Cyclacel Pharmaceuticals Looks Undervalued Given Potential Frontline Leukemia Drug

Cyclacel Pharmaceuticals Looks Undervalued Given Potential Frontline Leukemia 
LOS ANGELES, CA -- (Marketwire) -- 02/21/13 --   Cyclacel
Pharmaceuticals is a development-stage biopharmaceutical company
dedicated to the development and commercialization of novel,
mechanism-targeted drugs to treat human cancers and other serious
diseases. Cyclacel's strategy is to build a diversified
biopharmaceutical business focused in hematology and oncology based
on a development pipeline of novel drug candidates. Cyclacel's
clinical development priorities are focused on sapacitabine, an
orally available, cell cycle modulating nucleoside analogue. The oral
dose availability is one major differentiator Cyclacel offers with
its sapacitabine candidate. 
In 2007, Dr. Kantarjiian from the Leukemia Department at the
University of Texas's Cancer Center called sapacitabine, "one of the
most exciting drugs in development for AML since cytarabine, the
current standard of care." 
Here we discuss what is on the horizon for Cyclacel and this drug in
the short and long term. 
Currently, sapacitabine is being evaluated in the SEAMLESS Phase III
trial being conducted under a special protocol assessment (SPA)
agreement with the US Food and Drug Administration for the front-line
treatment of acute myeloid leukemia (AML) in the elderly. It is also
in Phase II studies for AML, myelodysplastic syndromes, non-small
cell lung cancer (NSCLC) and chronic lymphocytic leukemia. 
In October of last year at the Hematologic Malignancies Conference,
Cyclacel announced impressive data regarding survival of elderly
patients in its Phase II trial with intermediate-2 or high-risk
myelodysplastic syndromes (MDS) after failure of front-line
treatment. Per Wikipedia, myelodysplastic syndromes (formerly known
as pre-leukemia) are: 
"A diverse collection of blood related medical conditions that
involve ineffective production of the myeloid class of blood cells." 
In Cyclacel's October press conference, the company announced median
overall survival to date for the 63 patients in the Phase II study at
252 days or approximately eight months. Median overall survival for
41 out of 63 patients with 10% or more blasts in their bone marrow is
274 days or approximately nine months. This compares to the median
survival for patients as defined by the International Prognostic
Scoring System (IPSS) at 4.3 to 5.6 months. 
In January 11, 2011, the company opened enrollment of the SEAMLESS
pivotal Phase III trial for the company's sapacitabine oral capsules
as a front-line treatment of elderly patients aged 70 years or older
with newly diagnosed AML who are not candidates for intensive
induction chemotherapy. 
Cyclacel is using decitabine as the active control arm for its trial.
Decitabine (Dacogen) is manufactured by Astex Pharma's  and was
recently approved in Europe but not yet in the U.S. 
The most extensive clinical trial data of dacogen in AML is the
DACO-016 Phase III study initiated in 2006 and presented at ASCO in
2011. DACO-016 was a randomized open-label Phase III trial of Dacogen
versus physician's choice (supportive care or low-dose cytarabine) in
elderly patients with newly diagnosed AML with poor- or
intermediate-risk cytogenetics. 
Cyclacel chose decitabine as an active control arm as it is one of
the treatment options recommended by the National Comprehensive
Cancer Network's Clinical Practice Guidelines, said Judy Chiao, M.D.,
Cyclacel VP of clinical development and regulatory affairs. 
Cyclacel is looking at giving greater hope to older patients
diagnosed with acute myeloid leukemia. Considering the current
environment demonstrating a six month survival profile, people are
not going to see much of a benefit to going through potentially two
months of chemotherapy to a short time past that point. Generally,
they will just be going home to try and preserve some quality of life
in the time they have left. 
In a recent presentation at the BIO CEO & Investor Conference,
Cyclacel described why it feels sapacitabine can succeed. The drug
uses a lower level of intensity which helps the immune system while
treating. The company also notes that most elderly are unable to
sustain chemotherapy. In fact, in early data from the company's Phase
III SEAMLESS trial, safety indicators show a sapacitabine/decitabine
combination to have a mortality rate in the first two months of 13%
versus 36% for chemotherapy and 20% for decitabine alone. 
In the investor conference, the company goes on to say that the oral
dose of sapacitabine is well tolerated with multiyear maintenance
dosing achieved. 
Upcoming Catalysts: 

--  A SEAMLESS Phase III enrollment update
--  NDSMB (Data and Safety Monitoring Board) review of SEAMLESS
--  Update on Phase II data in myelodysplastic syndromes after HMAs
    (Hypomethylating Agent)
--  Update on Phase I data for sapacitabine and selleciclib in patients
    with solid tumors

Last week, Cyclacel announced two important additions to its patent
portfolio. Within this announcement, CEO Spiro Rombotis, commented; 
"The grants of the '792 and '790 patents are important enhancements
of sapacitabine's intellectual property estate. They supplement
sapacitabine's existing composition of matter, dosing regimen and
combination treatment patent protection and support US and EU market
exclusivity toward the end of the next decade. We are pursuing a
broad intellectual property strategy providing us with a strong
foundation to achieve our clinical and commercial objectives for
sapacitabine and our other assets. As we continue to enroll SEAMLESS,
our pivotal Phase III trial of sapacitabine as front-line treatment
in elderly patients with acute myeloid leukemia, we look forward to
providing additional updates for sapacitabine this year, including
Phase II data in myelodysplastic syndromes, AML preceded by MDS, and
solid tumors." 
The above statement certainly is positive, and can be expected from
any decent management. What is important above is the numerous near
term catalyst the company has coming. Also of note, is that
sapacitabine is being designed as a front line treatment. 
Seeking Alpha Contributor Steve Rosenman remarks from his December
2012 article; 
"As for AML, Cyclacel began the SEAMLESS pivotal Phase III trial for
the company's sapacitabine oral capsules as a front-line treatment in
early 2011. SEAMLESS is conducted under a Special Protocol
Assessment, or SPA, agreement with the FDA. SNSS's drug is not under
SPA, nor can it be taken as a front-line treatment." 
Steve also goes on to mention something worth noting here; 
"Many have speculated that the Celgene may want to mitigate legal
risk by simply acquiring or partnering with Cyclacel. This scenario
has merit and should not be ignored. The two are basically fighting
each other over the rights to use Cyclacel patents. At the end of the
day, until proven otherwise, they are valid Cyclacel patents --
potentially deserving of royalty." 
Cyclacel has a patent infringement lawsuit against Celgene  which
will begin a Markman patent construction hearing on March 16th, 2013.
While the final result from this litigation might not be known until
the middle of 2014 -- the case so far looks favorable for Cyclacel. 
It appears that Celgene might be better served buying Cyclacel out,
avoiding litigation all together while retaining a potential billion
dollar drug. 

*Institutional Ownership                     # of Holders    Shares         
Total Shares Held:                           26              2,214,622      
New Positions:                               10              1,003,391      
Increased Positions:                         12              1,009,297      
Decreased Positions:                         6               146,532        
Holders With Activity:                       18              1,155,829      
Sold Out Positions:                          3               48,590         

As we can see from above, institutions are buying Cyclacel, including
Goldman Sachs. 

**Balance Sheet                                                             
Total Cash (mrq):                                               17.84M      
Total Cash Per Share (mrq):                                     1.91        
Total Debt (mrq):                                               0.00        
Total Debt/Equity (mrq):                                        N/A         
Current Ratio (mrq):                                            2.73        
Book Value Per Share (mrq):                                     1.57        
Cash Flow Statement                                                         
Operating Cash Flow (TTM):                                   -12.84M        
Levered Free Cash Flow :                                     -7.96M         

Cyclacel has over 2 years of operating cash on hand, burning about $2M
a quarter, so a cash raise/dilution should not be something that is
likely here in the short term. 

Share Statistics                                                            
Avg Vol (3 month)3:                                             290,205     
Avg Vol (10 day):                                               108,867     
Shares Outstanding:                                             9.32M       
Float:                                                          7.70M       
% Held by Insiders:                                             4.45%       
% Held by Institutions:                                         16.90%      
Shares Short (as of Jan 31, 2013):                              1.27M       
Short Ratio (as of Jan 31, 2013):                               6.30        
Short % of Float (as of Jan 31, 2013):                          15.70%      
Shares Short (prior month):                                     1.18M       

The company has a low float with a healthy short interest, which is
something we always like to see in a stock. Too many shares short
signals too many bears and potentially bad issues with the company,
too small short interest often means a stock that could be
With the high barriers to entry in a very complex field, Cyclacel
looks to be undervalued with a market cap of only $52M.
Comparatively, Sunesis Pharma  has a market cap of $275M -- more than
5 times the market cap of Cyclacel. 
Sunesis's drug candidate vosaroxin, also designed to treat AML, is
currently undergoing a Phase III study in patients with relapsed or
refractory AML. 
Sunesis, like Cyclacel, was under the radar for some time causing it
to be very undervalued. On May 9th, 2012, I wrote an article
featuring Sunesis when the stock was trading around $2.70. Today,
Sunesis trades for around $5.35. The comparison above is not meant to
spark a debate which drug or company is better, but rather to show
the investment opportunity Cyclacel may provide, and to show that it
is very undervalued. Having said that, vosaroxin will not be a
frontline drug, where sapacitabine likely will be, which equates to
more money potential for sapacitabine. 
The chart has been in an uptrend and after forming a wedge, it looks
to be set to break out again, especially when we look at the last
candle for yesterday's trading session. The first price level to
watch is $6.16-$6.20, and then a test of the highs in the $8s could
be in range. 
We believe Cyclacel might be one of the most undervalued speculation
investments around. The data so far looks promising, and more data is
expected by the end of the current quarter. 
FDA approval of any of its pipelined drugs could see a stock price 5
times its current value, which would still result in a market cap
less than Sunesis's current valuation. If the data continues to be
positive for sapacitabine, a one year target of $15 to $20 is within
reach for Cyclacel. 
*Data sourced from 
**Data sourced from Yahoo Finance. 
Disclosure: Author Scott Matusow is Long CYCC 
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