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Executives

Corey Sohmer - Director of Corporate Finance

Spiro Rombotis - Chief Executive Officer, President and Executive Director

Judy H. Chiao - Chief Medical Officer and Vice President of Clinical Development & Regulatory Affairs

Paul McBarron - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer, Executive Vice President of Finance, Secretary and Executive Director

Analysts

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Michael G. King - JMP Securities LLC, Research Division

Cyclacel Pharmaceuticals (CYCC) Q4 2012 Earnings Call March 27, 2013 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Cyclacel Pharmaceuticals Fourth Quarter 2012 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Corey Sohmer, Director of Corporate Finance. Sir, you may begin your conference.

Corey Sohmer

Thank you. Good afternoon, and welcome to our quarterly conference call. During today's call, members of our senior management team will review Cyclacel's financial performance and business highlights for the fourth quarter and year-ended December 31, 2012.

Before turning the call over to senior management, I would like to remind everyone that during this conference call, any forward-looking statements made by management are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. As set forth in our press release, forward-looking statements involve risks and uncertainties that may affect the company's business and prospects, including those discussed in our filings with the SEC, which include, among others, our Form 10-K. These filings are all available from the SEC or our website. All of our projections and other forward-looking statements represent our judgment as of today, and Cyclacel does not take any responsibility to update such information.

With us today are Spiro Rombotis, President and Chief Executive Officer; Paul McBarron, Executive Vice President, Finance and Chief Operating Officer; and Dr. Judy Chiao, Vice President of Clinical Development and Regulatory Affairs.

At this time, I would like to turn the call over to Spiro Rombotis.

Spiro Rombotis

Thank you, Corey, and good afternoon, everyone. It is a pleasure to update you this afternoon on our corporate progress and financial results for the fourth quarter and year-ended December 31, 2012.

First, we are pleased to report that we have randomized 162 patients, all in the United States, in our SEAMLESS Phase III registration-directed study of sapacitabine in elderly patients with newly diagnosed acute myeloid leukemia or AML. This achievement represents approximately 33% of the projected number of patients in this study. We are encouraged by the continued investigator interest in SEAMLESS and plan to open additional sites during 2013.

The independent Data Safety Monitoring Board, or DSMB, of SEAMLESS recently convened its second meeting and recommended that the study should continue as planned after reviewing available data from 119 randomized patients. The Data Safety Monitoring Board noted that no safety or efficacy concerns were identified.

We recently reported promising survival data supporting the SEAMLESS study from all AML patients enrolled in the pilot study in leading stage of SEAMLESS. Median overall survival was approximately 8.5 months. In the approximately 72% of patients who are aged 75 years or older, median overall survival was approximately 9.4 months. In a recently published pivotal study of decitabine, approximately 38% of patients were aged 75 years or older. In this group, median overall survival for the decitabine arm was approximately 6.3 months.

Literature evidence indicates that if left untreated, elderly patients with AML aged 70 years or older can expect median overall survival of around 3.6 months. There is a high unmet medical need for the treatment of elderly patients with AML and the disease is associated with high mortality and poor quality of life. Currently, there is no standard or satisfactory treatment in the U.S. for this group of patients.

We also reported Phase II survival data in patients with myelodysplastic syndromes or MDS who fail front line treatment with either one or both hypomethylating agents or HMAs, azacitidine or decitabine. Unlike SEAMLESS, patients in this study were treated with sapacitabine as a single agent and achieved nearly double the expected survival reported in the literature for patients with MDS who are refractory to a single HMA. We plan to report updated survival data from our ongoing MDS program as soon as mature follow-up is reached.

In addition to our work in liquid cancers, we are studying sapacitabine in patients with solid tumors. Last summer at the ASCO Annual Meeting, we reported initial data from an open label, single-arm, Phase I escalation trial of sapacitabine in combination with seliciclib, our CDK inhibitor as an all-oral sequential regimen in pretreated patients with solid tumors. The regimen showed early evidence of anti-tumor activity, in particular, in cancer patients found to be carriers of BRCA-mutations. We believe this clinical observation may be directly related to the drug's mechanism acting on the ability of cancer cells to undergo DNA repair through the homologous recombination pathway or HR. If confirmed, this could be an exciting finding suggesting that a clinical development plan could be targeted to treat cancer patients with HR defects, such as BRCA. Updated data from this program will be reported on April 9 at the upcoming AACR medical conference by Dr. Geoffrey Shapiro from Harvard Medical School and Dana-Farber Cancer Institute.

It is very encouraging that data is emerging that suggest line extension opportunities for sapacitabine and its potential as a pipeline within a drug. I will now turn the call over to Judy, who will provide further details and review our clinical progress with sapacitabine. Judy?

Judy H. Chiao

Thank you, Spiro. SEAMLESS is a 2-arm randomized Phase III registration-directed trial. It is comparing the regimen of oral sapacitabine dosed in alternating cycles with intravenous decitabine versus intravenous decitabine alone as the front-line treatment in patients aged 70 years and older with newly diagnosed AML who are unfit for or have refused intensive induction chemotherapy.

An advantage of the experimental arm is that on even cycles, an elderly patient will be able to take sapacitabine by mouth at home instead of requiring a visit to an infusion center or physician's office in order to receive intravenous decitabine. SEAMLESS is expected to enroll approximately 485 patients. This study is being conducted and there is SPA or Special Protocol Assessment agreement that we reached with that U.S. FDA.

The randomized stage of SEAMLESS was initiated following a favorable review of the available data from a pilot Phase I/II studies and the leading part of SEAMLESS by the DSMB. The primary endpoint of the studies is an improvement in overall survival. The DSMB will conduct additional periodic reviews and will also perform a futility assessment when 212 events are observed.

As Spiro indicated, we are encouraged by investigator support and interest in the SEAMLESS study. Decitabine is clinically available and reimbursed in the United States for the population enrolled in SEAMLESS. We are also encouraged by the recent approval of decitabine in Europe for patients with AML aged 65 years or older.

At the 2012 American Society of Hematology Annual Meeting, we presented pooled updated survival data from the pilot study and leading phase of SEAMLESS, evaluating the same treatment regimen of sapacitabine dosed sequentially with decitabine as used in the experimental arm of SEAMLESS. Among 46 patients treated, median overall survival is 300 -- I mean, sorry, 238 days or approximately 8 months. The number of patients still alive at 3 months was 83%; at 6 months that was 65%; at 12 months was 35%; and at 18 months, 26%.

16 patients or 35% of the patients survived one year or longer. Among 33 patients who are 75 years older, median survival is 263 days or approximately 9 months, and 1-year survival is 36% percent. 19 patients or 41% responded, including 10 patients with complete remissions. Median time to respond is 2 cycles, that is one cycle of decitabine and one cycle of sapacitabine with a range of 1 to 10 cycles. 27 patients, 59% of the patient population, received 5 or more cycles. Two dose-limiting toxicities were observed, 30-day mortality from all causes was 4%. 60-day mortality from all causes was 14 -- 13%.

In addition to AML, we're exploring sapacitabine in older patients with intermediate-2 or high-risk myelodysplastic syndromes or MDS. In October, we reported updated Phase II survival data in such patients who failed the front-line treatment with either one or both hypomethylating agents, azacitidine or decitabine. Unlike SEAMLESS, these patients were treated with sapacitabine as a single agent and achieved nearly double the expected median survival of 4.3 to 5.6 months reported in the literature for those with MDS who are refractory to a single hypomethylating agent.

Sapacitabine-treated patients achieved a median overall survival ranging from 8 to 10 months depending on the dose used. Median overall survival in 65% of the sapacitabine-treated patients was 10% to 19% blasts [ph] in the marrow with approximately 9 months. We plan to report updated survival data from the ongoing MDS program as soon as a mature follow-up is reached.

Following up on these promising results and after consultation with the FDA, we will be preparing a registration-directed clinical development plan for sapacitabine MDS following a treatment failure of hypomethylating agents.

In addition to our work in the liquid cancers, we are also studying sapacitabine in patients with solid tumors. Last summer at ASCO Annual Meeting, we reported initial data from an open label, single-arm Phase I dose escalation trial of sapacitabine in combination with seliciclib, our CDK inhibitor, an orally administered, sequential treatment regimen in heavily pretreated patients with advanced solid tumors. The regimen shows early evidence of anti-tumor activity, particularly in cancer patients found to be carrier of BRCA mutations. Sapacitabine's activity in both hematological malignancy and solid tumor is a key differentiator for this unique oral agent.

I would now turn the call over to Paul.

Paul McBarron

Thank you, Judy. Turning to other recent events, the personalized medicine potential of our innovative oncology pipeline was highlighted at the 8th National Cancer Research Institute or NCRI Conference. Multiple posters were presented including translational findings demonstrating the combination potential of sapacitabine in patients with HR pathway defects, including BRCA, and also an early stage program reporting on Cyclacel's promising Plk1 inhibitors.

We also announced receipt of an approximately $1.9-million grant from the U.K. Government's Biomedical Catalyst to complete IND-directed preclinical development of CYC065. CYC065 is our novel, orally available, second-generation CDK inhibitor, targeting CDKs 2, 5 and 9. The grant will allow us to explore CYC065's [indiscernible] anticancer activity in a translational biology program, targeting specific leukemia and other cancer pathways with the ultimate goal of filing for regulatory approval to begin clinical trials.

Encouraging preclinical anticancer activity for CYC065 in multiple myeloma, chronic lymphocytic leukemia and mixed lineage leukemia have been presented at the 2010 annual meetings of the American Society of Hematology and the American Association of Cancer Research. If successful, the program will provide the basis for stratified clinical development of CYC065 for treating patients with cancers that match the genetic mechanism targeted by the drugs.

We were recently issued 3 U.S. and EU patents granting claims to a method of administering sapacitabine and its use in combination with various families of targeted anticancer agents. The first patent extends existing composition of matter protection for sapacitabine and supports U.S. market exclusivity for certain methods out to 2030. The combination treatment patents provide exclusivity until June 2029 and December 2027, respectively. These patents include claims to combinations and pharmaceutical compositions of sapacitabine and HDAC inhibitors and methods of treatment of proliferative diseases, including leukemias, lymphomas and [indiscernible].

I will now review the company's financials. As you saw from today's press release regarding our consolidated financial statements for the 3 months ended December 31, 2012, we reported a net loss applicable to common stockholders of $4.9 million, compared to a net loss of $3.8 million for the 3 months ended December 31, 2011. For the year-ended December 31, 2012, we reported a net loss applicable to common stockholders of $13.9 million as compared to a net loss of $16 million for the 12 months ended December 31, 2011.

Research and development expenses decreased from $2.2 million for the 3 months ended December 31, 2011 to $2 million for the 3 months ended December 31, 2012. Total research and development expenses decreased from $9.2 million for the year-ended December 31, 2011 to $6.6 million for the year-ended December 31, 2012. The 12 months decrease in cost was mainly due to a $1.6 million contractual payment to Daiichi-Sankyo during the first quarter of 2011 related to a milestone payment triggered by the opening of enrollment in our SEAMLESS Phase III trial.

Total selling, general and administrative expenses or SG&A for the fourth quarter of 2012 were $2.7 million, as compared to $1.4 million for the fourth quarter of 2011. SG&A for the year-ended December 31, 2012 were $8.6 million as [indiscernible] $6.5 million for the year-ended December 31, 2011. The increase is primarily due to an increase in legal, consultancy and other professional costs and a reduction in the stock-based compensation costs.

In November, we announced the grant of approximately $1.9 million from the U.K. government's Biomedical Catalyst to fund IND-directed development of CYC065. And in December, we entered into a common stock purchase agreement with Aspire Capital Fund, who have committed to purchase up to $20 million of Cyclacel's common stock from time to time as directed by Cyclacel over the next 2 years at formula prices based on the market price at the time of each sale. Under the agreement, Aspire has purchased to date an aggregate of $4.4 million of Cyclacel common stock, including $1 million at closing.

During the year, we entered into separate Securities Exchange Agreements with 2 stockholders, pursuant to which the company issued an aggregate 748,455 shares of its common stock to the stockholders in exchange for delivery to the company of an aggregate 417,003 shares of the Company's 6% Exchangeable Convertible Preferred Stock.

As of December 31, 2012, our cash and cash equivalents were $16.4 million, compared to $24.4 million as of December 2011. This excludes funds received from Aspire's stock purchases in 2013 of approximately $3.4 million. We expect our cash resources are sufficient to meet anticipated working capital needs and fund ongoing sapacitabine clinical trials for at least the next 12 months.

Let me now turn the call back to Spiro.

Spiro Rombotis

Thank you, Paul. Before opening the call for questions, I would like to briefly review our objectives for 2013: continue enrollment of the SEAMLESS pivotal Phase III study in AML; report upcoming DSMB reviews of SEAMLESS; report Phase II updated survival data for sapacitabine in MDS following treatment failure of hypomethylating agents; announce registration-directed clinical development plan for sapacitabine in MDS following treatment failure of HMAs; report updated Phase I sapacitabine and seliciclib combination data in patients with solid tumors; and report outcome of Markman patent construction hearing on romidepsin intellectual property litigation.

I will now turn the call back to the operator to open up the lines for your questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Brian Klein of Stifel.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Just wondering if you could give an update on the Pick a Winner European trial that's been ongoing for a while.

Spiro Rombotis

We announced toward the end of the year that the independent committee called the DMC overlay 1 [ph] recommended that sapacitabine should not continue to the next stage as it was unlikely to double 1-year survival over the control arm of low dose Ara-C. This came out at about the end of the year in December.

Operator

Your next question comes from Mike King at JMP Security (sic) [Securities].

Michael G. King - JMP Securities LLC, Research Division

Just wanted to see if you could give us some -- apologies if this has been addressed at points prior to this call, but just wondering if you could perhaps qualitatively give us some thoughts on the pace of enrollment in SEAMLESS and give some idea of when you think you might complete full enrollment?

Spiro Rombotis

Thank you, Mike. At this point we're only reporting data that's coming in. And as I mentioned earlier, we have enrolled 33% of the study. The pace continues to be very encouraging. We have seen no relaxation or reduction in the rate of enrollment. It appears to be holding steady and we'll also be opening additional sites as they become available. So we expect the completion of enrollment over the next 2 years based on achievement to date. Let me also tell you that during the first 6 months, during which the randomized study was open, we only had 1/3 of the sites open, about 12 centers or so. So the number we announced today reflects to about 8 months of enrollment with nearly all of the centers that are currently open, about 38 open at the same time.

Michael G. King - JMP Securities LLC, Research Division

Okay. So I guess it's fair to say that given that more sites will be coming on, that the pace should start to accelerate?

Spiro Rombotis

Well, we can't characterize that at this point [indiscernible] of the facts. But I'm comfortable with the previous broad guidance we have given.

Operator

[Operator Instructions] Your next question comes from William Meyers [ph] of Miller Asset Management [ph].

Unknown Analyst

I originally was going to ask the previous question about SEAMLESS enrollment but since that's been asked, could you possibly comment on how you see legal costs going forward?

Spiro Rombotis

Paul, why don't you take that question from William [ph]?

Paul McBarron

Yes, we haven't broken out specifically the legal cost but our anticipated forward legal costs would be not dissimilar to what we've had in the last quarter.

Spiro Rombotis

Let me also add to Paul's comment, William [ph], that as many of you have been following the story know, we raised in February of last year approximately $3 million from existing stockholders, which we're required to spend in support of litigation. We still have not spent that amount of money. That gives you some additional color.

Operator

This concludes today's question-and-answer session. I would now like to turn the floor back over to management for any additional or closing remarks.

Spiro Rombotis

Thank you, operator. In closing, if the SEAMLESS trial is successful, sapacitabine would address a major unmet need for patients in -- with AML as a front-line treatment. The results of the Phase II study in second-line MDS following treatment failure of HMAs are also very encouraging to us. We believe that sapacitabine, along with our pipeline, represent outstanding growth opportunities for Cyclacel.

Thank you for your continued support of our efforts. Operator, at this time, please conclude the call.

Operator

Thank you. This does conclude today's conference. You may now disconnect.

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