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Cyclacel Pharmaceuticals (NASDAQ:CYCC)

Q2 2013 Earnings Call

August 14, 2013 4:30 pm ET

Executives

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

Analysts

Michael G. King - JMP Securities LLC, Research Division

Operator

Good afternoon, and welcome to Cyclacel Pharmaceuticals' Second Quarter 2013 Earnings Conference Call and Webcast. Today's call is being recorded. [Operator Instructions] It is now my pleasure to turn the floor over to Bill Harris [ph], Cyclacel's Corporate Controller. Sir, you may begin.

Unknown Executive

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 second quarter ended June 30, 2013.

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 other things, our Form 10-K. These filings are 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, our President and CEO.

Spiro Rombotis

Thank you, Bill, and good afternoon, everyone. It is a pleasure to update this afternoon on our corporate progress and financial results for the second quarter of 2013.

The past quarter has been notable at Cyclacel, as we recorded a net income, greatly strengthened our balance sheet, continued to simplify our capital structure and progressed our clinical programs.

In SEAMLESS, our pivotal Phase III study of sapacitabine as frontline treatment in elderly patients with acute myeloid leukemia, or AML, we have enrolled over 40% of the 485 patients required. We have signed an agreement with a clinical research organization for the purpose of expanding SEAMLESS outside the United States, and in particular, in Western Europe, which we anticipate will approximately double the number of enrolling sites in SEAMLESS for the remainder of enrollment.

We also added approximately $24 million to our cash resources through the completion of an underwritten offering and the sale of 4 Cyclacel romidepsin-related patents. With these cash inflows, we expect our existing cash to fund us beyond the planned completion of the SEAMLESS study.

Additionally, the dismissal of the romidepsin patent litigation with Celgene allows us to focus on the development of our pipeline.

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 United States for this group of patients.

It is of note that the age of the patients with AML is an adverse prognostic factor for survival. SEAMLESS is the only Phase III study ongoing, which addresses this elderly frontline population who have either refused or are unfit for intensive chemotherapy treatment.

In support of the SEAMLESS study, we have reported promising [ph] survival data from 46 patients, who were treated with the same alternating drug regimen of sapacitabine and decitabine as in the experimental arm of SEAMLESS. Median overall survival was 8.5 months. Notably, in the approximately 72% of these patients who were aged 75 years or older, median overall survival was 9.4 months.

Recently, a pivotal file of decitabine as the same agent in older AMLs, the DACO-016 study, was published. In DACO-016, approximately 39% of patients randomized with decitabine were aged 75 years or older, and the median overall survival was 6.3 months.

During the quarter, we reported updated Phase II median survival data in patients with myelodysplastic syndromes, or MDS, who failed frontline treatment whether one or both hypomethylating agents, or HMAs, azacitidine and/or decitabine.

Patients were treated with sapacitabine as a single agent in this MDS study. The updated median survival data continued to be impressive and demonstrated that patients achieved nearly double the expected median survival reported in the literature for patients with MDS who are refractory to a single HMA. We expect to report primary endpoint data from this Phase II study later this year.

Turning to our solid tumor program. We are evaluating sapacitabine in combination with seliciclib, our CDK inhibitor, as an orally administered sequential dose escalation regimen in heavily treated patients with solid tumors in an ongoing Phase I trial.

Data presented on 38 patients at the 2013 American Association of Cancer Research Conference, or AACR, confirmed earlier evidence that the regimen achieved durable partial responses and prolonged stable disease in multiple cancer types, including breast, ovarian and pancreatic cancers, and in particular, in patients carrying BRCA mutations.

We believe these clinical findings 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 for sapacitabine in solid tumors could be targeted to keep cancer patients with HR defects such as BRCA.

BRCA-deficient cancers are considered by clinicians to be incurable. It is very encouraging that data is emerging that point toward the potential for sapacitabine as a pipeline within a drug.

While we have been concentrating our resources on the clinical development of sapacitabine, we have been opportunistic in terms of pursuing new approaches to develop the rest of our pipeline.

For example, it was recently announced that our second clinical development candidate, seliciclib, is to be evaluated in an investigator-initiated clinical study to treat patients with rheumatoid arthritis or RA. This clinical study is supported by an approximately $1.5 million grant from the United Kingdom's Medical Research Council or MRC.

The investigators who are leading this study believe that based on the extensive clinical data with seliciclib in solid tumors, seliciclib's mechanism of action and oral administration routes may be of benefit to patients with RA.

In our earlier pipeline, CYC065, our novel, orally available second-generation CDK inhibitor targeting CDKs 2, 5 and 9, is currently in IND-directed development, supported by grant funding from the United Kingdom's Biomedical Catalyst fund.

There is a strong preclinical rationale for the use of CYC065 as a targeted medicine in hematological indications. The grant allows for a translational biology effort to evaluate this and, in particular, in leukemias driven by the rearranged MLL or mixed lineage leukemia gene.

I will now turn the call over to Judy, who will provide further details on our most recent clinical data. Judy?

Judy H. Chiao

Thank you, Spiro. As Spiro mentioned, we continue to progress SEAMLESS. And with the study now over 40% enrolled, we expect to shortly convene the next Drug Safety Monitoring Board or DSMB meeting. The DSMB meets to consider safety after every 100 patients or so have been enrolled and followed.

We are also working on the operational aspects of expanding SEAMLESS outside U.S.A. to approximately double the number of enrolling sites in the study.

In addition to AML, we are exploring sapacitabine in older patients with intermediate-2 or high-risk myelodysplastic syndromes or MDS.

In April, we reported updated Phase II survival data in such MDS patients who failed frontline 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 and for this patient population.

The updated median overall survival for all 63 patients in the 3 arms is 259 days or approximately 9 months. The median overall survival for each arm was 291 days or approximately 10 months for Arm G, 290 days or approximately 10 months for Arm H and 227 days or approximately 8 months for Arm I. The 30-day mortality for all patients is 5%. Median number of cycles was 3. Approximately 43% of patients received 4 or more cycles. We expect to report the primary endpoint survival data from this MDS program later this year.

We anticipate announcing a registration-directed clinical development plan for sapacitabine in MDS after treatment failure of hypomethylating agents, following discussion and consultation with the FDA.

I'm now turning the call over to Paul. Paul?

Paul McBarron

Thank you very much, Judy. As you saw from today's press release regarding our consolidated financial statements, for the 3 months ended June 30, 2013, we reported a net income applicable to common shareholders of $1.4 million or $0.10 per basic and diluted share. This result includes $5.5 million of income received in April of this year for the sale of 4 Cyclacel romidepsin-related patents to Celgene and dismissal of all claims in a related patent litigation.

For the 3 months ended June 30, 2012, we reported a net loss applicable to common shareholders of $3.8 million or $0.45 per basic and diluted share.

Research and development expenses for the 3 months ended June 30, 2013, were $2.6 million compared to $1.7 million for the 3 months ended June 30, 2012. The increase of $0.9 million in expenses was primarily due to clinical trial and manufacturing costs.

Total general and administrative expenses for the second quarter of 2013 were $1.8 million as compared to $2.1 million for the second quarter of 2012. The decrease is primarily related to consultancy and other professional costs, including legal fees.

In May, we closed an underwritten offering of shares of our common stock, including shares of common stock that were issued pursuant to the underwriters' 30-day option to cover over-allotments, for net proceeds after underwriting discounts and other estimated fees payable by the company of approximately $19 million.

As of June 30, 2013, our cash and cash equivalents were $33.7 million compared to $16.4 million as of December 31, 2012. We expect our cash resources are sufficient to fund us beyond the planned completion of the SEAMLESS study.

Let me now turn the call back to Spiro. Spiro?

Spiro Rombotis

Thank you, Paul. Before opening the call for questions, I would like to briefly review our objectives for the next 12 months: continue enrollment in the SEAMLESS pivotal Phase III study of sapacitabine in AML in the United States and x U.S.; report upcoming DSMB reviews of SEAMLESS for safety every 100 patients and for futility when 212 events are pooled and have been observed; report primary endpoint Phase II sapacitabine survival data in MDS after treatment failure of HMAs; announce registration-directed clinical development plan for sapacitabine in MDS after treatment failure of HMAs; and report updated data from the Phase I study of sapacitabine and seliciclib in patients with advanced solid tumors, including BRCA carriers.

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 Mike King of JMP Securities.

Michael G. King - JMP Securities LLC, Research Division

I had a couple of questions. First of all, are you guys able to get any sense -- I know the data are blinded, but are you able to get any sense that patients in SEAMLESS are receiving the appropriate or expected number of cycles of both sapacitabine and decitabine [ph]?

Spiro Rombotis

When you say appropriate number of cycles, what do you mean exactly?

Michael G. King - JMP Securities LLC, Research Division

Well, just the expectation that patients will be receiving a certain number of alternating cycles of both drugs in line with your previous clinical trial experience. And do you see the experience in SEAMLESS mapping back to what you've seen in the Phase II studies?

Spiro Rombotis

I think we can say definitively that we have seen no differences in the pattern of administration between the randomized portion of SEAMLESS and the earlier Phase II study, which, as you recall, is called a pilot/median study. In fact, it appeared the 2 mirror each other quite closely in terms of number of cycles. As you correctly anticipated, we are blinded on all endpoints in the study, so it is simply impossible to say for sure if the number of cycle delivery would have any readout into the final result. But as far as any difference, the studies appear to be pretty evenly matched.

Michael G. King - JMP Securities LLC, Research Division

Okay. And then with regard to MDS, can you give us any sense of do you expect that you might be able to meet with the FDA for an end of Phase II discussion regarding registration-direct study design?

Spiro Rombotis

Sure. I think that is a question for Judy to best answer.

Judy H. Chiao

Mike, the way with FDA, as everybody knows, that one has to make the request and then the meeting has to be scheduled. So we are -- this is the pathway that we took for SEAMLESS. That's the same pathway that we will be taking for the sapacitabine MDS program. And I think that with the maturing of the primary endpoint of the randomized Phase II, as you know, the primary objective of which is to identify the dosing schedule, I think we will be ready to move forward to discuss with the agency.

Michael G. King - JMP Securities LLC, Research Division

Okay. Just -- not to pin you down on anything, but would we expect this to happen before the end of the year? Or could it -- is it something that's more realistically going to happen in early next year?

Judy H. Chiao

I don't think I can give you a preciseness on this [ph] because the timing of the meeting depends upon the agency's decisions.

Spiro Rombotis

I think to add to Judy's comments, Mike -- sorry, Mike, to add on Judy's comments, we will expect to have the -- we have the primary endpoint of this study reported before the year is out, which implies that we are going to be in the position to ask for the meeting. As Judy said, it's impossible to know when the agency will grant us a meeting. But certainly, our goal is to do this as soon as possible.

Michael G. King - JMP Securities LLC, Research Division

Just about [indiscernible] sapacitabine-selaciclib, [ph] obviously, in the BRCA mutant and homologous recombination space, broadly speaking, the PARP inhibitors are quite the rage and quite dominant there. So I don't know if you can you speak to your thoughts on clinical development strategy to be able to access patients that these [indiscernible] but would not necessarily be [indiscernible] by clinical trials of PARP inhibitors?

Spiro Rombotis

I think that's an excellent question. Let me address the commercial/strategic aspects of it and then Judy can come in with her thoughts on clinical development. I think you're right that the PARP inhibitor class is making a comeback in the area of solid tumors, including patients with BRCA mutations. There are several compounds in Phase II development and one has just entered Phase III in ovarian cancer. And in this space, we all very keen to see progress in what is up to now deemed to be incurable cancers. I will, however, point out that in our Phase I data reported at AACR, the predominant population that has benefited on the sapacitabine-seliciclib sequential regimen are PARP inhibitor-naive patients, which suggests some intriguing possibilities for testing patients who perhaps might not have seen PARP inhibitor patients. Perhaps the argument there is that if you do expose patients to PARP inhibitors, you might make them harder to treat afterwards with drugs like sapacitabine. So certainly, commercially, we'll be keen to monitor this space and see if PARP inhibitors cover the landscape, which seems unlikely given the very difficult nature of this disease, and then seek opportunities to position sapacitabine in populations where unmet medical need remains. Judy, what are your thoughts to Mike's questions?

Judy H. Chiao

I think again, Mike, it's a great question. And we have seen over the past couple of years of the ups and downs in our PARP inhibitors, and I think we will see eventually where this will play out with definitive answers from the randomized trials. I think there are 2 patient populations that are available to study for this combination right now. One is the patient haven't received the PARP inhibitor. I still believe this patient population exists unless the PARP inhibitor definitively was approved by the agency because you have the control arm of the randomized PARP inhibitor that did not get PARP inhibitors. So there will be available patients like that for our study. The second population, as you have -- already know, is patient who actually failed the PARP inhibitors. So I think that our clinical development programs, of course, we have to address both. And again, as Spiro has said, we are keen on watching out for the near future to see where does the PARP inhibitor stand after they have a "comeback."

Operator

[Operator Instructions] This concludes today's question-and-answer session. I would now like to turn the floor back over to Mr. Spiro Rombotis for any additional or closing remarks.

Spiro Rombotis

Thank you, operator. In closing, we have in place the resources to fund us beyond the expected completion of the SEAMLESS study. If SEAMLESS is successful, sapacitabine will address a major unmet need for patients as a frontline treatment with newly diagnosed AML, who are not candidates for intensive induction chemotherapy.

Based on the promising results of the Phase II study in second-line MDS following treatment failure or frontline hypomethylating agents, we plan to consult with the FDA and prepare a registration-directed clinical development plan for sapacitabine in this population. 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 teleconference. Please disconnect your line at this time and close your webcast browser, and have a wonderful evening.

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