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Cyclacel Pharmaceuticals, Inc. (NASDAQ:CYCC)

Q3 2013 Earnings Conference Call

November 12, 2013 16:30 ET

Executives

Bill Harris - Corporate Controller

Spiro Rombotis - President and Chief Executive Officer

Paul McBarron - Executive Vice President, Finance and Chief Operating Officer

Dr. Judy Chiao - Vice President, Clinical Development and Regulatory Affairs

Analysts

Mike King - JMP Securities

Kim Lee - Janney Capital

Operator

Good afternoon and welcome to Cyclacel Pharmaceuticals’ Third Quarter 2013 Earnings Conference Call and Webcast. Today’s call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. (Operator Instructions)

It is now my pleasure to turn the floor over to Bill Harris, Cyclacel’s Corporate Controller. Sir, you may begin.

Bill Harris - Corporate Controller

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 third quarter ended September 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 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, our President and CEO.

Spiro Rombotis - President and Chief Executive Officer

Thank you, Bill and good afternoon everyone. It is a pleasure to update you this afternoon on our corporate progress and financial results for the third quarter of 2013. Our remarks today will mainly address our progress with oral sapacitabine capsules, our lead product candidates. Sapacitabine is in late and mid stage clinical developments for hematological malignancies, including acute myeloid leukemia, or AML and myelodysplastic syndromes or MDS, an early clinical development for patients with solid tumors and in particular, those carrying germline BRCA or gBRCA mutations.

In AML, sapacitabine is being evaluated in SEAMLESS, our pivotal Phase 3 study as frontline treatments in elderly patients with AML who are unfit or have refused standard induction chemotherapy. We have been executing on our sapacitabine development plan by progressing enrollment in SEAMLESS, which is now close to the 50% enrollment mark with approximately 39 sites open, all of which are located in the U.S. In parallel, early in the quarter, we appointed an experienced contract research organization, or CRO to help us expand the study into Europe. At this point, we have nearly completed feasibility assessments and are excited about the level of interest we have found among European hematologists. Based on the number of interested investigators who signed confidentiality agreements and responded to our feasibility survey, we expect to at least double the total number our sites enrolling patients in SEAMLESS. We have approximately $34.5 million on the balance sheet and no debt. We expect our existing cash is sufficient to complete and readout the SEAMLESS study.

Turning to MDS, early in the year we reported that patients in our Phase 2 MDS study who are refractory to biotherapies achieved nearly double the expected medium overall survival reported in the literature for MDS patients who are refractory to either frontline azacitidine or decitabine. As reported last week primary clinical outcomes from our Phase 2 MDS study will be reported at ASH 2013 in early December with the aim of selecting a dosing schedule for Phase 3. As the ASH data is subject to embargo, we will have more to say at a later time regarding our future plans for MDS. We are very excited about the prospects of sapacitabine in terms of providing a treatment option to these underserved MDS patients.

Turning to intellectual property, we recently announced the grant of two U.S. patents further enhancing sapacitabine’s exclusivity. The patents claim the use of sapacitabine with DNA methyltransferase inhibitors including azacitidine and decitabine and superbly the dosing regimen used in SEAMLESS which is the one we intend to use for marketing. Our patents lifecycle strategy for sapacitabine now extends to 2030 which could have long-term commercial value implications for our stockholders. Drugs with long patent life cycles enable pharmaceutical companies to amortize development costs over expenditures and thus help fund additional line extensions as combination therapies. In addition to AML and MDS, we continued to enroll in our Phase 1 solid tumor study evaluating sapacitabine in combination with seliciclib, our CDK inhibitor as in all the administered sequential dose escalation regimen in heavily retreated patients with solid tumors.

Data on 38 patients presented at the 2013 AACR conference confirms earlier evidence that the regimen achieved durable PRs and prolonged stable disease in the multiple cancer types including breast, ovarian and pancreatic cancers and in particular in patients carrying gBRCA mutations. It is confirmed this finding suggests a clinical development strategy to treat cancer patients with homologous recombination defects such as gBRCA. gBRCA-deficient cancers are considered by physicians to be incurable. While we have been concentrating our resources on the clinical development of sapacitabine, we have been opportunistic in terms of pursuing the rest of our pipeline. Notably, CYC065, our internally discovered, orally available second generation CDK inhibitor targeting CDKs 2, 5, and 9 will shortly complete IND's rapid development supported by grants of approximately $1.9 million from the UK government’s Biomedical Catalyst funds. There is a strong preclinical rationale for the use of 065 as a targeted medicine in hematological indications. The drug allows for a translational biology effort. To evaluate this, in particular, in leukemias driven by the rear-range 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?

Dr. Judy Chiao - Vice President, Clinical Development and Regulatory Affairs

Thank you, Spiro. In addition to our progress with enrollment in SEAMLESS that Spiro outlined, we will convene the third meeting of the SEAMLESS independent Data Safety Monitoring Board, DSMB. The upcoming DSMB meeting will conduct a safety review following the randomization of approximately 200 patients with at least 50 days of follow-up. The study design provides with two additional DSMB safety reviews and a separate one for futility. As a reminder, the SEAMLESS study is a two arm design comparing sapacitabine, alternating with decitabine versus decitabine alone as control. We have reported promising survival data from a pilot and the leading phase of the Phase 3 study of 46 patients who were treated with the same regimen with the experiment arm of SEAMLESS. So eight weeks death rate of these 46 patients was 13%. Median overall survival was 8.5 months. Notably, in the approximately 72% of these patients who were aged 75 years or older, median survival was 9.4 months.

In DACO-016, a pivotal study of decitabine versus treatment choice and the basis for decitabine’s European approval in AML, the eight weeks death rate for decitabine was 20%. In DACO-016, approximately 38% of patients randomized to decitabine were aged 75 or older and their median survival was about 6.3 months. In addition to AML, we are exploring sapacitabine in older patients with intermediate to or high risk myelodysplastic syndromes, or MDS. As Spiro mentioned, researchers will present new Phase 2 data including the outcomes of the primary endpoint of 1 year survival at ASH this December. In this ongoing Phase 2 study, we are enrolling MDS patients who failed frontline treatment with either one or both hypomethylating agents, azacitidine and/or decitabine. Unlike SEAMLESS, these patients receive sapacitabine as a single agent and are randomized to one of the three sapacitabine schedules with the goal of selecting those who scheduled for Phase 3.

As previously reported, median overall survival for all 63 patients in the three arms is 8.6 months. The median overall survival for each arm was 9.7 months for Arm G, 9.7 for Arm H and 7.6 months for Arm I. The 30-day mortality for all patients in each arm is 5%. At baseline, 40 patients or 63% has 10% to 19% blood in the bone marrow. Median number of cycles was three and approximately 48% of patients received four or more cycles. We will provide more details from this study at ASH and look forward to announcing our Phase 3 development plans in due course after discussion and consultation with the FDA.

I will now turn the call over to Paul.

Paul McBarron - Executive Vice President, Finance and Chief Operating Officer

Thank you, Judy. As you saw from today’s press release regarding our consolidated financial statements for the three months ended September 30, 2013, we reported a net income applicable to common stockholders of $5.7 million, or $0.32 per basic and diluted share. This result includes $2.6 million of expense incurred related to clinical trial drug supply. For the three months ended September 30, 2012, we reported a net loss applicable to common shareholders of $2.1 million, or $0.25 per basic and diluted share.

Research and development expenses for the three months ended September 30, 2013 were $4.6 million compared to $1.5 million for the three months ended September 30, 2012. The increase of $3.1 million in expenses was primarily due to clinical trial and manufacturing costs, including $2.6 million of clinical trial drug supply for our Phase 3 SEAMLESS trial, which was expensed in full during the quarter when purchased although the drug supply will be used at the coming months as patients are accrued on to the study.

Total general and administrative expenses for the third quarter of 2013 were $1.5 million as compared to $2 million for the third quarter of 2012, with a decrease primarily related to consultancy and other professional costs, including legal fees.

As of September 30, 2013, our cash and cash equivalents were $34.5 million compared to $16.4 million as of December 31, 2012. And 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 over to Spiro. Spiro?

Spiro Rombotis - President and Chief Executive Officer

Thank you, Paul. Before opening the call for questions, I would like to briefly review our objectives for the next 12 months: continue U.S. enrollment and expand into Europe the SEAMLESS Phase 3 study of sapacitabine in AML; report outcomes from upcoming DSMB periodic safety reviews of SEAMLESS every 100 patients and futility when 212 pooled events have been observed; report at ASH 2013 the primary endpoints of the Phase 2 sapacitabine study in MDS after treatment failure of hypomethylating agents; announce registration-directed clinical development plan for sapacitabine in MDS after treatment failure of hypomethylating agents; report updated data from the Phase 1 study of sapacitabine and seliciclib in patients with advanced solid tumors, including gBRCA carriers; and advanced selective pipeline programs.

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

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Mike King of JMP Securities.

Mike King - JMP Securities

Good afternoon guys. Thanks for taking the question. Couple of questions to start related to the sapacitabine in MDS can you just tell us how much more mature will the data be when we see it at ASH relative to the data cut off?

Spiro Rombotis

Good afternoon Mike, are you asking a question as far as medium overall survival?

Mike King - JMP Securities

Yes, is there going to be any – are we at the median or would those numbers change at all and will there be any additional information either on the efficacy or safety endpoints?

Spiro Rombotis

Judy, will answer your that first question.

Dr. Judy Chiao

Well, I think that the data will be updated prior to the ASH presentations. And I think that given that we have sufficient follow-up or there will be some changes, but there will not be I expected to have different changes that’s where the question is.

Mike King - JMP Securities

Okay, so what you got is basically what you are saying?

Spiro Rombotis

Yes.

Mike King - JMP Securities

Okay. And then could you put that into context for us in both how we should think about the different uplift data for the different arms as well as how do we relate it to what would be expected from a hypomethylating agent in a similar setting?

Spiro Rombotis

Right, we can answer that question and much of this is in the press release. Let me just remind everybody that we are restricted by ASH embargo rules to only discuss what’s within the four corners of the abstract.

Mike King - JMP Securities

Yes.

Spiro Rombotis

We cannot make any comments out of that text, but we run the risk of having the abstract reformed, which is not what we want. So the first question – the first answer to your question Mike is to put this in context, we view the median overall survival as an important data point, because in this study we count the months or weeks of median overall survival from the time the patient was registered on the sapacitabine study. We do not count the number of weeks or months that may have elapsed from the time that they were withdrawn our frontline therapy until they present for registration on study. So we would look at that approximately 9.7 months for example on Arm G that Judy referenced, that could be longer depending on how many weeks or months passed if the patients failed frontline therapy. Second question you asked is how do we relate to published evidence? There is a small number of published data one happened when people failed frontline therapy drugs, both of these studies are cited in our press release and both report on what a single refractory patients. In other words, what happens to people when they fail either azacitidine as a single agent or decitabine as a single agent, then these numbers are 5.6 months for azacitidine singular refractory or 4.3 months median overall survival for decitabine single refractory.

In our population of patients as you may have seen in the presentation made earlier this year, we have people with double and triple refractory disease who failed not only azacitidine, but also decitabine at the same time and some have also failed lenalidomide. So we are treating the sicker population potentially with a much worst prognosis, but certainly in the absence of randomized studies, it’s hard to extrapolate from these historic comparisons, but we think the data is very encouraging and so do the key opinion leaders who participated in this study and what can be consulted.

Mike King - JMP Securities

Okay, thank you for that color. Also can you talk about, well let me – excuse me we have a question on SEAMLESS, will you make public the opening of the first European site or will you just give us an update on your next quarterly call regarding enrollment and opening of sites in Europe?

Spiro Rombotis

Yes, it would become later as it’s been our practice service on years now. We discussed our progress during the earnings call one of the unknowns in Europe is that we do not yet have color on who would be the high producer sites. We are very excited about the very large number of investigators that have responded favorably to our feasibility survey and have signed CDA, secrecy agreements, but this doesn’t mean that we know who will the higher performance be and therefore be able to give a lot more color, but certainly at the next earnings call, I would expect, Michael can give much more information about the project of European expansion.

Mike King - JMP Securities

Okay, great. I will turn back in the queue. Thank you.

Spiro Rombotis

Thank you, Mike.

Operator

Our next question comes from the line of Kim Lee of Janney Capital.

Kim Lee - Janney Capital

Good afternoon. Just some follow-up questions here. Can you tell us what has been the feedback from the European investigators with regards to sapacitabine in AML kind of what have you been hearing from these investigators?

Spiro Rombotis

Good afternoon Kim. Thank you for your question. I think I would try to summarize what we are learning from feasibility survey results, which represents input from a formal process that our CRO colleagues have engaged to give us a quantitative rigorous mapping of the landscape as far as interest of the study. Of course, during the ASH conference, a few weeks from now, in New Orleans, we will meet many of these investigators to get a personal view. So at this point, we are still referring to this feasibility survey outcome. It appears that the majority of scientists still using chemotherapy, most likely in low dose to treat these older patients, but many positions filled in into the common section of the survey, comments over the tune of – we need new therapies for these patients or there are really no good options available to us we are interested in the study.

So the impression we are getting is that there is a much high higher awareness among European investigators over the advances made in the United States, because as we know up to know we have just enrolled this study in the U.S. and they clearly wish to participate. This comes across a large number of countries. So it’s not driven by any one country, any one group, which is very encouraging to us. I even use this out. And more importantly, people are reacting to the excellent tolerability and oral administration of the drug as an important feature in their survey feedback why they wish to participate in the study. Hope, this gives you a bit of color on what we are hearing.

Kim Lee - Janney Capital

Yes, that’s very helpful. And just as a follow up here, how many Centers of Excellence would you estimate in Europe for AML and MDS?

Spiro Rombotis

Yes. We are not going to give precise numbers of our survey, that is sensitive information, but I would estimate that they are in the range of 100, 150 who treat AML patients. As you know, Europe has a smaller geography than the United States. Healthcare of this type is provided in typically government-subsidized healthcare systems and tends to be centralized as you pointed out in Centers of Excellence. So it is more compact geographically and based on a strong referral pattern, but we will learn more as we rollout the study and grow through the study initiation process and hopefully at the next earnings call, can give you a bit more color that what we are saying, but unlike the U.S., this is clearly driven by KOLs and people that work with them in regional hospitals and see patients to the main Centers of Excellence.

Kim Lee - Janney Capital

Okay, thanks for that clarity. And one final question with regards to other clinical – I mean, I am sorry, other pipeline candidates, what indications will you likely be targeting going forward?

Spiro Rombotis

Right. As I said, the emerging program was still in Phase 1 is with sapacitabine in combination with our owned only available CDK inhibitor, seliciclib. Some of the stockholders in the company may remember this drug. We completed a large randomized double-blinded placebo-controlled Phase 2 trial of seliciclib in advanced non-small-cell lung cancer, but we saw an early promising improvement in overall survival, but lack of the information to decide which patients to target rendering that a poor investment decision to go forward, which proved to be the right decision as the landscape in lung cancer is changing because of advances mainly in the area of immuno-oncology. This doesn’t mean that we forgot about that drug.

So when the investigator at the Dana-Farber Cancer Center approached us to collaborate in exploring an all oral combination of that drug with seliciclib and our sapacitabine agent who were quite responsive. So the result of this collaboration and the hard work of Cyclacel and the collaborating investigators, Dana-Farber in Boston, have produced a very encouraging signal in Phase 1 in a variety of patients with solid tumors, primarily in breast and ovarian, gynecological cancers and possibly in pancreatic. Subsequent to the study reporting interim results, the investigators found that the majority of patients were experienced durable clinical benefit, especially with PRs, were those that carry this genetic mutation called BRCA or BRCA in their germline. So in light of recent advances in our understanding of the biology of these cancers, we think it is possible that if you reproduce this data, we may develop the targeted approach to develop this oral combination or perhaps even sapacitabine on its own as a targeted therapy for patients with gBRCA mutations.

The other part of our pipeline that we talked about in our press release and preliminary remarks is our novel second generation CDK inhibitor, CYC065, which has been funded by UK government grant. So in a way the stockholder has benefited by the magnanimity of the UK taxpayer in supporting competitive application process which resulted in this £1.9 million government grant, which is now being invested in moving this drug into Phase 1 submission. This is the IND submission that will happen next year. The preclinical data for that compound strongly suggests that we should go on to leukemias, in particular, patients would have the MLL subtype of leukemia, what it stands for mixed lineage leukemia, a type of disease of blood cancer found across different subtypes of leukemia. It is found as a subtype of AML, a subtype of acute lymphocytic leukemia and other blood cancers. So this could be very exciting, because we understand a bit more about the biology of this sub-disease if I can call it that way, MLL, which hopefully illuminates early clinical development of that drug. So in summary both in solid tumors and in certain targeted subtypes of leukemia, there appear to be a promise with both sapacitabine, seliciclib as well as CYC065.

Kim Lee - Janney Capital

Great. And can you remind us what’s the IP on that drug, CYC?

Spiro Rombotis

CYC065 has long intellectual property protection to the end of the next decade. It was internally discovered and selected from a large library of cytic analogues. The primary criteria for its selection that is reflected in the long patent life was to improve on the properties of seliciclib, primarily its metabolic stability, but also have high potency both of which we achieved. So we expect if we succeed in bringing this to the clinic and it shows the promise and they don’t have major toxicology issues that this could provide possibly a source of long-term shareholder value in light of this long patent protection.

Kim Lee - Janney Capital

Great. Thanks for the clarity.

Spiro Rombotis

Thank you again.

Operator

At this time, there are no further questions. I would like to turn the floor back over to Mr. Spiro Rombotis for any additional or closing remarks.

Spiro Rombotis - President and Chief Executive Officer

Thank you, operator. In closing, the clinical data reported on sapacitabine is demonstrating its potential as the pipeline within the drug. And together with our earlier phase programs represents outstanding growth opportunities for Cyclacel. We have made solid progress with enrolling SEAMLESS for AML are reporting very promising data in MDS and are evaluating sapacitabine as a targeted therapy in gBRACA carriers with solid tumors. 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 or have refused intensive induction chemotherapy. And we have the resources in place to take us beyond the SEAMLESS Phase 3 study. Sapacitabine as a second line treatment for higher risk MDS patients following failure of frontline agents is another outstanding opportunity to create shareholder value and address a much bigger population and market opportunity than AML. 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 and close your webcast browser at this time and have a wonderful day.

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