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Cyclacel Pharmaceuticals, Inc. (NASDAQ:CYCC)

Q4 2013 Results Earnings Conference Call

March 25, 2014 4:30 PM ET

Executives

Bill Harris - Corporate Controller

Spiro Rombotis - President and CEO

Paul McBarron - Executive Vice President, Finance and COO

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

Analysts

Mike King - JMP Securities

Kim Lee - Janney Capital

Ed White - Laidlaw & Company

Operator

Good afternoon and welcome to Cyclacel Pharmaceuticals’ Fourth Quarter and Full Year 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

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 full-year ended December 31, 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 the company 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. During 2013, we continued to progress clinical development of sapacitabine in patients with acute myeloid leukemia or AML and myelodysplastic syndromes or MDS and solid tumors.

On today’s call, we will update you on the progress of SEAMLESS, our Phase 3 registration study of sapacitabine in its lead indication as a frontline treatment for elderly patients with AML. We will also provide certain information that underlines our planning for the second indication of sapacitabine as a treatment for older patients with MDS after failure of hypomethylating agents or HMAs.

Finally, we will recap key events of the fourth quarter of 2013 and discuss our financial position. First, we will comment on our SEAMLESS study in AML which has been conducted under a Special Protocol Assessment agreement with the U.S. FDA.

As you will recall, SEAMLESS is comparing sapacitabine and decitabine administered in alternating cycles versus decitabine alone as controlled and we enrolled approximately 485 patients. The primary endpoint is overall survival. As decitabine was not until recently commercially available in Europe, we have been enrolling just in the U.S.

As reported previously, enrollment of 39 American sites have been strong. We are currently approaching 60% and the fourth periodic safety review for the studies, independent Data Safety Monitoring Board or DSMB. Safety reviews are conducted every 100 patients with 60 days of follow-up. In all previous reviews, the DSMB found no safety or efficacy concerns and recommended that the study should continue as planned.

As indicated in today’s press release, we plan to treble the number of clinical centers participating in SEAMLESS and are pleased to report today initiation of our first European study sites. Following the recent European launch of decitabine which enables European investigators to participate in the SEAMLESS study, we conducted a feasibility assessment in which more than 100 European hospitals expressed interest in participating. After completing qualification, we expect to select and initiate approximately 80 of these sites.

This will accelerate the accrual pace of SEAMLESS as the total number of sites will triple to approximately 120 including existing U.S. sites. Based on the European expansion, we estimate completion of enrollment for SEAMLESS by the end of this year in top line data next year.

To recap, we expect free milestones for the SEAMLESS study in 2014, DSMB safety review of approximately 300 patients after 60 days of follow-up, DSMB futility analysis after 212 events or deaths and completion of enrollment.

Now let us turn to MDS. Following Phase 2 data reported at ASH 2013 demonstrating a near doubling of expected median survival of older patient with MDS after treatment failure of hypomethylating agents or HMAs, we are evaluating a randomized controlled trial or RCT of sapacitabine in this underserved patient population. We plan to disclose our plans for this second indication of sapacitabine later this year after obtaining inputs from U.S. and European clinical, regulatory and sophistical experts and the evaluation of feasibility.

For instance, we will have an opportunity to discuss our MDS plans at an upcoming European investigator meeting. Most of the European centers, we are now opening to accelerate SEAMLESS enrollment to also treat MDS patients. In addition, certain of these investigators have participated in pivotal studies with HMAs as front-line therapies for MDS.

We expect that the U.S. and EU clinical trial network of SEAMLESS would also run an RCT in MDS. We appreciate that there is a lot of investor and pharmaceutical company interest regarding our plans in high-risk MDS after HMA failure. In this respect, we would like to share with you certain aspects of our thinking regarding this indication.

There are several challenges and opportunities that need to be carefully considered before designing an RCT to increase the chance of a successful outcome. MDS is a form of blood cancer in which the bone marrow malfunctions. Scientifically, MDS is a clonal disease of ineffective hematopoiesis with cytopenias in peripheral blood and risk of progressing or transforming into AML.

Patients with high-risk MDS are treated with an HMA drug as front line. Typically, this is azacitidine, less frequently, it may be decitabine. In accordance with the azacitidine label, only 6% of patients achieve complete remission or CR from azacitidine, suggesting that CR is a poor surrogate endpoint for evaluating survival.

Depending on whether they respond or not to HMAs, nearly old patients eventually relapse or experience disease progressions despite HMA therapy. In healthy people, all patients responding to front-line therapy, the normal state for complete remission respectively is defined as immune cells, white blood cells or platelets at normal levels and blasts or cancer cells amounting to 5% or less of the bone marrow.

The World Health Organizations or WHO’s definition of MDS is blasts or cancer cells amounting to between 6% and 19% of the bone marrow. Blasts at or above 20% is defined as the boundary of leukemia or AML. In all the classification called the FAB or French-American-British System demarcated leukemia or AML as blasts at or above 30%. For this historical reason, the azacitidine label as front-line therapy for high-risk MDS is for blasts below 30%.

Now within these boundaries of MDS defined by blast level, it is desirable to further distinguish between two subgroups, low blast or 6% to 9% and high blasts or 10% to 19% at WHO or 10% to 30% for FAB. Different treatment strategies maybe beneficial for each of these two different subgroups.

Low blast patients typically have low blood counts. In other words, they have a low level of cancer cells but also low level of immunity. And aggressive myeloablative strategy may not be desirable for these patients. There are too few cancer cells to kill and the myeloablative treatment may result in increased infection by further worsening dangerously low levels of blood counts.

These patients are generally offered supportive care and the median survival tends to be around eight months. High-blast patients may have faster disease progression and the risk of transforming into AML and leukemia with median survival of three and half months if left untreated.

There is no effective therapy for high-blast patients after HMA failure. Median survival for high-blast patients is around five months, which is considerably shorter than low-blast patient. Based on the sapacitabine data reported at ASH, Cyclacel is considering an RCT to evaluate sapacitabine in high-risk MDS patients after HMA failures. The primary endpoint will be overall survival.

Our current population will be patients with high blasts of 10% or higher. As a reminder, in our ASH data reported three months ago, approximately two-thirds of the population have high blasts of 10% or higher. Their median survival at 9.7 months was comparable with the intent-to-treat population.

Please note that this median overall survival was measured on the time of registration in our study. It did not capture any additional time elapsed between withdrawal of the HMA front-line drug and registration of the sapacitabine study.

We will supply additional details with regard to our MDS study after completing consultations with experts and feasibility surveys. If the outcome of the MDS randomized study meets or exceed expectations, we intend to discuss the data with regulatory authorities.

Before I hand over to Paul, let me recap our three key highlights of the fourth quarter. The DSMB for SEAMLESS completed its third planned safety review of 212 patients, identified no safety or efficacy concerns and recommended that the study continue its plan without modification. The next plant safety review is forth coming.

As discussed earlier in the call, at ASH, we reported Phase 2 survival data of sapacitabine in high-risk MDS patients after HMA failures. We were awarded two U.S. patents covering sapacitabine use with HMAs and sapacitabine dosing regimens including that used in SEAMLESS. The patents extend market exclusivity of sapacitabine out to 2013.

I will now turn the call over to Paul.

Paul McBarron

Thank you, Spiro. Our cash position was $31.1 million at year end 2013 compared to $16.4 million at year end 2012. The increase is due to gross proceeds from our underwritten offering in May of $20.5 million, net proceeds of $8.9 million from the sales of common stock through our equity line and additionally $5.5 million from the sale to Celgene Corporation of romidepsin-related patents, a non-core program, offset by $18.2 million used in operating activities.

Revenue from the three months and year ended December 31, 2013 was $0.3 million and $1 million as compared to minimal revenue in the same period of 2012. The revenue is a grant award from the U.K. government, totaling $1.9 million to progress CYC065, our Cyclin Dependent Kinase or CDK inhibitor to the IND filing stage.

Research and development expenses increased to $2.5 million and $11.3 million respectively for the three months and year ended December 31, 2013 as compared to $2 million and $6.6 million for the same period of the previous year. The increases in 2013 were primarily due to enrollment activities of our SEAMLESS registration study, including drug manufacturing and other outsourced services.

General and administrative expenses for the three months and year ended December 31, 2013 were $1.8 million and $7.8 million as compared to $2.7 million and $8.6 million for the previous year. The decreases in 2013 were primarily due to lower legal and professional fees.

The research and development tax credit, which is cash we elect to receive annually from the U.K. tax authorities is $1.6 million for the year ended December 31, 2013, compared to $1.4 million for 2012. Although, we continued to focus the lion share of our resources from our Phase 3 AML program, we are selectively progressing other indications for sapacitabine and also our other drugs through investigated sponsored studies such as our seliciclib, CDK inhibitor in rheumatoid arthritis and non-diluted government grants such as our CYC065, CDK inhibitor and CYC140, a Polo-Like Kinase inhibitor in non-clinical programs.

To summarize, we have adequate capital to enroll the SEAMLESS Phase 3 study and to take us a few quarters beyond the projected data readout next year on SEAMLESS. Spiro?

Spiro Rombotis

Thank you, Paul. Operator, we are now ready to take questions.

Question-and-Answer Session

Operator

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

Mike King - JMP Securities

Hi, guys. Can you hear me?

Spiro Rombotis

We can hear you, Mike.

Mike King - JMP Securities

Hi. Thanks for taking the question. Just a couple of things that I wanted to ask you to talk about, one is maybe just talk a little bit about the whatever hurdles or the next steps with regard to actually enrolling patients in the European sites that was dependent upon the usual IRB stuff or whatever maybe required to actually enroll patients? Second is similar question about MDS, which is what are the gating factors or items are there before you can actually begin that protocol?

Spiro Rombotis

Let me take the first part of your question, which relates to the AML SEAMLESS study in Europe and then I will ask Judy to answer the second question which is the MDS program we discussed earlier. So the extremely good news is, we said in our prepared remarks is that we have now been through all Ethics Committee’s reviews.

We have received competent authority approval in more than a dozen countries and we’ve just, as I mentioned been opening our first sites. So we are now open for a moment in Europe, Mike. We don’t have anymore Ethics Committee IRB like processes to go through because that is open for enrollment.

Mike King - JMP Securities

Okay. So will you actually let us know when you’ve got patients in the study or can you say now that you have patients in the study in Europe?

Spiro Rombotis

Like I said, we have opened the sites. We will give an update during the next call when we’ll have precise numbers. But we expect the dramatic acceleration of the patient enrollment as well as the slope of the enrollment. In other words, we expect to have the majority of the sites coming on stream, probably within the next few weeks of Q1 and most of Q2.

Mike King - JMP Securities

Okay. Great. Thanks for adding that clarity.

Spiro Rombotis

Judy wants to take next question about what that both analysis we are undergoing to design an MDS study?

Dr. Judy Chiao

Mike, the type of consultation I would say is with variety of experts and the purpose of the consultation is to understand that drug approval of patient populations was the unmet medical needs with all the standard and available therapies including clinical files with such patients and what type of benefits essentially, improvement of survivals that is clinically relevant and justifiable and how many patients are there that could be approved such as studying in a certain period of time. And I think, once we have those informations then we could understand beyond the patient populations what type of designs, what are the control arms and the sample size and the benefits which I will think would be improving over survival is reasonable and clinically significant.

Mike King - JMP Securities

Okay. Thank you for those answers. I just wanted also to, have you opined if you would, Spiro and perhaps Judy can join in as well. But we've recently seen some readouts of other studies in the MDS space in particular, the recent negative trial on the part of Onconova, at least to the overall patient populations and what lessons might be learned there from your standpoint either as regards control arm overall survival expectations and/or the possibility of exploring targeted patient subgroups?

Spiro Rombotis

Mike, as you know, our policy for many-many years at Cyclacel, we do not comment about colleagues or competitor’s working in the same disease landscape. But looking that said in broad remarks about MDS, we also mentioned during our prepared section of remarks earlier this afternoon. I think it is important to understand the drug’s properties before one proposes to benefit either the whole population or one of the subgroups. As I mentioned before, a drug which has no myeloablative profile may be understandably directed by physicians to patients that have a low blood counts because these patients will be more likely to perhaps not be in an inferior position if they were to receive a drug one by definition that blast at low level.

The drug like sapacitabine, however, which is myeloablative may be best positioned. They have the maximum benefit in patients with blast arising who are risk-averse forming into leukemia and this means that we may not be terribly informed as your question put it or learn lessons necessarily by drawing upon very different mechanisms and very different affects on cancer cells.

I supposed that one could look at the control on outcomes of other studies in MDS and feel reasonably confident that within a few weeks, these numbers are similar to those numbers published in recent literature citations. We're of the view that these numbers are averages and as a result, it is dangerous to use them as hard comparative benchmarks as they are very likely to be a medley, an average on a weighted basis for patients with high blasts as we know have lower survival than the patients with low blasts.

So until such studies either get published in a peer review setting but we see them in ASCO for example in a few weeks, it’s going to be hard to make and form judgments as a way there are new lessons to be learned. We believe that for sapacitabine, our Phase 2 data reported in New Orleans last December during the ASH Conference speak very loudly. The drug affect is there for all patients but the numbers in terms of survival hold up also in the high blast subgroup. And that’s the reason we announced earlier today that we believe this is the best population to study sapacitabine. I'll just give you some context of our thinking and how we looked at other company's data and how that may or may not influence our plans.

Mike King - JMP Securities

Great. That’s helpful. Thanks.

Spiro Rombotis

Thank you.

Operator

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

Kim Lee - Janney Capital

Good afternoon. Can you hear me?

Spiro Rombotis

We can hear you, Kim. Good afternoon.

Kim Lee - Janney Capital

Great. Thanks. Just a quick question on, what are your thoughts on obtaining an SPA for the NVS study, would it makes sense for you to do trials and do you have plans of having those discussions with the FDA?

Spiro Rombotis

Okay. Well, we have a great pleasure of having a former FDA regulator in our midst, which of course is the Dr. Judy Chiao who many of you now actually serve the U.S. FDA reviewing and regulating oncology drugs. So let me ask her to give us a quick survey of what is the value of the spot and why the company seek one and then we can make a couple of remarks regarding whether this is applicable in the case of our MDS program. Judy?

Dr. Judy Chiao

Thank you, Spiro. The Special Protocol Assessment process, I think is a very good program. But in general, that I would think that one needs to go to the agency with sometimes challenging questions and we did that for our SEAMLESS study. As you know that, a particular challenging question for the SEAMLESS trial is the control of decitabine.

And the second thing of course, if you have a controversial end point, primary end point of the study that will warrant a discussions. So, I think that from the MDS program, it depends really on what kind of control arms, whether that will cause any controversial that will warrant such a discussion with agencies then I think, that would determine whether if one should pursue this spots.

Regarding the primary endpoint, I don’t think there is going to be too much debate on what the right endpoint should be in such a study. I personally would favor [over] survival because that to most of the patients, that’s probably the most meaningful endpoint that to assess the clinical relevance. I do not think that there is any debate on choosing such an endpoint from the regulatory point of view, so that is not something I will view as controversial.

Spiro Rombotis

Thank you, Judy. Perhaps Kim, one more point to add is that there are some important differences between AML and MDS with regard to your well placed question about the need for a SPA. AML disease, but we haven’t had any of the drug reach the market for more than 45 years. They are off-label use of approved drugs for other indications in AML. And that creates the controversy that Judy explained where it is probably useful for a sponsor to spend the six months of effort to get a SPA with the agency, so that the goalpost do not get moved.

Or at least, one has the comfort to know that despite in that case of AML, the decitabine control remaining off the market for the AML indication, that we have a SPA saying that the agency has agreed after their failure of decitabine to beat control in Phase 3 trial to allow us to use that as our control in the AML study.

Now MDS is a new disease. There is no 45-year old history. In fact, up until a decade or even less, maybe five years ago before HMAs became available, we didn’t even know how many patients had MDS. The implications of that is that in the new indications, where benchmarks are not hard and fast, there is a paucity of published source literature, obtaining a SPA in the absence of a controversy may limit once options to argue for clinical benefit in the way as a new disease.

So for these reasons, we view that what happened in the AML does not predict what may happen in MDS. But as we said earlier, until we get our study design finalized for our consultations, we’re not going to give a little more color. But I think I’ve given you at least the sense of where the value of the SPA is clear and where perhaps the expenditure of six months maybe less unclear.

Kim Lee - Janney Capital

Yes. It does. Great. Thank you for that clarity.

Spiro Rombotis

Thank you.

Operator

(Operator Instructions) Our next question comes from the line of Ed White with Laidlaw & Company.

Ed White - Laidlaw & Company

Hi. Good evening, everyone.

Spiro Rombotis

Good evening, Ed.

Ed White - Laidlaw & Company

So just a few timing questions for you, you had said that the time is approaching for the next DSMB review. Is that going to be measured in weeks or months and also that the time to the futility data?

Spiro Rombotis

Thank you, Ed. I think we can answer the first one with a bit more confidence because it is a question of patients and a 60-day follow-up clock and is probably weeks. In other words, we expect to cross the required threshold very shortly. The futility analysis is based on events, which in this trial given the primary endpoint of survival is deaths. And it is a bit difficult to project deaths although we feel it is going to be very likely a late 2014 events, probably in the second half of this year as our current estimate. Based on our current level of events, which we know and the fact that now that we have opened our first European sites, we expect a large influx of patients which will certainly cluster the events in the second half of the year.

You have to recall that the observation period for the study is around six to seven months. So if you’re opening studies -- centers, excuse me, in the first quarter and throughout the second quarter, it’s clear that that six to seven-month window will be fulfilled by the end of the year. So we think this is probably the right timeframe to project. As we get a bit closer probably our next earnings call, we will give a bit more guidance but that is our current guestimate.

Ed White - Laidlaw & Company

Okay. Great, thank you. And so on SEAMLESS, you continue to say that you expect to be fully enrolled by year end, top-line data though you are just saying next year, could you be a little bit more specific on that, may be early, late or a quarter?

Spiro Rombotis

We cannot give quarter granularities. It’s too early given the fact that we have a mid-stream trebling over the number of centers. We just don’t know what the slope of the normal curve will be in a precise way. We do know as when they dramatically increase that is in the steeper holdings, we’re our trebling the number of sites. We know that as I said that the observation period when the required number of patients enrolled is driven by the required number of events which is around 424.

We expect that this will happen towards the end of this year i.e. enrollment and then within the six to seven months that follow the last patient in, we should have much of the data granulized. So we think that middle of the next year is a reasonable guestimate but again we will provide more granularity as in the next and following quarters, we will give more precise information on the factual basis of the enrollment slope in particular because of the European expansion.

Ed White - Laidlaw & Company

Okay, great. Thank you. And my last question, I just want to address the MDS study, do you expect to start the MDS study before fully enrolling SEAMLESS and then also do you think you will need two Phase 3 studies in MDS?

Spiro Rombotis

I will take the first question. Judy, who is the firm regulator will take the second question. I think you are raising an excellent point. Are we ready to begin MDS before SEAMLESS completes enrollment, the answer is yes. However, there may be a reason to make us a bit more cautious and that is that if a patient who drops off the AML study, SEAMLESS and has been randomized to the control arm which is decitabine, may possibly be eligible for enrollment in an MDS study.

Remember they have failed in HMA. So if the exposure of this patient for sapacitabine in the second trial which is the MDS, makes them little longer that clearly is adverse to our purpose in SEAMLESS. So there are some complications that we need to carefully think about but for all types of purposes we will be ready in 2014 to begin, assuming that SEAMLESS enrollment goes as expected. Judy, would you like to take the second question.

Dr. Judy Chiao

Yes. Thank you, Spiro. It is the FDA’s desire to encourage sponsors to conduct two studies. However, that they could agree to conduct one study if the study is large enough and well conducted such as the case with the SEAMLESS. So I think that although two studies are desirable, one large study well conducted certainly have sufficed in other company’s registration trial for the base and support proof.

Spiro Rombotis

And Judy, just to give more color to Ed’s question, correct me if I am wrong but the two studies don’t have to be in the same indication. Is that correct?

Dr. Judy Chiao

Well, I think that depends on what kind of approval that one gets. I tried to reflect it back, in general, it would be for to converting accelerated approval to full approval, I try to recall over 10 years ago that the indications might not need to be the same.

Spiro Rombotis

Edward, are you able to hear that?

Operator

And we have reached our allotted time for questions. And now I’d like to turn the floor back over to management for any additional or closing remarks.

Spiro Rombotis

Thank you, operator and thank you all for attending our conference call. We appreciate your interest in Cyclacel and also your support. We look forward to update you on our forthcoming earnings call. Operator, at this time, please end the call.

Operator

Thank you. This concludes today’s conference call. You may now disconnect.

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