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Cyclacel Pharmaceuticals, Inc. (NASDAQ:CYCC)

Q1 2014 Earnings Conference Call

May 13, 2014 04:30 p.m. 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

Ed White – Laidlaw & Company

Kim Lee – Janney Capital

Operator

Good afternoon and welcome to Cyclacel Pharmaceuticals’ First Quarter 2014 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 first quarter ended March 31, 2014.

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 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 Forms, 10-Q and 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. In the short time, since our yearend results call, we have been expanding seamless our phase III study of oral sapacitabine capsules as first-line therapy in elderly patient with newly diagnosed Acute Myeloid Leukemia or AML, who are not candidates for standard intensive therapy into Europe. And we are pleased to report that we have enrolled our first European patients.

Based on our normal forecast of European site joining U.S. site and recent US and European investigator meetings, we expect to complete SEAMLESS enrolment around the end of 2014 with top-line data read out in the second half of 2015. As indicated previously, SEAMLESS is funded to completion. In addition to progress with SEAMLESS, we are preparing the ground for other key milestones for the future.

We have recently appointed external experts to advise us on the complex tasks of compiling a New Drug Application or NDA in the United States and the Marketing Authorization Application or MAA in Europe.

The net proceeds from April underwritten offering will be allocated to a Randomized Controlled Trial or RCT in myelodysplastic syndromes or MDS which is our second proposed indication for sapacitabine after AML. Following the rates, our per-forma cash resources stand at approximately $40 million.

With the first European patients now on study, it is worthwhile to remind you that we have achieved SEAMLESS enrolment on approximately 60% for mostly US clinical sites. Henceforth, we expect an acceleration of enrolment as we open the study in additional European sites. In total, we expect that approximately 100 to as many as 120 sites will enrol patients in SEAMLESS. Around two-thirds of these sites will be in Europe and the rest in the US. However, in terms of final patient numbers, we expect the majority of SEAMLESS patients to be from the US.

In addition to completion of enrolment, our other forthcoming milestones for SEAMLESS are the next Data Safety Monitoring Board or DSMB periodic safety review and separately the interim analysis futility.

The safety review is scheduled to occur when approximately 300 patients are enrolled with 60 days of follow-up. We expect that this will occur soon and we will make an announcement once the DSMB has met and advised us of their accommodations. The interim analysis [audio gap] 212 events or deaths are recorded.

It is difficult to forecast with accuracy an event-based milestone. Our rough estimate is that this will likely occur in the second half of 2014 or early 2015 o close to the completion of enrollment. Again, once advised with the DSMB, we will announce the outcome on their review.

As we get closer to achieving key milestones of SEAMLESS, it may be helpful to review the study design and it's rational. As a reminder, we are evaluating a sapacitabine regiment as front line treatment in elderly patients with newly diagnosed AML who are not candidates for or have refused intensive induction therapy. The primary end-point is overall survival.

SEAMLESS is being conducted under a special protocol assessment agreement with the U.S. FDA and it's comparing a sequential regimen of sapacitabine administered in alternating cycles with decitabin versus decitabin alone.

The rational for the SEAMLESS randomized design arose from two previous studies in the same patient population. The first was our randomized phase II study of sapacitabine alone given every month which was published in the Lancet Oncology.

The second study was the single-arm, pilot lead-in, part of SEAMLESS testing the same regiment of sapacitabine alternating with the decitabin which means each target is given one month time (audio gap) at the ASH 2012 conference. This is the same regiment that we are testing in the randomized part of SEAMLESS.

Data from the studies suggest that sapacitabine is active in AML as a single agent and the treatment regimen of sapacitabine administered in alternating cycles with the sapacitabine has sufficient anti-leukemic activity for further evaluation in the phase III settings. The alternating regimen resulted in nearly half the mortality at 60 days than that previously reported with the decitabin alone given every month. Sapacitabine and the decitabin may target different populations of leukaemia cells because the mechanism of actions are different.

With data read out of SEAMLESS anticipated in about a year or so, we have started preparations for compiling potential NDA and MAA submissions to regulators in the U.S. and Europe once data is online. To this end, we have appointed external experts to advise us on these complex tasks.

As these submissions include both clinical and non-clinical biopharmaceutical and manufacturing sections, it is worthwhile to note that we have qualified, and have been collaborating for quite some time with multiple third-party manufacturers supplying us with drug substance or ADI and drug product or finished form capsules.

During our previous financial results call in March, we provided some context on how we are approaching the development of sapacitabine for the second indication of MDS after failure of front line agents. We discussed the complexity of the disease, the similarities and differences compared to AML, therefore the challenge is of treating MDS patients and our phase II results to date.

As we mentioned previously, we are in discussions with key opinion leaders and other experts regarding the design of our RCT in MDS. We will broadly describe our approach in MDS at the end of this month at a company event taking place in Chicago during the ASCO 2014 meeting. Specifically, we will be holding an institutional investor and analyst reception in which a globally regarded key opinion leader will discuss the unmet medical needs of patients with MDS after frontline agent failure and company representatives will discuss our plans for an RCT in MDS. As mentioned the net proceeds from our April raise and other company funds will be used to conduct the study.

In addition to our clinical and regulatory progress, we have been working to broaden sapacitabine exclusivity and recently announced two Japanese patent grants which further enhance our sapacitabine intellectual property estate in one of the world's top pharmaceutical markets.

One patent claims novel pharmaceutical formulations of sapacitabine and the other claims methods of treating cancer comprising sapacitabine in combination with certain histone deacetylase or HDAC inhibitors. Equivalent patents have been granted in the United States and other countries.

Before turning over the call to Paul, let me summarize our key upcoming milestones. Completion of European rollout of SEAMLESS to approximately 80 new clinical sites. DSMB safety review of approximately 300 patients enrolled in SEAMLESS with 60 days follow-up.

The DSMB review of SEAMLESS data futility once 212 events have been observed. Completion of SEAMLESS enrollment disclosure of our approach for a randomized controlled trail of sapacitabine in MDS after failure of frontline agents. Paul?

Paul McBarron

Thank you, Spiro. As you saw in today's press release regarding our consolidated financial statements for the first quarter 2014, our cash position was $28.2 million as of March 31, 2014 compared to $31.1 million at the end of 2013. This excludes approximately 9.3 million in net proceeds with the underwritten equity offering in April with pro forma cash of approximately $40 million excluding any funds to be drawn down from our spot equity line, we are well funded to complete the SEAMLESS study and also conduct the proposed MDS RCT.

We estimate that the remaining cost to complete SEAMLESS is less than $12 million. We have managed the U.S. sites in SEAMLESS through our own clinical research team. We are expanding to European sites with the help of the CRO who have also helped us with National Regulatory Submissions for the study.

Revenue for the three months ended March 31, 2014 was $0.4 million compared to $0.2 million for the same period of the previous year. The revenue is related to a grant award from the UK government totaling $1.9 million (inaudible) research and development expenses increased to $4.3 million for the three months ended March 31, 2014 compared to $1.6 million for the same period in the previous year. The increase was primarily due to study and site start-up costs and drug supply costs associated with the expansion of the SEAMLESS registration study into Europe.

It is worth highlighting the research and development tax credit which is cash we elect to receive annually from the UK Tax Authorities. We can claim the credit for eligible R&D expenditure which includes our clinical studies.

For the three months ended March 31, 2014, the credit was $0.6 million compared to $0.3 million in 2013. However due to changes in tax legislation, we anticipate based on our budgeted spend that the annual R&D tax credit and the amount of cash we will receive going forward will be in the range of $3 million to $4 million.

General and administrative expenses for the three months ended March 31, 2014 decreased to $1.5 million compared to $2.7 million for the same period in 2013. The decrease was primarily due to higher legal and professional fees during the three months ended March 31, 2013 related to the litigation that was ultimately dismissed in April 2013, with the sale of four Cyclacel owned patents to Celgene for $5.5 million.

To summarize, we have sufficient funds to expand SEAMLESS into Europe. Complete enrolment and take us beyond the projected top line data readout in second half of next year. Our records remain focused on our AML registration study and advancing our second indication in MDS. In parallel we are selectively progressing other programs either supported by approximately $5.5 million of government grants such as CYC6065 our novel CDK inhibitor that has completed INDA naming studies for through investigated sponsored studies such as the planned study of seliciclib in rheumatoid arthritis. Spiro?

Spiro Rombotis

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

Question-and-Answer Session

Operator

Thank you. The floor is now open for question. [Operator Instruction] Our first question comes from the line of Ed White of Laidlaw & Company.

Ed White - Laidlaw & Company

Hi, good evening. So, just a couple of questions for you. As far as the raise that you did do you have enough cash now to fully fund the MDS trials all the way to completion or maybe can just say how far along you are going to be able to go?

Spiro Rombotis

Good evening, Ed. I think this is for Paul.

Ed White - Laidlaw & Company

Hi, Paul.

Paul McBarron

Thank you, for the question Ed. As you said we raised the $9.3 million net in April with the objective of funding our MDS study. We said on our remarks we will fund that along with other existing proceeds and resources in the company. We still have yet to finalize (inaudible) and when we have done that we will be able to give you a much closer estimate of the final cost.

Ed White - Laidlaw & Company

And just a question on SEAMLESS in Europe, can you tell us how many people are enrolled in Europe right now and at how many sites?

Spiro Rombotis

Ed we do not give play-by play granularity at this time as we speak. In fact, we approved in the last 48 hours additional sites, so if I were to give the answers almost certainly obsolete by the time I give it to you, it's an ongoing process that’s started a few weeks ago as we indicated. It is ongoing, we expect as one of our milestones to finish rolling out in the vicinity of the heat or possibly few more sites in Europe over the next few weeks. Quite a few are now opened and quite a few have an old patients. So it's an ongoing process and my guess is that by the next earnings call, specially all of the sites, not all of them will be opened and then will have the enrolled the number of patients (inaudible).

Ed White - Laidlaw & Company

Okay. Great. Well I think that’s all the questions I have for now. If I think something else I will get back in the queue. Thank you.

Spiro Rombotis

Thank you, Ed.

Operator

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

Kim Lee - Janney Capital

Good afternoon. Thanks for taking the questions. My first question is for the AML program, can you remind us if you have any pre-specified analysis that you are going to be looking at and also second question for the MDS trial same thing there and also given the heterogeneity of the population, any thought on biomarker that you can use to identify and better select patients. Thanks.

Spiro Rombotis

Good afternoon, Kim. Thank you for your question. Let me take upon on the first question and I will ask Dr. Judy Chiao to answer the question of any perceptual analysis for the AML file. I will then pick up on the MDS question you asked for the same type and also discuss the topic of potential biomarkers of selecting patients. Judy?

Dr. Judy Chiao

Okay well before I answer the question on pre-specified analysis that I think or I can say is that the primary endpoint is survival and the pre-specified analysis and when they were occurred has been said before, the only other pre-specified analysis is the interim futility analysis that were occurred at the time of 212 event which is said to have occurred.

Kim Lee - Janney Capital

So no other specified analysis as far subset population or anything like that?

Dr. Judy Chiao

Well we discussed pre-specified analysis only in the context of the primary analysis and also any interim analysis, those are the major ones. So I think regarding to pre-specified subset analysis, then those are not primary.

Kim Lee - Janney Capital

Okay. Alright. Great. Thank you.

Spiro Rombotis

Kim, Judy is a former FDA regulator and she has giving you of course what is the correct formal view of the agency which is that as we have seen with many other sponsors, they would only accept secondary, the primary outcome measure is valid. If it is not, then all secondary they are considered to be exploratory but just to remind you and others on the call that trial design has the primary outcome of although survival and secondary outcome is our rate of remission CRP, days in the hospital, transfusion requirement and other measures of both the quality of care and the patient's wellbeing such as being speared intervention such as transfusions. So, it's important to remember that there is a formal analysis for futility which is not an un-blinded look. So there is no alpha spend at the time of the futility analysis will occur when half of the required events are observed. So unlike other situations in this indication perhaps other sponsors may have for their own good reasons, chosen to un-blind the data, we are not. And as the result the original pre-specified analysis that was in our spa remains very much the read-out plan and I hope this makes it very clear.

Kim Lee - Janney Capital

Yes, I know, I appreciate the clarity. Thank you.

Spiro Rombotis

(inaudible) disease certainly as much as the AML possibly worse because these patients are of course earliest stage in the disease progression. And to remind anybody an MDS patient will fail the front-line, may unfortunately die of either transformation, or progression to AML or they may die but they still have MDS or either without having transform into AML. So yes, correct to remind this of heterogeneity of this disease and we are not going to give more color until the end of the month during the company event in Chicago at which we will explain in a bit more color of the trial design and hope to welcome you at that institutional investor analyst meeting and address those questions about time. We will also be webcasting the events so others will have the chance to access the information.

You asked, final question was the important one, is there any biomarkers in these diseases and opportunity to pre-select for patients that are more likely to respond and I think the answer could be very unambiguous. We are very much in favor of biomarker approaches. In fact we are pursuing such approach in our ongoing phase I trial for sapacitabine with your CDK drugs (inaudible) in solid cancers in patients that carry the germ-line like mutation. However in MDS, the genetic complexity is much more pronounced than in patients with solid tumors. And that lead as bad to possibly worse than AML given that there are over 20 genes found in biopsy specimens of patients with MDS, one could be very unfortunately in the situation of finding it very difficult mathematically to calculate the numbers of potential genetic profile this patient has.

One author I have recently read said that there are several thousand genetic profiles of patients with MDS. This renders the prospects of finding a single gene targeted by a drug as rather remote. Just to remind everybody though and you sapacitabine works on a specific pathway which is that of homologous combination repair and at this point we don't know, there is no published information to guide us on how to pre-select patients that may have (inaudible) in DNA repair.

So our approach is clearly not going to be enable by biomarker approach however we are highly encouraged by the phase II data in MDS that we report that has been asked about a year ago in the which we show specific activity and improved survival over the expected survival of patients who failed the frontline drugs which are the Vidaza, Azacitidine and/ or Dacogen Decitabine. So on the basis of this result, in peculiar patients we believe the drug is active in MDS after HMA failure and we will give some more detail in Chicago at which points perhaps we can pick up this conversation in light of the (inaudible) design that we are proposing which I think will be informative to you and other investors.

Kim Lee - Janney Capital

Alright. Thank you for your answers.

Spiro Rombotis

Thank you Kim.

Operator

Our next question comes from the line of George (inaudible).

Unidentified Analyst

Hi Spiro, Judy and Paul. Thank you for the update. I have a question regarding your third party manufacturing process that seems to have recently begun ahead of the finishing of SEAMLESS and potential NDA and MAA submission. First of all to Paul, is that process or cost that related to that also included in the raise that you did in April and could you briefly describe exactly what needs to be done. I presume maybe final formulation perhaps one year stability?

Paul McBarron

George thanks for the question. To be clear, this is not a new item for us for manufacturing, because we are making because we are happy manufacturing with the third-party for some time and have qualified them over period of time. And as you quite rightly said there is the usual process of manufacturing and validation and stability studies and that has been be ongoing and will continue to be ongoing until the NDA is filed. The funding of that is not related to the recent financing. This is clearly a pre-financing SEAMLESS item and part of our normal operating cost which certainly we have seen over the last couple of years and continue over the next year.

Spiro Rombotis

Thank you Paul, let me just bounce me if you allow me George and thank you for the question to make another point, just to make investors aware of some of the differences of the process we have been employing compared to perhaps other companies in the similar position. For my background in pharama, I remember that one of the major stumbling blocks in partnering discussions between small companies and pharama is that although the small company was ready in all regulatory respects to file NDA, there was some times in months and really years of we are supplying commercial launch qualities and that was of course a major damper on the (inaudible) because they wanted to be able to launch almost immediately after an approval. This will not happen with Cyclacel. As Paul said, we have had several years, not months, we have been working with multiple manufacturers both for the drug product in terms of the finished formed capsules, (inaudible) and the chemical that is used to actually manufacturer this capsules. We have validated those sources, those different vendors. These are companies that in the finished goods content have been inspected by the FDA for previous NDA submissions and/ or approvals and therefore have been through this all important chat and we expect given the scale with other manufacturing we will be comfortably able to supply all of our clinical trial needs including invested gear initiatives now are going or to be done as well as being in the position to skill up to the launch quantities in relatively short timeframe following a regulatory submission.

Unidentified Analyst

Spiro you just answered my next question which was whether you are prepared to launch as quickly as possible following successful NDA submission and approval and I guess the answer to that is yes, as quickly as possible and at the same time you suggested that it also would help you to – help you in potential partnering discussion. Yes okay. Thanks very much for that but that’s reassuring. Thank you Spiro.

Spiro Rombotis

Thank you, George.

Operator

There are no further questions at this time. I will now turn the floor back over to Mr. Spiro Rombotis for any additional or closing remarks.

Spiro Rombotis

Thank you operator. And thank you all for listening to our quarterly conference call. We look forward to updating you on upcoming events and meeting some of you on our upcoming Annual Stockholders Meeting and investor conferences including the JMP Securities Healthcare Conference on June 24th in New York City. Operator, at this time, please end 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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