory post- approval clinical trials by the FDA and other CytRx and foreign regulatory authorities. Any delay or failure in obtaining required approvals or to comply with post-approval regulatory requirements could have a material adverse effect on CytRx’s ability to generate revenue from the particular product candidate. The failure to comply with any post-approval regulatory requirements also could also result in the rescission of the related regulatory approvals or the suspension of sales of the offending product.

     CytRx’s current and planned clinical trials of its molecular chaperone amplification product candidates may fail to show that these product candidates are clinically safe and effective.

     The results of CytRx’s Phase IIa clinical trial and open-label extension clinical trial of arimoclomol for the treatment of ALS indicated that arimoclomol was safe and well-tolerated in patients. However, the results of the open-label extension clinical trial indicated only a non-statistically significant trend of improvement in the ALS Functional Rating Scale, or ALSFRS, in the arimoclomol high-dose group as compared with reports of previous studies of untreated patients. Because this trial did not have concurrent placebo control group, CytRx can draw no definitive conclusions with respect to efficacy. CytRx plans to initiate a Phase II clinical trial of iroxanadine for diabetic ulcers in the first quarter of 2009. In December 2007, CytRx initiated a Phase IIb efficacy trial of arimoclomol for the treatment of ALS, which was subsequently placed on clinical hold by the FDA. CytRx plans to conduct additional animal toxicology studies to address issues raised by the clinical hold, and depending on the outcome of those studies and other factors, to thereafter resume the Phase IIb efficacy trial. CytRx also plans to undertake a second efficacy trial of arimoclomol for ALS, possibly overlapping with the Phase IIb efficacy trial, to provide additional data to support possible FDA approval. In addition, contingent upon the results of the planned animal toxicology studies and other factors, CytRx plans to conduct a Phase II clinical trial of arimoclomol in stroke patients. The FDA may also require additional, larger Phase III clinical trials before CytRx may submit an application for marketing approval. None of these trials may yield favorable safety and efficacy data, and the FDA may disagree with how CytRx interprets the data from these clinical trials. For example, CytRx may not obtain data from its planned animal toxicology studies of arimoclomol that enable it to proceed with further clinical development, the favorable safety data CytRx observed in earlier trials may not be reproduced in these later trials, and these later trials may not yield statistically significant data indicating that the product candidates are clinically effective. Accordingly, CytRx may ultimately be unable to provide the FDA with satisfactory data on clinical safety and efficacy sufficient to persuade the FDA to approve arimoclomol or iroxanadine for these indications.

     The FDA has placed a clinical hold on CytRx’s Phase IIb efficacy trial of arimoclomol, which will delay the trial and could lead to a requirement that CytRx conduct additional toxicology studies or alter the trial design.

     In January 2008, the FDA placed a clinical hold on CytRx’s Phase IIb clinical efficacy trial of arimoclomol for the treatment of ALS due to concerns relating to previous toxicology studies of arimoclomol in rats. Although CytRx has not yet received a formal determination letter from the FDA with respect to the ongoing clinical hold, CytRx recently announced plans to conduct additional preclinical toxicology studies of arimoclomol, which are expected to take up to one year to complete, before any possible resumption or initiation of clinical trials of arimoclomol. CytRx cannot predict the outcome of those additional animal toxicology studies. Depending on the outcome, CytRx may be:

	•		required to conduct additional toxicology or human studies prior to or in parallel with the resumption of CytRx’s clinical trial, which would result in substantial additional expenses and possible significant delays in completing the clinical trial;
	•		required to alter the design including reducing the dosage of arimoclomol, of the clinical trial, which could significantly delay the completion of the trial, increase the cost of the trial, adversely affect CytRx’s ability to demonstrate the efficacy of arimoclomol in the trial or cause CytRx to cancel the trial altogether due to one or more of these considerations; or

•

prohibited by the FDA from resuming CytRx’s current planned clinical trial or initiating any other clinical trial of arimoclomol for the treatment of ALS or any other indication due to safety concerns.

     CytRx’s development of arimoclomol for stroke recovery is subject to similar risks.

     Even if CytRx obtains regulatory approval for arimoclomol or iroxanadine, these product candidates may not achieve market acceptance or be profitable.

     CytRx does not expect to receive regulatory approvals for the commercial sale of arimoclomol or iroxanadine, its candidate for the treatment of diabetic ulcers, for several years, if at all. Even if CytRx does receive regulatory approvals, the future commercial success of these drug candidates will depend, among other things, on their acceptance by physicians, patients, healthcare payors and other members of the medical community as therapeutic and cost-effective alternatives to commercially available products. If CytRx’s product candidates fail to gain market acceptance, CytRx may not be able to earn sufficient revenues to continue its business.

     Any drugs CytRx develops may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material adverse effect on CytRx’s business.

     CytRx intends to sell its products primarily to hospitals which receive reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare, Medicaid and other domestic and international government programs, private insurance plans and managed care programs. Most third-party payors may deny reimbursement if they determine that a medical product was not used in accordance with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication. Third-party payors also may refuse to reimburse for experimental procedures and devices. Furthermore, because CytRx’s programs are in the early stages of development, CytRx is unable at this time to determine their cost-effectiveness and the level or method of reimbursement. Increasingly, the third-party payors who reimburse patients are requiring that drug companies provide them with predetermined discounts from list prices, and are challenging the prices charged for medical products. If the price CytRx is able to charge for any products CytRx develops is inadequate in light of its development and other costs, CytRx’s profitability could be adversely effected.

     CytRx currently expects that any drugs it develops may need to be administered under the supervision of a physician. Under currently applicable law, drugs that are not usually self-administered may be eligible for coverage by the Medicare program if:

	•		they are “incidental” to a physician’s services;
	•		they are “reasonable and necessary” for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standard of medical practice;
	•		they are not excluded as immunizations; and
	•		they have been approved by the FDA.

     CytRx’s current financial resources may be diminished if it elects to provide RXi Pharmaceuticals Corporation with additional funding.

     CytRx has no obligation to provide any additional funding to RXi, but CytRx might seek to provide funding to RXi in order to protect CytRx’s current investment in RXi if RXi is unable to obtain sufficient funding on its own, or in order for CytRx to maintain its relative ownership interest in RXi if RXi undertakes a

financing. If CytRx provides RXi with any additional funding, CytRx will have less funds available for its own business and operations.

     CytRx may rely upon third parties in connection with the commercialization of its products.

     CytRx plans to retain the services of one or more site management and clinical research organizations to help conduct CytRx’s planned clinical trials. CytRx may seek to complete the development and marketing of arimoclomol, if it is approved by the FDA. However, the completion of the development of arimoclomol and CytRx’s other product candidates, as well as the marketing of these products, may require CytRx to enter into strategic alliances, license agreements or other collaborative arrangements with other pharmaceutical companies under which those companies will be responsible for one or more aspects of the commercial development and eventual marketing of CytRx’s products.

     CytRx’s products may not have sufficient potential commercial value to enable CytRx to secure strategic arrangements with suitable companies on attractive terms, or at all. If CytRx is unable to enter into such arrangements, CytRx may not have the financial or other resources to complete the development of any of its products and may have to sell its rights in them to a third party or abandon their development altogether.

     To the extent CytRx enters into collaborative arrangements with respect to its product candidates, CytRx will be dependent upon the timeliness and effectiveness of the development and marketing efforts of its contractual partners. If these companies do not allocate sufficient personnel and resources to these efforts or encounter difficulties in complying with applicable FDA and other regulatory requirements, CytRx may not obtain regulatory approvals as planned, if at all, and the timing of receipt or the amount of revenue from these arrangements may be materially and adversely affected. These arrangements also would reduce the potential profitability of these product candidates to CytRx.

     CytRx has reported several material weaknesses in the effectiveness of its internal controls over financial reporting, and if CytRx cannot maintain effective internal controls or provide reliable financial and other information, investors may lose confidence in CytRx’s SEC reports.

     In its most recent annual report and its most recent quarterly report filed with the Securities and Exchange Commission, or SEC, CytRx reported material weaknesses in the effectiveness of CytRx’s internal controls over financial reporting related to failures on the part of CytRx’s accounting personnel to follow established practices and procedures and a failure to keep current CytRx’s legal database for contracts relating to CytRx’s arimoclomol development program. Additionally, within the past three years:

	•		CytRx identified a material weakness related to CytRx’s accounting for an equity transaction by RXi and CytRx’s tax withholding in connection with exercises of employee stock options. As a result, CytRx restated its financial statements for the quarter ended June 30, 2007 and extended the filing of its quarterly report for the quarter ended September 30, 2007;
	•		CytRx identified a material weakness related to its accounting for transactions at its former laboratory facility in Worcester, Massachusetts. As a result, CytRx restated its financial statements for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006;
	•		CytRx improperly applied generally accepted accounting principles related to its accounting for deemed dividends incurred in connection with anti-dilution adjustments made to its outstanding warrants. This misapplication of accounting principles constituted a material weakness and caused CytRx to twice restate its financial statements for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 and for the year ended December 31, 2005, as well as restate its financial statements for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006; and

•

CytRx miscalculated pro forma employee stock option compensation figures disclosed in the footnotes to its financial statements. As a result, CytRx restated its financial statements for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 and for the year ended December 31, 2005.

     In addition, CytRx concluded in its annual report for the year ended December 31, 2007 and quarterly reports for the quarters ended March 31, 2008, September 30, 2007 and June 30, 2007 that CytRx’s disclosure controls and procedures were ineffective as of those dates. Disclosure controls generally include controls and procedures designed to ensure that information required to be disclosed by CytRx in the reports it files with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

     Effective internal controls over financial reporting and disclosure controls and procedures are necessary for CytRx to provide reliable financial and other reports and effectively prevent fraud. If CytRx cannot maintain effective internal controls or provide reliable financial or SEC reports or prevent fraud, investors may lose confidence in CytRx’s SEC reports, its operating results and the trading price of its common stock could suffer and CytRx may become subject to litigation.

     CytRx may be unable to protect its intellectual property rights, which could adversely affect CytRx’s ability to compete effectively.

     CytRx believes that obtaining and maintaining patent and other intellectual property rights for its technologies and potential products is critical to establishing and maintaining the value of its assets and its business. CytRx will be able to protect its technologies from unauthorized use by third parties only to the extent that CytRx has rights to valid and enforceable patents or other proprietary rights that cover them. Although CytRx has patents and patent applications directed to its molecular chaperone amplification technologies, these patents and applications may not be effective to prevent third parties from developing or commercializing similar or identical technologies. In addition, CytRx’s patents may be held to be invalid if challenged by third parties, and CytRx’s patent applications may not result in the issuance of patents.

     The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States and in many foreign countries. The application and enforcement of patent laws and regulations in foreign countries is even more uncertain. Accordingly, CytRx may not be able to effectively file, protect or defend its proprietary rights on a consistent basis. In particular, the patents and patent applications related to its molecular chaperone amplification product candidates were issued or filed by third parties prior to the time CytRx acquired rights to them, and they begin to expire in 2016. The validity, enforceability and ownership of those patents and patent applications may be challenged, and if a court decides that CytRx’s patents are not valid, CytRx will not have the right to stop others from using CytRx’s inventions. There is also the risk that, even if the validity of CytRx’s patents is upheld, a court may refuse to stop others on the ground that their activities do not infringe CytRx’s patents.

     Any litigation brought by CytRx to protect CytRx’s intellectual property rights could be costly and have a material adverse effect on CytRx’s operating results or financial condition, make it more difficult for CytRx to enter into strategic alliances with third parties to develop CytRx’s products, or discourage CytRx’s existing licensees from continuing their development work on CytRx’s potential products. If CytRx’s patent coverage is insufficient to prevent third parties from developing or commercializing similar or identical technologies, the value of CytRx’s assets is likely to be materially and adversely affected.

     CytRx also relies on certain proprietary trade secrets and know-how, especially where CytRx believes patent protection is not appropriate or obtainable. However, trade secrets and know-how are difficult to protect. Although CytRx has taken measures to protect CytRx’s unpatented trade secrets and know-how,

including the use of confidentiality and invention assignment agreements with CytRx’s employees, consultants and some of CytRx’s contractors, it is possible that these persons may disclose CytRx’s trade secrets or know-how or that CytRx’s competitors may independently develop or otherwise discover CytRx’s trade secrets and know-how.

     If CytRx’s product candidates infringe the rights of others, CytRx could be subject to expensive litigation or be required to obtain licenses from others to develop or market them.

     CytRx’s competitors or others may have patent rights that they choose to assert against CytRx or CytRx’s licensees, suppliers, customers or potential collaborators. Moreover, CytRx may not know about patents or patent applications that CytRx’s products would infringe. For example, because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents that CytRx’s arimoclomol, iroxanadine or other product candidates would infringe. In addition, if third parties file patent applications or obtain patents claiming technology also claimed by CytRx in issued patents or pending applications, CytRx may have to participate in interference proceedings in the U.S. Patent and Trademark Office to determine priority of invention. If third parties file oppositions in foreign countries, CytRx may also have to participate in opposition proceedings in foreign tribunals to defend the patentability of its foreign patent applications.

     If a third party claims that CytRx infringes the third party’s proprietary rights, any of the following may occur:

	•		CytRx may become involved in time-consuming and expensive litigation, even if the claim is without merit;
	•		CytRx may become liable for substantial damages for past infringement if a court decides that CytRx’s technology infringes a competitor’s patent;
	•		a court may prohibit CytRx from selling or licensing CytRx’s product without a license from the patent holder, which may not be available on commercially acceptable terms, if at all, or which may require CytRx to pay substantial royalties or grant cross licenses to CytRx’s patents; and
	•		CytRx may have to redesign CytRx’s product candidates or technology so that it does not infringe patent rights of others, which may not be possible or commercially feasible.

     If any of these events occurs, CytRx’s business and prospects will suffer and the market price of CytRx’s common stock will likely decline substantially.

     CytRx is subject to intense competition, and CytRx may not compete successfully.

     CytRx and its strategic partners or licensees may be unable to compete successfully against CytRx’s current or future competitors. The pharmaceutical, biopharmaceutical and biotechnology industries are characterized by intense competition and rapid and significant technological advancements. Many companies, research institutions and universities are working in a number of areas similar to CytRx’s primary fields of interest to develop new products. There also is intense competition among companies seeking to acquire products that already are being marketed. Many of the companies with which CytRx competes have or are likely to have substantially greater research and product development capabilities and financial, technical, scientific, manufacturing, marketing, distribution and other resources than CytRx and at least some of its present or future strategic partners or licensees.

     As a result, these competitors may:

	•		succeed in developing competitive products sooner than CytRx or CytRx’s strategic partners or licensees;
	•		obtain FDA or foreign governmental approvals for their products before CytRx can obtain approval of any of CytRx’s products;
	•		obtain patents that block or otherwise inhibit the development and commercialization of CytRx’s product candidate candidates;
	•		develop products that are safer or more effective than CytRx’s products;
	•		devote greater resources than CytRx to marketing or selling products;
	•		introduce or adapt more quickly than CytRx to new technologies and other scientific advances;
	•		introduce products that render CytRx’s products obsolete;
	•		withstand price competition more successfully than CytRx or CytRx’s strategic partners or licensees;
	•		negotiate third-party strategic alliances or licensing arrangements more effectively than CytRx; and
	•		take better advantage than CytRx of other opportunities.

     CytRx is aware of only one drug, Rilutek, which was developed by Aventis Pharma AG, that has been approved by the FDA for the treatment of ALS. Many companies are working to develop pharmaceuticals to treat ALS, including Aeolus Pharmaceuticals, Celgene Corporation, Mitsubishi Tanabe Pharma Corporation, Ono Pharmaceuticals, Trophos SA, Knopp Neurosciences Inc., Faust Pharmaceuticals SA, Oxford BioMedica plc, Phytopharm plc and Teva Pharmaceutical Industries Ltd., as well as RXi. ALS patients often take over-the-counter supplements, including vitamin E, creatine and coenzyme Q10, or drugs such as lithium that are approved for other indications. ALS belongs to a family of neurodegenerative diseases that includes Alzheimer’s, Parkinson’s and Huntington’s diseases. Due to similarities between these diseases, a new treatment for one such disease potentially could be useful for treating others. There are many companies producing and developing drugs used to treat neurodegenerative diseases other than ALS, including Amgen, Inc., Biogen Idec, Boehringer Ingelheim, Cephalon, Inc., Ceregene, Inc., Elan Pharmaceuticals, plc, Forest Laboratories, Inc., H. Lundbeck A/S, Phytopharm plc, UCB Group and Wyeth.

     Current drug classes used to treat stroke include antiplatelet agents, anticoagulants, salycylates, neuroprotectants and thrombolytic agents. Prescription antiplatelet agents include Aggrenox by Boehringer Ingelheim, Plavix by Sanofi-Aventis and Bristol-Myers Squibb, and Ticlid by Roche Pharmaceuticals. Coumadin by Bristol-Myers Squibb and Jantoven by Upsher-Smith Laboratories are branded forms of warfarin, an anticoagulant. Moreover, salicylates, like aspirin, are commonly used to treat patients after stroke. In Europe, Ferrer Grupo markets the neroprotectant, Somazina. Activase, also known as tissue plasminogen activator, or t-PA, is a thrombolytic agent marketed by Genentech. Many new drug candidates are in development by pharmaceutical and biotech companies, including GlaxoSmithKline, Indeveus Pharmaceuticals, Ipsen, Merck & Co., Neurobiological Technologies, Ono Pharmaceuticals, PAION AG and Wyeth. In addition to drug therapy, companies such as Medtronic and Northstar Neurosciences are developing neurostimulation medical devices to aid in recovery after stroke.

     The wound care market is highly competitive, and there are many products available for treating skin wounds, including diabetic foot ulcers. Prescription and over-the-counter products for the prevention and treatment of infections include topical anti-infectives, such as Betadine, silver sulfadiazine, hydrogen peroxide,

Dakin’s solution and hypochlorous acid, and topical antibiotics, such as Neosporine, Mupirocin and Bacitracin. Skin substitute products include Apligraf, manufactured by Organogenesis, Inc., which is an FDA-cleared product using human dermal and epidermal cells placed on a collagen matrix, for the treatment of both venous stasis and diabetic foot ulcers, and Dermagraft, produced by Advanced BioHealing, Inc., which uses human derived dermal cells placed on a polyglactin matrix and is FDA cleared to treat diabetic foot ulcers. In addition, a number of companies are working to develop proprietary pharmaceuticals and cell-based therapies to treat diabetic wound healing, including Agennix, Inc., BioSyntech, Inc., CardioVascular BioTherapeutics, Inc., Cardium Therapeutics, Inc., Genentech Inc., KeraCure, Inc., King Pharmaceuticals, Inc., MacroChem Corporation, Oculus Innovative Sciences, Inc., Rovi Pharmaceutical Laboratories, SanuWave, Inc. and Wyeth.

     Most of CytRx’s competitors have substantially greater research and product development capabilities and financial, technical, scientific, manufacturing, marketing, distribution and other resources than CytRx.

     CytRx may be required to pay milestone and other payments relating to the commercialization of its products.

     The agreement by which CytRx acquired rights to arimoclomol and CytRx’s other molecular chaperone amplification product candidates provides for milestone payments by CytRx upon the occurrence of certain regulatory filings and approvals related to the acquired products. In the event that CytRx successfully develops arimoclomol or any of these other product candidates, these milestone payments could aggregate as much as $3.7 million, with the most significant payments due upon the first commercialization of any of these products. In addition, CytRx’s agreement with the ALS Charitable Remainder Trust requires CytRx to pay a one-percent royalty interest on worldwide sales of arimoclomol for the treatment of ALS. Also, any future license, collaborative or other agreements CytRx may enter into in connection with its development and commercialization activities may require CytRx to pay significant milestone, license and other payments in the future.

     CytRx will rely upon third parties for the manufacture of its clinical product supplies.

     CytRx does not have the facilities or expertise to manufacture supplies of any of its product candidates, including arimoclomol or iroxanadine. Accordingly, CytRx is dependent upon contract manufacturers, or potential future strategic alliance partners, to manufacture these supplies. CytRx has manufacturing supply arrangements in place with respect to some of the clinical supplies needed for its planned development programs for arimoclomol for ALS and stroke recovery and for iroxanadine for diabetic ulcers. However, CytRx has no supply arrangements for the commercial manufacture of these product candidates or any manufacturing supply arrangements for any other potential product candidates, and CytRx may not be able to secure needed supply arrangements on attractive terms, or at all. CytRx’s failure to secure these arrangements as needed could have a materially adverse effect on its ability to complete the development of its products or to commercialize them.

     CytRx is subject to potential liabilities from clinical testing and future product liability claims.

     If any of CytRx’s products are alleged to be defective, they may expose CytRx to claims for personal injury by patients in clinical trials of CytRx’s products or, if CytRx obtains marketing approval and commercializes its products, by patients using CytRx’s commercially marketed products. Even if the commercialization of one or more of CytRx’s products is approved by the FDA, users may claim that such products caused unintended adverse effects. CytRx currently does not carry product liability insurance covering the commercial marketing of its product candidates. CytRx obtained clinical trial insurance for CytRx’s Phase IIa clinical trial and Phase IIb efficacy trial of arimoclomol for the treatment of ALS, and CytRx plans to seek to obtain similar insurance for any other clinical trials that CytRx conducts, as well as liability insurance for any products that CytRx may market. However, CytRx may not be able to obtain additional insurance in the amounts it seeks, if at all. In addition, any insurance maintained by CytRx or CytRx’s licensees may not prove adequate in the event of a claim against CytRx. Even if claims asserted

against CytRx are unsuccessful, they may divert management’s attention from CytRx’s operations, and CytRx may have to incur substantial costs to defend such claims.

     CytRx may be unable to acquire products approved for marketing.

     In the future, CytRx may seek to acquire products from third parties that already are being marketed or have been approved for marketing. CytRx has not currently identified any of these products, however, and CytRx does not have any prior experience in acquiring or marketing products and may need to find third parties to market any products that CytRx might acquire. CytRx may also seek to acquire products through a merger with one or more companies that own such products. In any such merger, the owners of CytRx’s merger partner could be issued or hold a substantial, or even controlling, amount of stock in CytRx’s company or, in the event that the other company is the surviving corporation, in that other company.

     CytRx uses hazardous materials and must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how CytRx does business.

     CytRx’s research and development and manufacturing processes involve the controlled storage, use and disposal of hazardous materials, including biological hazardous materials. CytRx is subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of these materials and waste products. Although CytRx believes that its safety procedures for handling and disposing of these hazardous materials comply with the standards prescribed by law and regulation, CytRx cannot completely eliminate the risk of accidental contamination or injury from hazardous materials. In the event of an accident, CytRx could be held liable for any damages that result. CytRx could incur significant costs to comply with current or future environmental laws and regulations.

Risks Associated With CytRx’s Investment in RXi

     The recent distribution of RXi common stock to CytRx’s stockholders is taxable to CytRx.

     On March 11, 2008, CytRx distributed to CytRx’s stockholders 4,526,624 shares of RXi common stock. CytRx will recognize gain on the distribution for income tax purposes of approximately $32.9 million, which is the amount of the excess of the fair market value of the RXi shares distributed over CytRx’s basis. This gain will be included in determining whether CytRx has current year earnings and profits subject to taxation. Although CytRx has ascribed a value to RXi shares in the distribution for tax purposes, CytRx’s valuation will not be binding on the Internal Revenue Service or any state taxation agency, which could ascribe a different valuation to the distributed RXi shares.

     CytRx’s ownership interest in RXi may be diluted.

     RXi raised approximately $8.7 million of gross proceeds in a private placement on June 25, 2008. Prior to this recent financing, RXi had indicated that it had sufficient working capital to fund its planned expenditures into the second quarter of 2009 and that it will need to raise substantial amounts of money in the future to fund a variety of activities integral to the development of its business. Under CytRx’s agreement with RXi and RXi’s other founding stockholders, with some exceptions, CytRx will have preemptive rights to acquire a portion of any new securities sold or issued by RXi in the future so as to maintain CytRx’s percentage ownership of RXi. Depending upon the terms and provisions of any proposed sale of new securities by RXi, CytRx’s financial condition and other factors, CytRx may be unwilling or unable to exercise CytRx’s preemptive rights. CytRx agreed to waive its preemptive rights in connection with RXi’s recent financing, which resulted in a reduction of CytRx’s percentage ownership in RXi from approximately 49% to approximately 45%. If RXi raises funds through further issuances of additional equity securities in which CytRx does not participate, CytRx’s percentage ownership interest in RXi may be diluted further.

     CytRx may elect to dispose of some of its remaining RXi shares, and may not be able to do so on attractive terms.

     As of July 8, 2008, CytRx owned 6,268,881 shares of common stock of RXi, which had a market value of approximately $47.0 million based upon the market price of RXi common stock as reported on The Nasdaq Capital Market on that date. This compares to CytRx’s total assets as of March 31, 2008 of approximately $50.5 million. CytRx may be deemed to be an “investment company” within the meaning of the Investment Company Act of 1940, and become subject to the stringent regulations applicable to investment companies, if the value of CytRx’s RXi shares, when taken together with the value of any other investment securities CytRx holds, continues to exceed 40% of the value of CytRx’s assets for a period of one year, unless CytRx obtains a declaration from the SEC that it is not an investment company. If CytRx is unable to obtain such a declaration, then CytRx would likely seek to sell or otherwise dispose of some of CytRx’s RXi shares in order to avoid being an inadvertent investment company.

     CytRx also may desire to sell its RXi shares in the future in order to raise funds for the conduct of CytRx’s business and operations. If it becomes necessary or advisable for any reason for CytRx to sell its RXi shares, CytRx would have to sell RXi shares pursuant to Rule 144 under the Securities Act, which includes manner of sale and volume limitations applicable to sales by affiliates such as CytRx, or negotiate private sales with third parties. CytRx may be unable to sell or divest of RXi shares at attractive prices, if at all. In addition, any sale or other disposition of RXi shares by CytRx, or the possibility of such sale or disposition, could adversely affect the market price of CytRx’s RXi shares.

     RXi retains discretion over its use of the funds that CytRx has provided to it.

     All funds previously provided by CytRx to RXi may be used by RXi in any manner its management deems appropriate. None of these uses may yield a significant or any return at all for RXi stockholders, including CytRx.

     CytRx does not and will not control RXi, and the officers, directors and other RXi stockholders may have interests that are different from those of CytRx.

     Although CytRx currently owns a significant portion of RXi’s outstanding common stock, CytRx does not control RXi’s management or operations. RXi has its own board of directors and management, who are responsible for the affairs and policies of RXi and its development plans. CytRx has entered into letter agreements with the University of Massachusetts Medical School, or UMMS, RXi and RXi’s other founding stockholders under which CytRx agrees to vote its shares of RXi common stock for the election of directors of RXi and to take other actions to ensure that a majority of RXi’s board of directors are independent of CytRx. The other stockholders of RXi may have interests that are different from CytRx’s, and RXi may engage in actions in connection with its business and operations that CytRx believes are not in CytRx’s best interests.

     Products developed by RXi could eventually compete with CytRx’s products for ALS, type 2 diabetes, obesity and other disease indications.

     RXi is focusing its initial efforts on developing ribonucleic acid interference, or RNAi, therapeutics for the treatment of a specific form of ALS caused by a defect in the SOD1 gene. Although CytRx is developing arimoclomol for treatment for all forms of ALS, it is possible that products developed by RXi for the treatment of ALS could compete with ALS products that CytRx may develop. RXi also plans to pursue the development of RNAi therapeutics for the treatment of other neurodegenerative diseases and type 2 diabetes, which could compete with products that CytRx may develop for the treatment of these diseases. The potential commercial success of any products that CytRx may develop for these and other diseases may be adversely affected by competing products that RXi may develop.

Risks Associated With Innovive’s Business

     We have an immediate need for capital and will need to raise additional capital in the future to continue our business.

     To date, we have generated no product revenues, yet we have had operating and capital expenditures to in-license and begin development of our product candidates. As a result of these expenses and lack of revenue, at March 31, 2008, we had a working capital deficit of approximately $3.7 million. In addition, as a result of our financial position at December 31, 2007, we received a “going concern” opinion from our independent registered public accounting firm, which is included in our financial statements included as Appendix F to this proxy statement/prospectus. Until, and unless, we receive approval from the FDA or foreign regulatory authorities for our product candidates, we cannot sell our drugs and will not have product revenues. Currently, our only product candidates are INNO-406, tamibarotene, INNO-206, and INNO-305, and none of them have been approved by the FDA or any foreign regulatory authority for sale. Therefore, for the foreseeable future, we will have to fund all of our operations and capital expenditures from existing cash and short-term investments or future financings. At March 31, 2008, we had cash and short-term investments of only $301,962. We have insufficient funds to meet our current obligations or future operating expenses. As a result, we have been seeking and will continue to seek additional sources of financing for our operations, which might not be available on favorable terms, if at all. If we do not succeed in raising additional funds on acceptable terms, we will be unable to complete planned pre-clinical and clinical trials or obtain approval of any of our product candidates from the FDA or any foreign regulatory authorities. In addition, we could be forced to discontinue product development, reduce or forego sales and marketing efforts and forego attractive business opportunities. Any additional sources of financing will likely involve the issuance of our equity securities, which would have a dilutive effect on our then current stockholders.

     Our internal control over financial reporting is not adequate and may result in financial statements that are incomplete or subject to restatement.

     Section 404 of the Sarbanes Oxley Act of 2002 requires significant procedures and review processes of our system of internal controls. Section 404 required that we evaluate and report on our system of internal control over financial reporting beginning with the year ended December 31, 2007. In addition, our independent registered public accounting firm will be required to report on those controls for the year ending December 31, 2009. The additional costs associated with this process may be significant.

     After documenting and testing our system, we have identified a material weakness in our accounting and financial functions due to a lack of a segregation of duties among these functions. As a result, our internal control over financial reporting is not effective. As a result of our internal control over financial reporting being ineffective, investors could lose confidence in our financial reports, and our stock price might be adversely affected. In addition, remedying this or any future material weaknesses that we or our independent registered public accounting firm might identify, could require us to incur significant costs and expend significant time and management resources. We cannot assure you that any of the measures we might implement to remedy any such deficiencies would effectively mitigate or remedy such deficiencies.

     If we are unable to satisfy our obligations under current and future license agreements, we could lose license rights which would adversely affect our business.

     We are a party to various license agreements, each of which requires us to make periodic payments, which in our current financial condition is likely to be difficult or even impossible.

     We may enter into additional licenses in the future. Our existing licenses impose, and we expect future licenses will impose, various milestone payments, royalty payments and other obligations on us. If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights

that are important to our business. If a licensor challenges our license position, our competitive position and business prospects could be harmed.

     We might not obtain the necessary U.S. or worldwide regulatory approvals to commercialize INNO-406, tamibarotene, INNO-206, and INNO-305 or any future product candidate.

     We cannot assure you that we will receive the approvals necessary to commercialize and sell our current product candidates, INNO-406, tamibarotene, INNO-206, and INNO-305, or any product candidate we acquire or develop in the future. We will need FDA approval to commercialize any product candidate in the U.S. and approvals from the equivalent regulatory authorities in foreign jurisdictions to commercialize any product candidate in those jurisdictions. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the product candidate is safe for humans and effective for its intended use. This demonstration requires significant research and animal tests, which are referred to as pre-clinical studies, as well as human tests, which are referred to as clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical approaches will result in drugs that the FDA considers safe for humans and effective for indicated uses, including our current product candidates.

     Even if we comply with all FDA requests, the FDA may ultimately reject any of our NDAs. We cannot be sure that we will ever obtain regulatory clearance for our current product candidates or any other product. Failure to obtain FDA approval of our product candidates will severely undermine our business by leaving us without a saleable product, and therefore without any source of revenues, until another product candidate can be developed. There is no guarantee that we will ever be able to develop or acquire another product candidate.

     In foreign jurisdictions, we must receive approval from the appropriate regulatory authorities before we can commercialize any drugs. Foreign regulatory approval processes generally include all of the risks associated with the FDA approval procedures described above. We cannot assure you that we will receive the approvals necessary to commercialize any product candidate for sale outside the United States.

     Delays in the regulatory approval process might harm our ability to commercialize any product candidate.

     The FDA has substantial discretion in the drug approval process and may require us to conduct additional pre-clinical and clinical testing or to perform post-marketing studies for any of our current product candidates or any product candidate we acquire or develop in the future. The approval process might also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals might:

	•		delay commercialization of, and our ability to derive product revenues from, any product candidate;
	•		impose costly procedures on us; and
	•		diminish any competitive advantages that we might otherwise enjoy if competing products are able to be marketed before our products.

     Delays in the regulatory approval process in foreign jurisdictions could have the same negative impact on our drug commercialization plans in those jurisdictions.

     Our current product candidates are in the early stage of clinical trials or are still in pre-clinical trials.

     Our current product candidates, INNO-406, tamibarotene, INNO-206, and INNO-305, are still in various stages of development and require some additional pre-clinical testing and extensive clinical testing. That testing might show that these compounds have little or no efficacy. Even if pre-clinical or clinical trials for these compounds are positive, we cannot predict with any certainty if or when we might submit a new drug application, or NDA, for regulatory approval of any of them or whether such an NDA will be accepted. Failure to submit or receive approval of an NDA for any of our current product candidates or any other product candidate we might acquire will severely undermine our business by leaving us with few or no saleable products, and therefore with limited or no sources of revenues, until another product candidate can be developed. Delays in the approval of an NDA could:

	•		delay commercialization of, and our ability to derive product revenues from, any product candidate;
	•		impose costly procedures on us; and
	•		diminish any competitive advantages that we might otherwise enjoy if competing products are able to be marketed before our products.

     Our INNO-406 IND was allowed on June 15, 2006. Our Phase I study for INNO-406 began in July 2006 and is ongoing. Our expectations for this product are based on preclinical studies conducted on animals and Phase I clinical study results to date.

     An IND for INNO-305 was allowed in October 2006. The Phase I study for INNO-305 began in October 2006 and is ongoing. Our expectations for INNO-305 are based on pre-clinical studies and on analogous programs in Germany and Japan which showed positive clinical outcomes in Phase I and II clinical testing.

     An IND for tamibarotene was allowed in May 2007. The Phase II pivotal clinical study began in September 2007 and is ongoing.

     Given the early stages and limited scope of these various studies, we have very limited safety and efficacy data on our products. We cannot determine whether the prior or current studies, including any preliminary positive data, for the products are predictive of clinical safety or efficacy. These same risks are true for our planned development of INNO-206 for which an IND was allowed in April 2007.

     Clinical trials are very expensive, time-consuming and difficult to design and implement.

     Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time consuming. We estimate that clinical trials of our product candidates will take at least several years to complete. Further, failure can occur at any stage of the trials, and we could encounter problems that could delay or cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials, including those for our current product candidates or any future compound, might be delayed by several factors, including:

	•		unforeseen safety issues;
	•		determination of dosing issues;
	•		lack of effectiveness during clinical trials;

	•		slower than expected rates of patient recruitment;
	•		inability to monitor patients adequately during or after treatment; and
	•		inability or unwillingness of medical investigators to follow our clinical protocols.

     In addition, we or the FDA might suspend any of our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in the IND submission or the conduct of that trial. Therefore, we cannot predict with any certainty the schedule for future clinical trials.

     The results of our clinical trials might not support our product candidate claims.

     Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and pre-clinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. This failure may cause us to abandon a product candidate and might delay development of other product candidates. Any delay in, or termination of, a clinical trial will delay the filing of the related NDA with the FDA and, ultimately, our ability to commercialize that product candidate and generate product revenues from that product. In addition, our Phase I clinical trials for INNO-406 and INNO-305 and our Phase II pivotal clinical trial for tamibarotene involve, and future trials for these and our other product candidates might involve, a small number of patients. Because of the small sample size, the results of these clinical trials might not be indicative of future results.

     Physicians and patients might not accept and use our drugs.

     Even if the FDA approves our current product candidates, physicians and patients might not accept and use them or any other product we might develop. Acceptance and use of our products will depend upon a number of factors including:

	•		perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drug;
	•		cost-effectiveness of our products relative to competing products;
	•		availability of reimbursement for our products from government or other healthcare payers; and
	•		effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.

     Because we expect sales of our product candidates, if approved, to generate substantially all of our product revenues for the foreseeable future, the failure of these drugs to find market acceptance would harm our business and could require us to seek additional financing.

     Our product candidates might have unintended results, which might not be discovered until after commercialization.

     Any of our product candidates, even if successfully tested, approved and commercialized, could result in unintended consequences in consumers. Any consequence might not be discovered for many years after commercialization of a product. Such a development could have a negative impact on our earnings and operations.

     Our drug development program depends upon third-party researchers who are outside our control.

     We depend upon independent investigators and collaborators, such as universities, medical institutions and clinical research organizations, to conduct our pre-clinical and clinical trials under agreements with us. These collaborators are not our employees and we cannot control the amount or timing of resources that they devote to our programs. These investigators might not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If outside collaborators fail to devote sufficient time and resources to our drug development programs, or if their performance is substandard, the approval of our FDA applications, if any, and our introduction of new drugs, if any, will be delayed. These collaborators might also have relationships with other commercial entities, some of whom might compete with us. If our collaborators assist our competitors at our expense, our competitive position would be harmed.

     We will rely exclusively on third parties to formulate and manufacture our product candidates.

     We have no experience in drug formulation or manufacturing and do not intend to establish our own manufacturing facilities. We lack the resources and expertise to formulate or manufacture our own product candidates. For INNO-406, we have ongoing production contracts for clinical material for our current Phase I clinical trial. Product for future trials will require additional contracts with our current suppliers. We have contracted with a third party to supply, store and distribute tamibarotene for our clinical trials and any possible commercialization. We currently do not have contracts for product supply for our planned future clinical trials for INNO-206 but have identified vendors with the capability to perform the development and manufacturing steps necessary to manufacture the product. We believe we currently have ample supplies of INNO-305 for its continuing Phase I trial. If any of our current product candidates or any other product candidate we might develop or acquire in the future, receives FDA approval, we will rely on one or more third-party contractors to manufacture our products. Our reliance on third-party manufacturers exposes us to the following risks:

	•		we might not be able to retain current third party manufacturers or other service providers or attract new ones due to our financial condition;
	•		we might be unable to identify manufacturers on commercially reasonable terms or at all because the number of potential manufacturers is limited and the FDA must approve any replacement contractor. This approval would require new testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA approval, if any;
	•		our third-party manufacturers might be unable to formulate and manufacture our drugs in the volume and of the quality required to meet our clinical needs and commercial needs, if any;
	•		our future contract manufacturers might not perform as agreed or might not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products;
	•		drug manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration, and corresponding state and foreign agencies to ensure strict compliance with good manufacturing practice and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards; and
	•		if any third-party manufacturer makes improvements in the manufacturing process for our products, we might not own, or might have to share, the intellectual property rights to the innovation.

     Each of these risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenues. Any of these events could impair our earnings and financial condition.

     We have no experience selling, marketing or distributing products and no internal capability to do so.

     We currently have no sales, marketing or distribution capabilities. Currently, we intend to perform selling and marketing activities ourselves which will require significant capital expenditures, management resources and time to establish and develop an in-house marketing and sales force with technical expertise. We do not currently have the resources to allocate to the sales and marketing of our proposed products. To the extent that we decide not to, or are unable to establish sales and marketing activities for our products, our future success will depend, in part, on our ability to enter into and maintain collaborative relationships for such capabilities, the success of which will be dependent upon the collaborator’s strategic interest in the products under development and the collaborator’s ability to successfully market and sell any such products. If we do pursue collaborative arrangements regarding the sales and marketing of our products, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if able to do so, that they will have effective sales forces. There can also be no assurance that we will be able to establish or maintain relationships with third-party collaborators or develop in-house sales and distribution capabilities. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful. In addition, there can also be no assurance that we will be able to market and sell our products in the United States or overseas.

     Our potential future earnings may be reduced should we decide to out-license one or more of our drug product candidates.

     We may decide to out-license one or more of our drug product candidates, reducing future profits available to us. Should we license any one of our drug candidates to another pharmaceuticals company, it would allow the partner to market and sell our compounds in any of the markets allowable under the license agreement governing the product. If one of our products is out-licensed, the profit available to us may be substantially reduced from what might otherwise be possible should we retain all rights to the product and market and sell it directly.

     If we cannot compete successfully for market share against other drug companies, we might not achieve sufficient product revenues and our business will suffer.

     The market for each of our current product candidates, as for most drugs, is characterized by intense competition and rapid technological advances. If any product candidate receives FDA approval, it will compete with a number of existing and future drugs and therapies developed, manufactured and marketed by others. The most significant competitors for INNO-206 are Poniard Pharmaceuticals and Celgene, each of which is developing a compound for small cell lung cancer. Cell Genesys is developing a vaccine for acute leukemia that may be competitive with INNO-305. Novartis and Bristol-Myers Squibb have each developed a treatment for chronic myelogenous leukemia that may be competitive with INNO-406. The most significant competitors for tamibarotene are treatment with ATRA, a generic compound, and Cephalon’s arsenic trioxide. These or other future competing products might provide greater therapeutic convenience or clinical or other benefits for a specific indication than our products, or might offer comparable performance at a lower cost. If our products fail to capture and maintain market share, we might not achieve sufficient product revenues, if at all, and our business will suffer.

     We will compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. Many of these competitors have oncology compounds already

approved or in development. As noted above, Poniard Pharmaceuticals and Celgene are each developing a compound for small cell lung cancer that would compete with INNO-206. Cell Genesys is developing a vaccine for acute leukemia that would compete with INNO-305. Novartis and Bristol-Myers Squibb have each developed a treatment for chronic myelogenous leukemia that would compete with INNO-406. ATRA and arsenic trioxide could both compete with tamibarotene. These competitors, either alone or together with their collaborative partners, operate larger research and development programs or have substantially greater financial resources than we do, as well as significantly greater experience in:

	•		developing drugs;
	•		undertaking pre-clinical testing and human clinical trials;
	•		obtaining FDA and other regulatory approvals of drugs;
	•		formulating and manufacturing drugs; and
	•		launching, marketing and selling drugs.

     We might not be able to compete successfully with these entities due to our limited operating history and limited resources.

     Developments by competitors might render our products or technologies obsolete or non-competitive.

     Companies that currently sell both generic and proprietary compounds for the treatment of cancer and related diseases include but are not limited to Amgen, Sanofi-Aventis, Bristol-Myers Squibb, Genentech, Eli Lilly, Johnson & Johnson and Celgene. Alternative technologies are being developed to treat cancer and related diseases by numerous companies including Bristol-Myers Squibb, MGI Pharma, Merck and Genentech, several of which are in advanced clinical trials. There also are cancer tumor inhibiting therapies that are in the late stage of development, and that are being developed by larger established companies: Alimta (Eli Lilly), Avastin (Genentech), Eloxatin (Sanofi-Aventis), Erbitux (Bristol-Myers Squibb and Imclone Systems) and Tarceva (Genentech). Cell Genesys is developing a vaccine for acute leukemia. Poniard Pharmaceuticals and Pharmion are developing compounds for small cell lung cancer. Novartis and Bristol-Myers Squibb have each developed a treatment for chronic myelogenous leukemia that would compete with INNO-406. ATRA and arsenic trioxide could compete with tamibarotene. In addition, companies pursuing different but related fields represent substantial competition. Any of these competing therapies could prove to be more effective than INNO-406, tamibarotene, INNO-206, or INNO-305 or any future therapy of ours. In addition, many of these organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, longer drug development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures or other collaborations. Any or all of these competitors might inhibit or prevent entirely the successful commercialization of our products.

     If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish.

     Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

     We currently hold exclusive patent rights, including rights under U.S. patents and U.S. patent applications as well as rights under foreign patents and patent applications on our current product candidates.

     However, we cannot predict for our current product candidates or any other proprietary property we might acquire:

	•		the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents;
	•		if and when patents will issue;
	•		whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or
	•		whether we will need to initiate litigation or administrative proceedings to protect or defend other intellectual property rights which might be costly whether we win or lose.

     Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our licensors and contractors. To help protect our proprietary know-how and our inventions for which patents might be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, it is our policy to require all of our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements might not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.

     If we infringe the rights of third parties we could be prevented from selling products, forced to pay damages, and defend against litigation.

     If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we might have to:

	•		obtain licenses, which might not be available on commercially reasonable terms, if at all;
	•		abandon an infringing drug candidate;
	•		redesign our products or processes to avoid infringement;
	•		stop using the subject matter claimed in the patents held by others;
	•		pay damages; or
	•		defend litigation or administrative proceedings that might be costly whether we win or lose, and which could result in a substantial diversion of our financial and management resources.

     Any of these events could substantially harm our earnings, financial condition and operations.

     Our ability to generate product revenues will be diminished if our drugs sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.

     Our ability to commercialize our drugs, alone or with collaborators, will depend in part on the extent to which reimbursement will be available from:

	•		government and health administration authorities;
	•		private health maintenance organizations and health insurers; and
	•		other healthcare payers.

     Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if our product candidates are approved by the FDA, insurance coverage might not be available, and reimbursement levels might be inadequate, to cover our drugs. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our product, once approved, it might inhibit or prevent market acceptance of such product.

     We might be exposed to liability claims associated with the use of hazardous materials and chemicals.

     Our research and development activities might involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive materials and waste products might require us to incur substantial compliance costs that could materially adversely affect our business, financial condition and results of operations.

     We might incur substantial liabilities and might be required to limit commercialization of our products in response to product liability lawsuits.

     The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully defend ourselves against product liability claims, we might incur substantial liabilities or be required to limit commercialization of our products. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of our products. While we carry clinical trial insurance that includes product liability insurance, the coverage might not be sufficient to cover any claims. We intend all our agreements with our collaborators to indemnify us for their errors and omissions. However, we might not be able to obtain such contractual protection. Even if our agreements with any future collaborators entitle us to indemnification against losses, such indemnification might not be available or adequate should any claim arise.

     Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

     The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Therefore, enforceability or scope of our patents in the United States or in foreign countries cannot be predicted with certainty, and, as a result, any patents that we own or license may not provide sufficient protection against competitors.

     Some jurisdictions have laws that permit the government to force a patentee to grant a license to a third party for commercialization of a patented product if the government concludes that the product is not sufficiently developed or not meeting the health needs of the population. Such compulsory licensing laws are very rarely invoked outside of South America and Africa. In addition, a number of countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent

owner may be limited to monetary relief and may be unable to enjoin infringement, which could materially diminish the value of the patent. Such compulsory licenses could be extended to include some of our product candidates, which may limit our potential revenue opportunities.

     Because of the extensive time required for development, testing and regulatory review of a new drug, it is possible that any related patent may expire before any of our product candidates can be commercialized or remain in force for only a short period following commercialization. In either case, this would reduce any advantages of the patent.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

     This proxy statement/prospectus contains a number of forward-looking statements, including statements about the financial conditions, results of operations and the prospects of Innovive and CytRx, and may include statements relating to the period following the completion of the merger. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.

     The forward-looking statements involve certain risks and uncertainties. The ability of Innovive and CytRx to predict results or the actual effects of their respective plans and strategies is subject to inherent uncertainty. Factors that may cause actual results to differ materially from such forward-looking statements include, among others, those set forth under “Risk Factors” in this proxy statement/prospectus, as well as those discussed and identified in public filings with the SEC made by Innovive and CytRx.

     Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/ prospectus.

     All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement/prospectus and attributable to Innovive or CytRx or any person acting on behalf of Innovive or CytRx are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus. Except to the extent required by applicable law or regulation, Innovive and CytRx undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

THE MERGER

     The following discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement/prospectus as Appendix A. You should read the merger agreement carefully.

Background of the Merger

     Innovive is a development-stage company with several therapeutic candidates in development. As a development-stage company without any marketable product, we do not have a revenue stream. Consequently, Innovive, like many such companies, is dependent on a steady source of cash infusions to continue operations.

     The only sources of funds available to us are equity or debt financings that would provide a cash infusion or partnerships or other strategic alliances with third parties that would provide a revenue stream.

     Since 2005, our board of directors and management have worked to secure our future by expanding our drug candidate pipeline and obtaining the funds necessary to develop and commercialize these drug candidates. As part of this process, our board and management have considered a range of strategic alternatives, including public and private equity and debt financings, corporate partnering and licensing strategies and more recently a merger strategy, all with a view to increasing stockholder value.

     Innovive completed a private placement of convertible notes in June 2005, a private placement of Series A preferred stock in June 2006 and a private placement of common stock in April 2007, raising net proceeds of $2,249,984, $12,501,135 and $13,872,046, respectively. As is normal with many development-stage companies, these financings were completed when we were low on cash, because these financings tend to provide operating funds for a relatively short period of time during which the company conducts pre-clinical and/or clinical studies to advance the development of one or more drug candidates.

     After the completion of our common stock financing in April 2007, we had funds to allow us to operate to approximately October 2007 if all programs were to be pushed forward at full speed. These funds were deployed primarily to the development of INNO-406, INNO-206 and tamibarotene, supporting dosing studies for INNO-406, a phase II study for INNO-206 and a pivotal phase II study for tamibarotene.

     Shortly after the closing of the April 2007 financing, management began planning the pursuit of another larger financing. In addition, management considered other strategic alternatives, including merger and acquisition opportunities and strategic partnerships for the development of one or more of our product candidates.

     Beginning in May 2007, management began interviewing investment bankers to conduct a common stock financing. By August 2007, the board authorized the engagement of one investment banker to serve as lead agent and two other investment bankers to act as co-agents in a private placement of Innovive common stock. These investment banks were engaged in August 2007.

     During the summer and early fall of 2007, the investment banks attempted to put together an investor pool. However, by October 2007, no definitive investor group or terms were established. One obstacle to a financing was a price protection provision that was agreed to in the April 2007 common stock financing. This price protection provision provided that in the event that we issued shares of our common stock at a price per share less than the purchase price of the offering, which was $2.73, at any time prior to October 24, 2007, then each investor would have the right to receive a number of additional shares of our common stock equal to (i) the aggregate purchase price per unit paid by the investor in the offering, divided by the subsequent share purchase price, (ii) less the number of shares of common stock purchased by the investor in the offering.

     Also during the summer and early fall of 2007, management sought other strategic alternatives and held discussions with interested parties. Based on these inquiries, in October 2007, our board of directors began considering other strategic alternatives. At this point, the investment banks had found only one lead investor for the private placement, which was not significant enough to attract other investors. While the investment banks continued to seek investors for the financing, management held conversations with three potential investors, two of which were interested in bringing in its own investor group and the other of which was interested in a significant investment on its own. In addition, management had identified four strategic partnership candidates for INNO-406.

     In early November 2007, our board determined that a strategic partnership for INNO-406 was increasingly unlikely without further clinical data, based on feedback received by management in its discussions with the interested parties. At a special meeting on November 13, 2007, our board authorized management to negotiate a written term sheet with one of the entities that had expressed interest in developing its own investor group to invest in the company’s stock. A term sheet from this investor, with two other investors, was signed on November 26, 2007. The term sheet allowed the investor group 10 days to complete due diligence. At the conclusion of the 10 days, on December 7, 2007, the investor group informed Mr. Kelly, our President and Chief Executive Officer, that it had decided not to proceed with the investment.

     Subsequent to the expiration of the above term sheet, negotiations with an entity in the investor group noted above and an additional investor proceeded and at a special meeting on December 21, 2007, our board approved the execution of a term sheet with that investor group. One of the conditions to the term sheet was that at least three institutional investors were to be secured before the investor group would commit to the investment. This condition was not met and on January 11, 2008 the investors informed Mr. Kelly that they would not be proceeding with an investment in Innovive.

     At a regular meeting on January 15, 2008, our board considered possible strategic alternatives, including an equity or debt financing, a sale of assets or a sale of the company, and considered the discussions held by management with third parties to date on all of these alternatives. Our board authorized seeking a bridge financing with Paramount Biocapital, Inc. as placement agent. Paramount Biocapital had successfully conducted our 2005 bridge financing and our two equity financings.

     At this point, we did not have sufficient funds to cover our current obligations or future operating expenses, a situation that first developed in October 2007. On January 17, 2008, we terminated four employees, which represented approximately one-half of our employees. In addition, our ongoing clinical programs were reduced to include only essential steps necessary to obtain new data. At a special board meeting on January 29, 2008, management updated our board on potential merger or acquisition parties. Our board also was advised by bankruptcy lawyers on the process and impact of bankruptcy and our board’s and Innovive’s duties were Innovive to declare bankruptcy. At the end of the meeting, our board authorized management to continue negotiating with Paramount Biocapital to act as placement agent in a bridge financing of debt.

     At a regular meeting held on February 13, 2008, our board reviewed the status of possible transactions and considered the benefits and challenges of a financing, a merger or acquisition, or a sale of company assets. After deliberation, our board approved a placement agreement with Paramount Biocapital. Paramount Biocapital, however, was not able to find investors willing to invest a sufficient amount of capital, and it ceased its efforts on our behalf in March. During this time, management continued to contact third parties about a possible strategic transaction with Innovive.

     Throughout March and April, our management contacted several companies who subsequently expressed interest in conducting additional due diligence on our product candidates. One of these companies was CytRx. CytRx was introduced to the company through one of our directors, J. Jay Lobell, by means of a telephone call on April 2, 2008. Mr. Lobell knew Steven A. Kriegsman, the President and Chief Executive Officer of CytRx, and had contacted him earlier on April 2, 2008 to determine if CytRx had any interest in a

transaction with Innovive. During the call, David Haen, Vice President – Business Development of CytRx, expressed interest in learning more about us and sent over a mutual confidentiality agreement that we and CytRx executed on April 4, 2008. CytRx also provided a diligence checklist to us at that time and, in response, CytRx was granted access to our virtual data room that day.

     Our management facilitated the diligence process by providing the requested information to all of the companies that requested information. Three of these companies provided term sheets in April that provided for the acquisition of certain of our assets for equity in the acquiring company. None of the term sheets addressed acquiring the company as a whole.

     Mr. Lobell arranged for a telephone call on April 23, 2008 among himself, Mr. Kriegsman and Mr. Haen of CytRx, and Lindsay Rosenwald, an affiliate and major stockholder of Innovive. On the call, the parties discussed the terms of a possible offer by CytRx to acquire Innovive and related matters.

     On April 25, 2008, at a regular meeting of our board, management reviewed with the board term sheets that had been received from these three companies. Management also informed the board that it believed that term sheets were imminent from four other companies, one of which was CytRx. Our board reviewed each term sheet it had received, as well as the expected terms to be contained in the term sheets expected from the other four entities, including CytRx. Our board concluded that it needed more time to consider the current and expected term sheets and noted that a decision would have to be made in the early part of the next week, given our cash position.

     During subsequent diligence discussions with CytRx, our management expressed the need to receive either a term sheet or letter agreement from CytRx and the desire or our board of directors to move quickly in order, among other things, to demonstrate to TMRC Inc., the licensor of tamibarotene, and Medpace, Inc., a contract research organization working on the clinical development of three Innovive products, that we were making progress on a possible transaction and would be able to meet our financial obligations to them.

     On May 1, 2008, CytRx provided Mr. Kelly a term sheet for the acquisition of Innovive pending certain remaining due diligence, including face-to-face meetings scheduled for May 6 and 7. On or about this time, Mr. Lobell spoke with Mr. Kriegsman and Mr. Haen regarding the term sheet and suggested that CytRx discuss further with Innovive management the clinical development assumptions underlying CytRx’s term sheet.

     On May 6 and 7, 2008, CytRx management, including Mr. Kriegsman, Jack Barber, Ph.D., Chief Scientific Officer, Benjamin S. Levin, General Counsel, Vice President of Legal Affairs and Secretary, Scott Wieland, Ph.D., Vice President of Clinical and Regulatory Affairs, and Mr. Haen, met with our management at our offices in New York City. On May 8, 2008, Mr. Kelly informed Mr. Haen by telephone that Innovive had received another offer for the entire company and encouraged CytRx to revise the term sheet prior to the special meeting of our board of directors scheduled for the next day. CytRx, however, declined to revise its offer.

     At the special meeting held on May 9, 2008, our board of directors voted unanimously to accept the CytRx term sheet and authorized management to negotiate a binding merger agreement.

     Mr. Kelly then contacted several prospective investment advisors, including Chartered Capital Advisers, Inc., to act as the company’s financial advisor in connection with the possible merger with CytRx. We engaged Chartered on May 29, 2008.

     From May 9 through June 5, 2008, we and CytRx negotiated the final terms of the merger agreement. CytRx also conducted additional due diligence, including at a meeting on May 28, 2008 between Dr. Wieland and representatives of Medpace, Inc. Mr. Haen, Dr. Wieland and John Caloz, CytRx’s Chief Accounting

Officer, also met and conducted further diligence with our management at our offices in New York on May 28 through 30.

     Our board of directors formally met on June 6, 2008 in a special meeting, at which all the members of our board were in attendance, for the purpose of reviewing the terms of the proposed merger agreement. Also in attendance were Ronald Quintero of Chartered, our financial advisor, and David Mannheim of Wyrick Robbins Yates & Ponton LLP, our legal counsel. At this meeting, Mr. Kelly provided a report and analysis related to the terms of the proposed transaction, including, without limitation, the value of the consideration to be received in the transaction by our stockholders as of that date and the conditions to closing the transaction. Mr. Kelly and J. Gregory Jester, our Chief Financial Officer, also reported on the status of our recent financing efforts and financial condition. Mr. Mannheim reviewed the terms of the merger agreement and the loan and security agreement and the relevant legal approvals necessary to consummate the merger. Mr. Quintero reviewed with the board Chartered’s analysis of Innovive and the merger proposal, at the conclusion of which he presented the board with Chartered’s written opinion that the merger is fair, from a financial point of view, to the stockholders of Innovive. After deliberating, our board determined that the merger agreement and the transactions contemplated thereby, including the merger, were fair to, advisable and in the best interests of the Innovive stockholders and each other relevant corporate constituency and unanimously voted to approve the terms of the merger agreement and the merger.

Innovive’s Reasons for the Merger

     After careful consideration, our board of directors, by a unanimous vote of the directors, has determined that the merger agreement is advisable, fair to, and in the best interests of Innovive and its stockholders, has approved and authorized in all respects the merger agreement, and recommends that you vote “FOR” the approval of the merger agreement.

     In considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers who participated in meetings of the board of directors have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. See “The Merger — Interests of Certain Persons in the Merger” beginning on page 47.

     In the course of deliberations, our board reviewed Innovive’s historical, present and projected financials under various scenarios, and its historical and short and long-term strategic objectives, the opportunities in the marketplace that Innovive is pursuing and the risks associated therewith.

     In reaching the decision to approve and authorize the merger, the merger agreement, the loan and security agreement and the other transactions contemplated under the merger agreement, our board of directors consulted with senior management and Innovive’s financial and legal advisors, and considered a number of factors, including, but not limited to, those set forth below.

	•		Innovive stockholders will have the opportunity to participate in the potential growth of CytRx after the merger;
	•		the increased ability of the combined company to secure investment capital and financing for expansion of the combined company’s business;
	•		the market potential for the combined company’s drug development pipeline;
	•		the historical, current and prospective financial condition, results of operations and cash flows of CytRx;
	•		CytRx’s seasoned management team, greater financial resources and access to capital;

	•		the shares of CytRx common stock issued to Innovive stockholders as merger consideration will be registered with the SEC and will be freely tradable for Innovive stockholders who are not affiliates of CytRx;
	•		Innovive’s prospects to continue as an independent company;
	•		the historic, current and prospective financial condition, results of operations and cash flows of Innovive, particularly the fact that due to cash limitations, Innovive has decreased, and most likely will have to cease, its research and clinical operations;
	•		without the completion of a strategic transaction like the merger, Innovive will likely be forced to file for federal bankruptcy protection;
	•		based on our historical efforts over a period of nearly a year to attract capital and to pursue alternative transactions, the low probability that any alternative transaction would be available to Innovive that would provide the same or greater value to our stockholders within a reasonable time frame;
	•		the terms and conditions of the merger agreement and the loan and security agreement, including the merger consideration and closing conditions;
	•		the belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants and the conditions to the parties’ respective obligations, are reasonable;
	•		the terms of the transaction, including the merger consideration and the loan and security agreement, as compared to the terms that might be achieved with other similar transactions with other potential merger partners;
	•		dissenters’ rights would be available to Innovive stockholders under applicable state law;
	•		apart from the approval by stockholders, completion of the merger would not require any material consents or approvals;
	•		the likelihood that the merger will be consummated on a timely basis;
	•		the fact that the merger agreement permits our board of directors to change its recommendation of the transaction to stockholders in connection with an unsolicited superior proposal by a third party for an alternative transaction if the failure to do so would be reasonably likely to violate the board of directors’ fiduciary obligations under applicable law, provided that Innovive complies with certain requirements, including payment of a $1.5 million termination fee to CytRx;
	•		the amount of the termination fee payable by us and the circumstances under which it is payable are typical for transactions of this size and type and were necessary to induce CytRx to enter into the merger agreement;
	•		Chartered’s financial analysis and its written opinion to our board of directors that as of June 6, 2008, and based upon and subject to the factors and assumptions set forth in its opinion, the merger is fair from a financial point of view to the Innovive stockholders; and
	•		the support agreements of our directors and officers and their affiliates who own beneficially an aggregate of approximately 22% of the shares of our common stock entitled to vote at the special meeting to vote all shares that they control in favor of the merger agreement, as well as their

willingness to grant CytRx proxies to vote such shares in favor of the approval of the merger agreement, and the fact that the support agreements can be terminated by our directors and officers and their affiliates if the merger agreement is terminated by us.

     Our board of directors also considered the following potentially negative factors in reaching its decision to approve and authorize in all respects the merger agreement, the merger, and the other transactions contemplated under the merger agreement:

	•		restrictions in the merger agreement on solicitation generally prohibit us from soliciting any acquisition proposal or offer for a merger or business combination with any other party, including a proposal that might be advantageous to our stockholders when compared to the terms and conditions of the merger, and further prohibit us from entering into discussions regarding unsolicited proposals unless certain requirements are met;
	•		if the merger is not completed for whatever reason we will have incurred substantial expenses, and will have to repay CytRx for advances under the loan and security agreement, which we may not be able to pay, in which event CytRx would be entitled to pursue its remedies under the loan and security agreement, including a possible foreclosure sale of all or substantially all of our assets;
	•		if the merger is not completed under certain circumstances specified in the merger agreement, we may be required to repay to CytRx any funds loaned to Innovive pursuant to the loan and security agreement, which may deter third parties from proposing or pursuing alternative business combinations that might result in greater value to our stockholders than the merger;
	•		the interests of our directors and officers may be different in certain respects from the interests of our stockholders, generally, as described under “The Merger - Interests of Innovive’s Directors and Executive Officers in the Merger”;
	•		the restrictions on the conduct of our business prior to the consummation of the merger, which, subject to specific limitations, may delay or prevent us from taking certain actions during the time that the merger agreement remains in effect;
	•		the requirement under the terms of the merger agreement that we pay CytRx a termination fee if we terminate the merger agreement to accept a superior proposal for the acquisition of Innovive, if our board of directors changes its recommendation concerning the merger agreement, or in certain other circumstances (including, in some instances, if stockholders do not vote to approve the merger agreement), and that our obligation to pay the termination fee might discourage other parties from proposing a business combination with, or an acquisition of, Innovive;
	•		the risk that, while the merger is expected to be completed, there is no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied and, as a result, it is possible that the merger may not be completed even if approved by our stockholders;
	•		additional advances under the loan and security agreement are at the discretion of CytRx and may affect our working capital; and
	•		other risk factors described under the section entitled “Risk Factors.”

     Our board of directors considered all of these factors as a whole and considered the factors in their totality to favor and support the decision to approve and authorize in all respects the merger agreement, the merger, and the other transactions contemplated under the merger agreement and to recommend that Innovive’s stockholders approve the merger agreement.

     In view of the variety of factors considered in connection with its evaluation of the merger, our board of directors did not find it practicable to, and therefore did not, quantify, rank, or otherwise assign relative or specific weight or values to any of these factors. In addition, each individual director may have given different weights to different factors.

     The foregoing discussion of our board of directors’ considerations concerning the merger is forward looking in nature. This information should be read in light of the discussions under the heading “Cautionary Statement Concerning Forward-Looking Information.”

Recommendation of the Board of Directors

     After careful consideration, our board of directors, by unanimous vote:

	•		has determined that the merger agreement is advisable, fair to, and in the best interests of Innovive and its stockholders;
	•		has approved and authorized in all respects the merger agreement, the merger, and the other transactions contemplated by the merger agreement; and
	•		recommends that our stockholders vote “FOR” the approval of the merger agreement.

CytRx’s Reasons for the Merger

     In reaching the decision to approve and authorize the merger, the merger agreement, and the ancillary agreements, the board of directors of CytRx consulted with senior management and CytRx’s legal advisors, and considered a number of factors, including, but not limited to, those set forth below.

	•		the acquisition of Innovive will expand CytRx’s portfolio of product candidates to include Innovive’s four current product candidates for the treatment of cancer and may facilitate obtaining additional funding by CytRx;
	•		Innovive’s product candidates, including tamibarotene, which is marketed in Japan for the treatment of relapsed or refractory acute promyelocytric leukemia, or APL, and is in a pivotal Phase II clinical trial in APL, are expected to accelerate by several years the time to CytRx’s first potential new drug application, subject to the successful completion of Innovive’s clinical trials;
	•		the prior experience of some of CytRx’s management team in the development of drugs for the treatment of cancer, and management’s belief that CytRx can integrate Innovive’s and CytRx’s product candidates and drug development efforts and achieve economies of scale in general and administrative expenses and perhaps other costs;
	•		the terms and conditions of the merger agreement and the loan and security agreement, including the fact that the merger consideration includes a relatively modest payment of initial merger consideration and that the larger earnout merger consideration is subject to the achievement of specified future net sales of Innovive’s products;
	•		apart from the approval by Innovive’s stockholders, completion of the merger would not require any material consents or approvals;
	•		the amount of the termination fee payable to CytRx and the circumstances under which it is payable to CytRx; and

•

the support agreements of Innovive directors and officers and their affiliates who own beneficially an aggregate of approximately 22% of the shares of Innovive common stock entitled to vote at the special meeting to vote all shares that they control in favor of the merger agreement, as well as their willingness to grant CytRx proxies to vote such shares in favor of the approval of the merger agreement.

     In view of the variety of factors considered in connection with its evaluation of the merger, CytRx’s board of directors did not find it practicable to, and therefore did not, quantify, rank, or otherwise assign relative or specific weight or values to any of these factors. In addition, each individual director may have given different weights to different factors.

     The foregoing discussion of CytRx’s board of directors’ considerations concerning the merger is forward-looking in nature. This information should be read in light of the discussions under the heading “Cautionary Statement Concerning Forward-Looking Information.”

Effects of the Merger

     If the merger agreement is approved by our stockholders and if the merger is completed, Merger Subsidiary will be merged with and into Innovive, with Innovive continuing as the surviving corporation and wholly owned subsidiary of CytRx. All of the shares of Innovive common stock outstanding immediately prior to the effective time of the merger (other than shares that are owned by Innovive, CytRx and Merger Subsidiary and shares that are owned by stockholders, if any, who properly exercise dissenters’ rights under Delaware law) will be cancelled and converted into the right to receive the merger consideration.

     After the completion of the merger, Innovive will be a wholly owned subsidiary of CytRx and its name will be changed to CytRx Oncology Corporation, our current stockholders will have no ownership interest in Innovive and shares of Innovive common stock will no longer be publicly traded.

Management and Operations After the Merger

     Management of CytRx will manage the business and operations of Innovive after the merger. CytRx intends to undertake a comprehensive review of Innovive’s development activities after the merger with a view to optimizing the clinical and development programs and eliminating any cost inefficiencies and redundancies of the combined company.

Interests of Certain Persons in the Merger

     Neither Innovive nor any of our officers or directors has an ownership interest in CytRx or is otherwise affiliated with CytRx, and we had no dealings with CytRx or its officers or directors other than in connection with the merger agreement and related matters. However, in considering the recommendation of our board of directors with respect to the merger agreement, you should be aware that some of our directors and executive officers who participated in meetings of our board of directors have interests in the merger that are different from, or in addition to, the interests of our stockholders, generally. These interests, to the extent material, are described below. Our board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the merger.

     CytRx’s officers and directors own CytRx common stock and have been granted stock options to purchase CytRx common stock, none of which will vest or be adjusted or otherwise changed as a result of the merger. Except for the interests inherent in their ownership of CytRx common stock and stock options, CytRx’s officers and directors do not have any material interests in the merger.

     Severance Benefits

     We have entered into employment agreements with Steven Kelly and J. Gregory Jester, which provide that, if the employment of either officer is terminated by us without cause (as defined in the agreement), or either officer terminates his employment with us for good reason (as defined in the agreement), he will be entitled to receive a severance payment equal to six times his monthly salary and we will be obligated to continue his health insurance benefits for six months following his termination.

     In February 2008, we instituted an employee retention program to ensure that we could retain the services of Mr. Jester and Dr. Poma. Pursuant to the program, we agreed to pay each officer severance equal to six months of his salary if he is terminated by us, CytRx or Merger Subsidiary without cause (as defined in the program) at any time after June 30, 2008. No such severance will be due the officer to the extent that he is eligible to receive severance payments in an equal or greater amount pursuant to his employment agreement or other agreement with us or CytRx.

     Set forth below is an estimate of the pre-tax amount of the severance benefits that would be owed to each such officer under his employment agreement assuming that the officer is terminated on the day following the completion of the merger:

		Estimated Severance				Estimated Value of Health
Name		Payment				Insurance Benefits
Steven Kelly		$	187,500			$	7,746
J. Gregory Jester			95,000			$	-0-	(1)
Eric Poma, Ph.D.			125,000			$	-0-

     The merger agreement provides that the directors of Merger Subsidiary will become the directors of Innovive upon the closing of the merger. Therefore, we do not anticipate that any of our directors will continue to serve as directors of Innovive or will serve as directors of CytRx after the completion of the merger.

     Release of Personal Guarantee

     Mr. Kelly, our President and Chief Executive Officer, currently serves as a guarantor of our rental payments under our lease for our executive offices. Pursuant to the merger agreement, CytRx has agreed to use its commercially reasonable efforts to remove Mr. Kelly as the guarantor, effective at the effective time of the merger. If the removal is not effective at that time, CytRx and Merger Subsidiary will enter into a written agreement satisfactory to Innovive and Mr. Kelly to indemnify Mr. Kelly under the guarantee and to obtain the removal of Mr. Kelly as guarantor as soon as possible after the effective time of the merger.

     Stock, Stock Options and Warrants

     As of the record date for the special meeting of stockholders, our directors and officers held in total                      shares of our common stock. As of the record date for the special meeting of stockholders, our directors and officers held options and warrants to purchase a total of                      shares of our common stock. See “Security Ownership by Certain Beneficial Owners and Management of Innovive” for details on the ownership of our equity securities by our directors and officers.

     All shares of common stock, stock options and warrants held by our directors and officers will be treated in the merger in the same manner as those held by our other stockholders.

     Indemnification and Insurance

     In the merger agreement, CytRx and Merger Subsidiary have generally agreed to indemnify our current and former directors and officers and directors for acts or omissions in their capacity as directors or officers occurring on or before the effective time of the merger and to provide for liability insurance for a period of three years from and after the effective time of the merger, subject to certain conditions. The terms of the liability insurance policies must be no less favorable than the policies of Innovive, unless the cost of the policies would exceed the current policies’ annual premium, in which case the coverage will be the greatest amount of coverage available for an amount not exceeding 125% of the current premium.

Stock Exchange Listing of CytRx Common Stock

     It is a condition to the completion of the merger that the shares of CytRx common stock issuable to Innovive stockholders in payment of the initial merger consideration be approved for listing on The Nasdaq Capital Market. It is also a condition to the payment of any earnout merger consideration that CytRx may elect to pay in shares of CytRx common stock that such shares be listed on The Nasdaq Capital Market or other trading market.

Comparative Market Prices of Common Stock

     CytRx common stock is listed on The Nasdaq Capital Market and our common stock is quoted on the OTCBB. On June 6, 2008, the last full trading day before the public announcement of the merger agreement, the closing price of CytRx common stock as reported on The Nasdaq Capital Market was $0.99. On June 6, 2008, the last full trading day before the public announcement of the merger agreement, the closing price of shares of our common stock as reported on the OTCBB was $0.15. If the merger is completed, there is no assurance as to what the market price of CytRx common stock will be at that or any other time.

Regulatory Requirements

     The merger is not subject to any federal or state regulatory requirements.

OPINION OF INNOVIVE’S FINANCIAL ADVISOR

     Innovive has retained Chartered Capital Advisers, Inc., or “Chartered,” to act as Innovive’s financial advisor in connection with the merger. Chartered provides merger and acquisition, valuation, and corporate financial advisory services on behalf of corporate clients, investors, financial institutions, attorneys, accountants, and participants in employee benefit plans. Chartered is regularly engaged in the valuation of securities and other financial advisory work in connection with mergers and acquisitions, recapitalizations, private placements, financial restructuring, shareholder transactions, financial reporting, estate and gift taxes, litigation, and for other purposes. Innovive selected Chartered to act as Innovive’s financial advisor in connection with the merger on the basis of Chartered’s experience in transactions similar to the merger.

     On June 6, 2008, at a meeting of the board of directors of Innovive held to evaluate the merger, Chartered delivered to the board of directors Chartered’s written opinion dated June 6, 2008, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the merger consideration to be received by holders of Innovive common stock was fair, from a financial point of view, to such holders.

     The full text of Chartered’s written opinion to the Board of Directors of Innovive, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex D to this proxy statement/prospectus and is incorporated by reference in its entirety into this proxy statement/prospectus. The following summary of Chartered’s opinion is qualified in its entirety by reference to the full text of the opinion. Chartered

delivered its opinion to the board of directors of Innovive for the benefit and use of the board of directors in connection with and for purposes of its evaluation of the merger consideration from a financial point of view. Chartered’s opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger.

     In connection with rendering its opinion, Chartered:

	•		reviewed the merger agreement and various documents relating thereto;
	•		conferred with Innovive’s management, its legal advisors, and the management of CytRx;
	•		reviewed various documents and other information prepared by or in connection with Innovive including, but not limited to, documents filed with the SEC, historical financial statements, Innovive’s balance sheet as of May 31, 2008, financial projections, a summary of financing contacts, an investor presentation dated as of May 2008, technical documentation, and Innovive’s website;
	•		reviewed various documents and other information prepared by or in connection with CytRx including, but not limited to, documents filed with the SEC, historical financial statements, analyst reports, and CytRx’s website;
	•		analyzed the historical financial performance and financial condition of Innovive and CytRx;
	•		analyzed the Innovive financial projections prepared by its management;
	•		analyzed the historical stock prices of Innovive and CytRx;
	•		considered Innovive’s current capitalization, financial condition, and risks relating thereto;
	•		evaluated the proposed consideration to Innovive equity holders reflected in the proposed merger, taking into consideration various valuation benchmarks including:

	o		net book value;
	o		current and historical market price of Innovive common stock;
	o		premiums paid in mergers deemed to be relevant to Innovive;
	o		discounted cash flow analysis;
	o		capitalization multiples of guideline public companies; and
	o		capitalization multiples paid in acquisitions deemed to be relevant to Innovive;

	•		considered the historical experience of Innovive’s management and the investment bankers that it retained to pursue capital infusions and other potential transactions;
	•		considered the potential perception of Innovive and its investment prospects from the vantage point of investors capable of committing the amount of capital required by Innovive, and the amount of dilution that may result from a potential capital infusion;

	•		considered the current financing environment for financing development-stage companies similar to Innovive;
	•		considered the process employed by Innovive’s management to negotiate the proposed merger;
	•		considered the risks of rejecting the proposed merger in order to seek an enhanced transaction with CytRx or an improved transaction with an alternative investor or acquirer; and
	•		considered such other information, financial studies, and analyses as it deemed relevant, and performed such analyses, studies, and investigations as it deemed appropriate.

     In arriving at its opinion, Chartered assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by it that was obtained from Innovive’s management, CytRx, and from public sources that are routinely used in its profession. Chartered also assumed that the representations of Innovive management and its advisors were made in good faith, and that they reflect the best currently available management judgments as to the matters covered and that the distributions of initial merger consideration and earnout merger consideration would be made on a timely basis in accordance with the provisions of the merger agreement.

     Chartered’s opinion was necessarily based upon economic, market, and other conditions as in effect on, and the information made available to Chartered as of, the date of its opinion. Chartered disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion which may come up or be brought to its attention after the date of its opinion. In the event that there is any change of fact or matter affecting Chartered’s opinion after its date and prior to the consummation of the proposed merger, Chartered reserves the right to change, modify, or withdraw its opinion.

     The following represents a brief summary of the material financial analyses presented by Chartered to the board of directors of Innovive in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by Chartered, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by Chartered. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by Chartered.

Considerations Underlying Chartered Fairness Opinion

     Neither Innovive nor CytRx has historical revenues to which customary analyses can be applied. In addition, due to the absence of historical revenues for either Innovive or CytRx, no projections of operations could be or were developed for either Innovive or CytRx because any such projections would be speculative in nature. As a result, many of the analyses typically performed to value companies that are at more advanced stages of development could be credibly performed in connection with the proposed merger. Consequently, Chartered relied heavily on qualitative factors in arriving at its opinion. The following are the principal considerations relied upon by Chartered in its analysis:

Consideration		Comments
Steps leading to merger		Innovive’s management hired four leading investment banks over an 18-month period to explore transaction alternatives; Contacts were made with more than 65 potential investors; and The proposed merger is the culmination of an extensive undertaking by well-recognized firms.

Consideration		Comments
Urgency of current situation		Innovive is insolvent and has been insolvent for several months; Trade debt is significantly in arrears, research and development, or R&D, activities have been halted, and personnel have been laid off pending additional funding; and Absent necessary financing, there is risk that Innovive may be compelled to relinquish some or all of the licenses upon which the success of Innovive depends, and all remaining value could be lost.
Alternative potential transactions		None.
Market capitalization of Innovive and CytRx common stock		Innovive — $1.46 million (as of 5/30/08); and CytRx — $79.9 million (as of 5/30/08).
Potential value of merger consideration to Innovive stockholders		Initial merger consideration—CytRx common stock valued at $3.0 million; and Earnout merger consideration (if earned)—CytRx common stock valued at $2.0 million to $18.25 million.
Relative liquidity of Innovive and CytRx stock		Innovive common stock is relatively illiquid, trading a median of 3,500 shares/day; and CytRx common stock is more liquid than that of Innovive, trading in excess of 500,000 shares/day.
Institutional ownership of stock		Innovive—minimal ; and CytRx—approximately 30%.
Analysts covering stock		Innovive—none; and CytRx—five analysts.
Impact of proposed merger on Innovive stockholder risk		Risk would be reduced because: (1) CytRx is better capitalized than Innovive; (2) CytRx has historically been more successful than Innovive in raising capital; and (3) CytRx has additional products in the pipeline that provide diversification benefit.
Impact of proposed merger on potential Innovive stockholder return		Potential returns are enhanced by an increased ability to fund R&D; Dilution from proposed merger may not be significantly different than the dilution that would occur if Innovive remained independent and obtained funding from investors (although it has been unsuccessful in doing so); and Innovive stockholders are also able to participate in the potential return from CytRx R&D.
Implied merger premium		At least 105% (based on 5/30/08 Innovive stock price), but potentially in excess of 1,000%, depending upon the amount of earnout merger consideration paid; and Implied merger premium is high in comparison to premiums generally paid in M&A transactions, including premiums paid since the beginning of 2007 in the acquisition of biotech stocks (median 65.17%) and companies with sales below $10 million (median 34.23%).
Innovive stockholders’ share of post-merger combined company		Innovive stock represented 1.80% of the combined market capitalization of Innovive and CytRx as of 5/30/08; and Initial merger consideration (without regard to earnout merger consideration) would give Innovive stockholders 3.61% of the post-merger capitalization of the combined companies.
Innovive pro forma value		An analysis of Innovive stockholders’ share of the pro forma future value of Innovive if it were to remain an independent company and obtain a highly dilutive financing is less than what may be realized from their share of the pro forma future value of the combined Innovive and CytRx after the merger; and The pro forma analysis was based, in part, upon discounted cash flow analysis, and price/revenue multiples of publicly traded biotech companies, as well as price/revenue multiples paid in acquisitions of biotech companies.
Innovive net book value		Preliminary unaudited internal financial statements indicated Innovive had a stockholders’ deficit of $3.678 million as of 5/30/08.

Consideration		Comments
Risk of rejecting the proposed merger		The only available transaction may be lost if CytRx chose to withdraw; Innovive common stock may become worthless; and Innovive may be liable to CytRx for a $1.5 million termination fee (nearly equal to the aggregate market capitalization of Innovive common stock as of 5/30/08), as well as for repayment of advances made by CytRx.

Miscellaneous

     As noted above, the discussion set forth above is a summary of the material financial analyses presented by Chartered to the board of directors of Innovive in connection with its opinion and is not a comprehensive description of all analyses undertaken by Chartered in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. Chartered believes that its analyses summarized above must be considered as a whole. Chartered further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Chartered’s analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

     In performing its analyses, Chartered considered industry performance, general business and economic conditions and other matters, many of which are beyond the control of Innovive and CytRx. The estimates of the future performance of Innovive and CytRx in or underlying Chartered’s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by Chartered’s analyses. These analyses were prepared solely as part of Chartered’s analysis of the fairness, from a financial point of view, of the merger consideration and were provided to the board of directors of Innovive in connection with the delivery of Chartered’s opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be Chartered’s view of the actual values of Innovive or CytRx.

     The type and amount of consideration payable in the merger was determined through negotiations between Innovive and CytRx, rather than by any financial advisor, and was approved by the board of directors of Innovive. The decision to enter into the merger agreement was solely that of the board of directors of Innovive. As described above, Chartered’s opinion and analyses were only one of many factors considered by the board of directors of Innovive in its evaluation of the proposed merger and should not be viewed as determinative of the views of the board of directors of Innovive or management with respect to the merger or the merger consideration.

     Innovive paid Chartered $25,000 for its services in rendering its opinion and also will reimburse Chartered for reasonable out-of-pocket expenses incurred in connection with Chartered’s engagement. Innovive has agreed to indemnify and hold harmless Chartered and its shareholders and employees against any costs incurred by Chartered in connection with any litigation to which Chartered or its shareholders and employees may become subject as a consequence of its services to Innovive in the proposed merger. In addition, Innovive has agreed that the maximum liability of Chartered for any and all losses, claims, damages, or liabilities to which Chartered may become subject in connection with the services rendered by it to Innovive will be limited to $25,000, other than in matters involving Chartered’s gross negligence, willful misconduct, fraud or deliberate malfeasance.

     Chartered or its affiliates have not provided financial advisory or any other services to Innovive in the past. In the ordinary course of business, Chartered and its affiliates have never owned any securities of Innovive or CytRx for their own accounts.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of certain material U.S. federal income tax consequences of the merger that are relevant to CytRx and holders of Innovive common stock who will receive the merger consideration in the merger.

     CytRx will recognize no gain or loss in connection with the merger. However, CytRx will be entitled to deductions for such portion of each payment of earnout merger consideration, if any, as and when made, that represents imputed interest (see “U.S. Holders — Earnout Merger Consideration,” below).

     The following discussion is for general information only and does not purport to consider all aspects of U.S. federal income taxation that might be relevant to holders of Innovive common stock. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, or the “Code,” existing, proposed, and temporary regulations promulgated under the Code, and rulings, administrative pronouncements, and judicial decisions as in effect on the date of this proxy statement/prospectus, changes to which could materially affect the tax consequences described below and could be made on a retroactive basis. The discussion applies only to holders of Innovive common stock in whose hands the shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to holders who acquired their shares pursuant to the exercise of employee stock options or other compensation arrangements with Innovive or who hold their shares as part of a hedge, straddle, conversion, or other risk reduction transaction or who are subject to special tax treatment under the Code (such as dealers in securities or foreign currency, insurance companies, other financial institutions, regulated investment companies, tax-exempt entities, S corporations, partnerships, and taxpayers subject to the alternative minimum tax). In addition, except as specifically discussed below, this discussion does not consider the effect of any state, local, or foreign tax laws.

     The following discussion is not binding on the Internal Revenue Service, or the “IRS,” or the courts and, therefore, could be challenged. Neither we nor CytRx will seek any ruling from the IRS with respect to the merger.

     For purposes of this discussion, the term “U.S. holder” means a holder of Innovive common stock that is, for U.S. federal income tax purposes: a citizen or individual resident of the United States; a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created in or under the laws of the United States or of any state (including the District of Columbia); an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or a trust that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. For purposes of this discussion, the term “non-U.S. holder” means a holder of Innovive common stock (other than a partnership) that is not a U.S. holder.

U.S. Holders

     It is uncertain under current authorities whether the merger will qualify as a tax-free reorganization under Section 368 of the Code or as a taxable exchange. Innovive and CytRx have not yet determined whether they will report the merger as a taxable event or as a reorganization under Code Section 368, and that determination may not be able to made until after the closing of the merger. Because of the complexity of the tax issues arising from the structure of the earnout merger consideration and the uncertainty under current authorities of the tax treatment of the merger, you are strongly advised to consult your own tax advisor regarding the tax consequences of the merger to you.

     Merger as Taxable Exchange

     If the merger fails to qualify as a reorganization under Code Section 368, it will constitute a taxable exchange, and the tax consequences set forth below would generally apply.

     Initial Merger Consideration. The receipt of the initial merger consideration will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder will recognize gain or loss for federal income tax purposes measured by the difference, if any, between the value of the shares of CytRx common stock (plus any cash receive in lieu of a fractional share) received as initial merger consideration and the portion of the U.S. holder’s adjusted tax basis in the shares of Innovive common stock surrendered pursuant to the merger (which basis may have to be allocated, in part, to the earnout merger consideration). Gain or loss will be determined separately for each block of Innovive shares (i.e., shares acquired at the same price per share in a single transaction). Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than one year at the time of consummation of the merger. The maximum federal income tax rate on net long-term capital gain recognized by individuals is 15% under current law. Deduction of capital losses may be subject to certain limitations.

     Earnout Merger Consideration. In connection with the payment of earnout merger consideration, if any, a U.S. holder generally will recognize capital gain or loss measured by the difference, if any, between (i) the value of the shares of CytRx common stock (plus any cash received in lieu of a fractional share), or cash, or combination of CytRx shares and cash, received as earnout merger consideration, and (ii) any portion of the U.S. holder’s adjusted tax basis in the shares of Innovive common stock surrendered pursuant to the merger allocable to the earnout merger consideration. A portion of each earnout merger consideration payment, however, will be characterized as interest under the Code’s imputed interest rules, and treated as ordinary interest income to the U.S. holder, based on the applicable federal rate in effect on the date of the merger for the term from the date of the merger to the payment date.

     Installment Method. Because the common shares of Innovive are quoted and tradable on the Over-the-Counter Bulletin Board, the installment method of reporting under Code Section 453 will generally not be available for Innovive stockholders, other than possibly for certain officers, directors or significant stockholders whose ability to sell shares in the public markets is limited under SEC rules and regulations (as discussed below). Accordingly, for ordinary Innovive stockholders that are not eligible for the installment method, the earnout merger consideration generally would be taxable in the year of the merger based on the fair market value, as of the date of the merger, of the rights to any future earnout merger consideration. For such stockholders ineligible for the installment method, however, an exception might be available to the general rule of taxation in the year of merger either under the “open-transaction” doctrine or, for Innovive stockholders who are cash-method taxpayers, based on the cash-method-taxpayer doctrine. If applicable, the judicially created open-transaction doctrine or the cash-method-taxpayer doctrine might permit an Innovive stockholder to recover all of the holder’s basis in the exchanged Innovive stock before recognizing capital gain from the merger. The IRS views the open-transaction doctrine, though, as being rarely available and applying only in those “rare and extraordinary cases” where a contingent payment obligation is considered to have no ascertainable value. Innovive stockholders should consult their own tax advisors regarding the availability of either the open-transaction doctrine or the cash-method-taxpayer doctrine in connection with the merger, and how it might apply to them if available.

     In the case of Innovive officers, directors or significant stockholders whose ability to sell all of their Innovive shares in the public markets is limited under SEC Rule 144 or similar restrictions, IRS private letter rulings have held that the installment method might be available to such a stockholder, in light of the securities laws restrictions on the salability of the stockholder’s shares. Such Innovive stockholders should consult their own tax advisors regarding the availability of the installment method for some or all of their Innovive shares and, if the installment method is otherwise applicable, the effects of the installment method on them and whether the stockholder should adopt or elect out of the installment method with respect to any merger consideration.

     Tax-Free Reorganization

     If the merger instead is held to constitute a reorganization within the meaning of Section 368(a) of the Code, then, subject to the limitations and qualifications described herein, the following tax consequences would generally apply to stockholders who exchange Innovive common stock for shares of CytRx common stock and any earnout merger consideration:

	•		no gain or loss will be recognized by the Innovive stockholders upon their receipt of the initial merger consideration in the form of CytRx common stock;
	•		taxable gain or, in certain cases, loss will be recognized by Innovive stockholders with respect to any cash they may receive as consideration in the merger, including in lieu of fractional shares;
	•		taxable income or gain will be recognized upon the receipt of any earnout merger consideration that is paid in the form of cash, and a portion of any earnout merger consideration will be recharacterized under the imputed-interest provisions of the Code as being interest for federal income tax purposes, regardless of whether the underlying earnout merger consideration is received in the form of cash or CytRx shares, as discussed more fully above under “Merger as Taxable Exchange — Earnout Merger Consideration”;
	•		the aggregate tax basis of the CytRx common stock received in the merger will be the same as the aggregate tax basis of the holder’s Innovive common stock surrendered in exchange therefor, reduced by (i) an amount of basis allocable to any fractional share interests for which cash was received and (ii) the portion of such basis, if any, allocable to any portion of the earnout merger consideration not received in the form of shares of CytRx common stock; and
	•		the holding period of the CytRx common stock received in the merger will include the period during which the holder’s Innovive common stock surrendered in exchange therefor was held, provided that the holder’s Innovive common stock is held as a capital asset at the time of the merger.

     Exercise of Appraisal Rights

     The discussion above does not apply to stockholders of Innovive who exercise appraisal rights under Delaware law. An Innovive stockholder who exercises appraisal rights with respect to the merger and receives cash for shares of Innovive stock will generally recognize capital gain (or loss) measured by the difference between the amount of cash received and the stockholder’s basis in those shares, provided that (i) the Innovive shares are capital assets in the hands of such stockholder and (ii) the payment is treated as a redemption pursuant to Section 302 of the Code, and not otherwise equivalent to a dividend with respect to the stockholder. A sale of all Innovive shares held by a stockholder, based on an exercise of appraisal rights or otherwise, will not be treated as a dividend if the stockholder exercising appraisal rights owns no shares of Innovive or CytRx immediately after the merger, after giving effect to the constructive ownership rules pursuant to the Code. The capital gain or loss will be long-term capital gain or loss if the holder’s holding period for the Innovive shares surrendered is more than one year. If a stockholder exercising appraisal rights or exchanging Innovive shares solely for cash will own shares in CytRx immediately following the merger, the stockholder should consult his, her or its own tax advisers as to the tax consequences to the stockholder of the Merger.

Non-U.S. Holders

     A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to any taxable gain on merger consideration received pursuant to the merger, unless one of the following applies:

	•		the taxable gain is effectively connected with a non-U.S. holder’s conduct of a trade or business within the United States and, if a tax treaty applies, the gain is attributable to a non-U.S. holder’s U.S. permanent establishment. In such case, the non-U.S. holder will, unless an applicable tax treaty provides otherwise, generally be taxed on its net gain derived from the merger at regular graduated U.S. federal income tax rates, and in the case of a foreign corporation, may also be subject to the branch profits tax; or
	•		a non-U.S. holder who is an individual and holds Innovive stock as a capital asset, is present in the United States for 183 or more days in the taxable year that the merger occurs and certain other conditions are met. In such a case, the non-U.S. holder will be subject to a flat 30% tax on the taxable gain derived from the merger, which may be offset by certain U.S. capital losses.

Backup Withholding

     Certain non-corporate holders of Innovive common stock may be subject to backup withholding at a 28% rate on any cash payments received in connection with the merger or upon the exercise of appraisal rights. Backup withholding will not apply, however, to a holder who (1) furnishes a correct taxpayer identification number and certifies that he, she, or it is not subject to backup withholding on the substitute IRS Form W-9 or successor form, (2) provides a certification of foreign status on an IRS W-8 series Form or successor form, or (3) is otherwise exempt from backup withholding.

     The discussion set forth above is included for general information only. Each Innovive stockholder should consult his, her or its own tax advisor with respect to the specific tax consequences of the merger to him, her or it, including the application and effect of state, local, and foreign tax laws.s

THE SPECIAL MEETING OF STOCKHOLDERS

Time, Place, and Purpose of the Special Meeting

     This proxy statement/prospectus is being furnished to our stockholders as part of the solicitation of proxies by our board of directors for use at a special meeting to be held at 10:00 a.m., local time, on                     , 2008, at our offices located at 555 Madison Avenue, 25^th Floor, New York, New York, or at any postponement or adjournment of the meeting. The purpose of the special meeting is to consider and vote on the proposal to approve the merger agreement (and to approve the adjournment of the special meeting, if necessary or appropriate to solicit additional proxies). If the stockholders fail to approve the merger agreement, the merger will not occur. A copy of the merger agreement is attached to this proxy statement/prospectus as Appendix A.

Who Can Vote at the Special Meeting

     You may vote at the special meeting all of the shares of Innovive common stock you owned of record as of the close of business on                     , 2008. If you own shares that are registered in someone else’s name (for example, a broker), you need to direct that person to vote those shares on your behalf or obtain an authorization from them to vote the shares yourself at the special meeting. As of the close of business on                     , 2008, there were                      shares of Innovive common stock outstanding held by approximately                      holders of record. We believe that a number of our stockholders hold their shares in “street name” and, as a result, that the number of beneficial owners of Innovive common stock is greater than the number of record holders.

Vote Required for Approval of the Merger Agreement

     Approval of the merger agreement requires stockholders holding a majority of the outstanding shares of Innovive common stock at the close of business on the record date to vote for the approval of the merger

agreement, with each share having a single vote for this purpose. Failure to vote will have the same effect as a vote against the approval of the merger agreement.

     Steven Kelly, Neil Herskowitz, J. Jay Lobell and Eric Poma, M.D., each of whom is a director or officer of Innovive, and their affiliates, Lindsay A. Rosenwald, M.D., and Lester Lipshutz, as investment manager or trustee of trusts established for the benefit of Dr. Rosenwald and his family, along with Angelo De Caro, who recently resigned as a director, have agreed pursuant to support agreements that they have entered into with CytRx and Merger Subsidiary to vote all Innovive shares that they control in favor of the merger agreement. These directors and officers and their affiliates own beneficially an aggregate of approximately 22% of the shares of common stock entitled to vote at the special meeting. To facilitate the support agreements, these beneficial owners also granted CytRx proxies to vote their shares with respect to the merger and the merger agreement. The full text of the form of support agreements is attached to this proxy statement/prospectus as Appendix B.

     Brokers who hold shares in street name for customers are precluded from exercising their voting discretion with respect to the approval of matters such as the approval of the merger agreement and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as “broker non-votes.” Abstentions and broker non-votes will be treated as shares that are present and entitled to vote at the special meeting for purposes of determining whether a quorum exists and will have the same effect as votes against approval of the merger agreement.

     The holders of a majority of the outstanding shares of Innovive common stock entitled to be cast as of the record date, represented in person or by proxy, will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. Once a share of Innovive common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum and any adjournment of the special meeting, unless the holder is present solely to object to the special meeting. However, if a new record date is set for an adjourned meeting, then a new quorum will have to be established.

Voting By Proxy

     This proxy statement/prospectus is being sent to you on behalf of our board of directors for the purpose of requesting that you allow your shares of Innovive common stock to be represented at the special meeting by the persons named in the enclosed proxy card. All shares of Innovive common stock represented at the special meeting by proxies voted by the Internet or by properly executed proxy cards will be voted in accordance with the instructions indicated on that proxy. If you sign and return a proxy card without giving voting instructions, your shares will be voted as recommended by our board of directors.

     The persons named in the proxy card will use their own judgment to determine how to vote your shares regarding any matters not described in this proxy statement/prospectus that are properly presented at the special meeting. Innovive does not know of any matter to be presented at the special meeting other than the proposal to approve the merger agreement (and the proposal described below to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies).

     You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must (1) send a signed written notice of revocation to us at Innovive Pharmaceuticals, Inc., 555 Madison Avenue, 25^th Floor, New York, New York 10022, Attention: Corporate Secretary, (2) submit a proxy by mail or by the Internet dated after the date of the earlier proxy you wish to change, or (3) attend the special meeting and vote your shares in person. Merely attending the special meeting without voting will not be sufficient to revoke your earlier proxy.

     If your shares of Innovive common stock are held in street name, you will receive instructions from your broker, bank, or other nominee that you must follow in order to have your shares voted. If you do not

instruct your broker to vote your shares, it has the same effect as a vote against the approval of the merger agreement.

     Innovive will pay the cost of this proxy solicitation. In addition to soliciting proxies by mail, directors, officers, and employees of Innovive may solicit proxies by telephone, by other electronic means, or in person. None of these persons will receive additional or special compensation for soliciting proxies. Innovive will also, upon request, reimburse brokers, banks, and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.

Adjournments and Postponements

     Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment may be made without notice (if the adjournment is not for more than 30 days), by an announcement made at the special meeting of the time, date, and place of the adjourned meeting. If no quorum exists, the chairman of the meeting will have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If a quorum exists, holders of a majority of the shares of Innovive common stock present in person or represented by proxy at the special meeting and entitled to vote at the meeting may adjourn the special meeting. Any signed proxies received by Innovive in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Innovive’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

     After careful consideration, our board of directors, by a unanimous vote of all of the directors, recommends a vote “FOR” the approval of the adjournment of the special meeting.

Stockholder Representative

     If the merger agreement is approved at the special meeting, you will be deemed to have appointed Steven Kelly, our President and Chief Executive Officer, as your agent and attorney-in-fact for purposes of the merger agreement if the merger is completed.

THE MERGER AGREEMENT

     This section describes the material terms of the merger agreement. The description in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the merger agreement, itself, a copy of which is attached to this proxy statement/prospectus as Appendix A. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read carefully the merger agreement in its entirety.

     The merger agreement has been included to provide you with information regarding its terms and is not intended to provide any other factual information about Innovive, CytRx or Merger Subsidiary. Furthermore, the merger agreement contains representations and warranties made by and to Innovive, CytRx and Merger Subsidiary for the purposes of that contract and which are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of that contract.

Effective Time of the Merger

     The effective time of the merger will occur at the time that Innovive and Merger Subsidiary file a certificate of merger with the Secretary of State of the State of Delaware on the closing date of the merger or on a later date agreed to by CytRx and Innovive. The closing of the transactions contemplated by the merger agreement will occur on the second business day after all of the conditions to the merger set forth in the merger agreement have been satisfied or waived, or on such other date as CytRx and Innovive may agree.

Structure of the Merger

     At the effective time of the merger, Merger Subsidiary will merge with and into Innovive in accordance with the Delaware General Corporation Law. The separate existence of Merger Subsidiary will cease, and Innovive will survive the merger and continue to exist after the merger as a wholly owned subsidiary of CytRx. All of Innovive’s and Merger Subsidiary’s rights and properties and all of their debts and liabilities will become those of the surviving corporation.

     Following completion of the merger, Innovive common stock will be deregistered under the Securities Exchange Act of 1934 and no longer quoted on the OTCBB or publicly traded.

Merger Consideration

     In the merger, CytRx will pay initial merger consideration of $3,000,000 in the form of shares of CytRx common stock valued at $0.94 per share, which equals the average daily volume-weighted closing price of CytRx common stock as reported on The Nasdaq Capital Market over the 10 trading days prior to the signing of the merger agreement. CytRx also will pay future earnout merger consideration of up to $18,253,462, subject to the achievement of specified net sales under Innovive’s existing license agreements, as follows:

Net Sales						Earnout Merger Consideration
$	2,000,000					$	2,000,000
$	15,000,000					$	5,000,000
$	30,000,000					$	5,000,000
$	40,000,000					$	6,253,462

     Subject to specified conditions, any earnout merger consideration will be payable in shares of CytRx common stock or, at CytRx’s election, in cash, or by a combination of shares of CytRx common stock and cash. CytRx common stock will be valued for purposes of any earnout merger consideration based upon the average of the daily market price during the 10-trading day period ending on the second trading day prior to payment of the earnout merger consideration. Your right to receive any earnout merger consideration will not be transferable, except by operation of law.

     The earnout merger consideration is subject to offset by CytRx as described under “Indemnification and Offset” below in this section.

Fractional Shares

     No fractional shares of CytRx common stock will be issued in the merger. In lieu of any fractional share, you will receive cash equal to the value in the merger of such fractional share, less any applicable withholding.

Treatment of Stock, Options and Warrants in the Merger

     Innovive Common Stock

     At the effective time of the merger, all outstanding shares of Innovive common stock (other than shares that are owned by Innovive as treasury stock, or by CytRx and Merger Subsidiary, and other than shares that are owned by Innovive stockholders, if any, who properly exercise dissenters’ rights under Delaware law) will be cancelled and converted into the right to receive the merger consideration. Any of our shares that are owned by Innovive, CytRx and Merger Subsidiary will be cancelled without the payment of any consideration. After the effective time of the merger, each outstanding stock certificate or book-entry share representing

shares of Innovive common stock converted in the merger will represent only the right to receive the merger consideration with respect to each share of Innovive common stock.

     Conversion of Merger Subsidiary Capital Stock

     At the effective time of the merger, all of the outstanding shares of the capital stock of Merger Subsidiary will be converted into one share of the common stock of Innovive, and such converted share will constitute the only outstanding capital stock of Innovive as of the effective time of the merger.

     Innovive Stock Options

     Each Innovive stock option outstanding as of the effective time of the merger, whether or not then vested or exercisable, will, by its terms, automatically be cancelled, with any consideration due to the holders thereof being paid at such time. After the merger, such stock options will no longer be outstanding and the holders of the options will no longer have any rights to purchase Innovive common stock. As of the record date for the special meeting, all of our employees held options to purchase an aggregate of                      shares of our common stock at a weighted-average exercise price of                      per share.

     All of our stock options currently are “underwater,” so we expect that our option holders will receive no payments or other consideration in connection with the merger. After the merger, such stock options will no longer be outstanding and the holders of the options will no longer have any rights to purchase Innovive stock or other securities.

     Innovive Warrants

     Each Innovive warrant outstanding immediately prior to the effective time of the merger that, by its terms, does not expire upon the effective time will remain outstanding in accordance with the terms thereof and the holder thereof will thereafter have the right to purchase and receive (in lieu of the shares of Innovive common stock) the merger consideration payable with respect to the number of shares of Innovive common stock purchasable under the warrant immediately prior to the effective time of the merger. To the extent Innovive warrants outstanding at the effective time of the merger are subsequently cancelled, or terminate, without being exercised in full, the merger consideration otherwise payable with respect to such cancelled or terminated warrants will become the property of CytRx.

     If required by the terms of the warrants, CytRx will cause to be issued promptly after the completion of the merger replacement warrants for the Innovive warrants that, by their terms, will remain outstanding after the merger.

Exchange and Payment Procedures

     Prior to the effective time of the merger, CytRx will deposit with a disbursing agent selected by CytRx and reasonably acceptable to us shares of CytRx common stock (and cash in lieu of any fractional shares) sufficient to pay the initial merger consideration.

     Promptly after the effective time of the merger, the disbursing agent will mail to each stockholder who is entitled to receive the merger consideration a letter of transmittal and instructions for use in effecting the surrender of the stockholder’s stock certificates or book-entry shares in exchange for payment of the merger consideration. Upon surrender to the disbursing agent of the stockholder’s stock certificates or book-entry shares, together with the letter of transmittal duly executed and such other documents as may be reasonably required by the disbursing agent, the stockholder will be paid promptly in exchange therefor the merger consideration. No interest will be paid or accrued on the merger consideration.

     A stockholder should not return a stock certificate with the enclosed proxy card, and a stockholder should not send a stock certificate to the disbursing agent without a signed letter of transmittal.

     The merger consideration may be paid to a person other than the person in whose name the corresponding certificate is registered if the certificate is properly endorsed or is otherwise in the proper form for transfer. In addition, the person who surrenders the certificate must either pay any transfer or other applicable taxes or establish to the satisfaction of the surviving corporation that such taxes have been paid or are not applicable.

     After the effective time of the merger, there will be no transfers on our stock transfer books of shares of our common stock that were outstanding prior to the effective time of the merger. If, after the effective time of the merger, certificates are presented to us for transfer, they will be canceled and exchanged for the merger consideration.

     If a stockholder has lost a stock certificate, or if it has been stolen or destroyed, then before the stockholder will be entitled to receive any portion of the merger consideration, he or she will need to make an affidavit of the fact of such loss, theft, or destruction and, if required by the surviving corporation, post a bond in a reasonable amount sufficient to protect the surviving corporation and CytRx against any claim that may be made against either of them with respect to such certificate.

     No fractional shares of CytRx common stock will be issued in the merger. In lieu of any fractional share, you will receive cash equal to the value in the merger of such fractional share, less any applicable withholding.

     Any portion of the merger consideration deposited with the disbursing agent that remains undistributed to former holders of our common stock more than six months after the effective time of the merger will be delivered, upon demand, to CytRx. Former holders of our common stock who have not complied with the above-described exchange and payment procedures will thereafter be entitled to look only to CytRx for payment of the merger consideration. The disbursing agent, CytRx, and Innovive will not be liable to any former holders of our common stock for any cash that is delivered to a public official pursuant to any applicable abandoned property, escheat, or similar laws.

     The disbursing agent is entitled to deduct, withhold, and pay to the appropriate taxing authorities any applicable taxes from the merger consideration. Any sum that is withheld and paid to a taxing authority by the paying agent will be deemed to have been paid to the person with regard to whom it is withheld.

Representations and Warranties

     The merger agreement contains customary representations and warranties of the parties to the merger agreement, which are made to and solely for the benefit of each other. The assertions embodied in the representations and warranties are qualified and modified by information contained in a confidential disclosure schedule that the parties exchanged in connection with the signing of the merger agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts about us or CytRx because (1) they were made only as of the date of the merger agreement or a prior specified date, (2) in some cases they are subject to qualifications with respect to materiality and knowledge, and (3) they are modified in important part by the underlying disclosure schedule. The disclosure schedule contains information that has been included in our prior public disclosures, as well as non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, and such subsequent information may or may not be fully reflected in our public disclosures.

     Our representations and warranties in the merger agreement relate to, among other things:

	•		our due incorporation, valid existence, good standing, and qualification to do business;
	•		our certificate of incorporation and bylaws;
	•		our capitalization, including the number of shares of Innovive common stock, stock options and warrants outstanding;
	•		our corporate power and authority to enter into the merger agreement and to consummate the transactions contemplated by the merger agreement;
	•		the approval and recommendation by our board of directors of the merger agreement and the merger and the other transactions contemplated by the merger agreement;
	•		the absence of certain specified violations of, or conflicts with, our governing documents, applicable law, and certain agreements as a result of entering into the merger agreement and consummating the merger;
	•		the required consents and approvals of governmental entities in connection with the execution, delivery, and performance of the merger agreement, the merger, and the other transactions contemplated by the merger agreement;
	•		our SEC forms, documents, registration statements, and reports filed since January 1, 2007, including the financial statements contained therein;
	•		our compliance with the Sarbanes-Oxley Act of 2002, including our internal control over financial reporting;
	•		the absence of certain undisclosed liabilities and an estimate of our “net liabilities” (as defined) as of June 6, 2008;
	•		the absence of a material adverse effect and certain other changes or events related to us since December 31, 2007;
	•		the absence of undisclosed legal proceedings and governmental orders against us;
	•		the accuracy of the information supplied by us for inclusion in this proxy statement/prospectus;
	•		compliance with applicable laws and permits;
	•		material contracts and compliance with contracts;
	•		taxes;
	•		employment matters affecting us, including matters relating to our employee benefit plans;
	•		leasehold interests, tangible personal property, and title to assets;
	•		the required vote of our stockholders in connection with the approval of the merger agreement;
	•		intellectual property;
	•		insurance policies;