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Cyclacel Pharmaceuticals (NASDAQ:CYCC)

Q2 2012 Earnings Call

August 14, 2012 4:30 pm ET

Executives

Corey Sohmer - Director of Corporate Finance

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

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

Operator

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

Corey Sohmer

Thank you. Good afternoon and welcome to our quarterly conference call. During today's call, members of our senior management team will review Cyclacel's financial performance and business highlights for the second quarter ended June 30, 2012.

Before turning the call over to senior management, I would like to remind everyone that during this conference call, any forward-looking statements made by management are intended to fall within the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and 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 available from our -- 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 Paul McBarron, Executive Vice President, Finance and Chief Operating Officer; and Dr. Judy Chiao, Vice President of Clinical Development and Regulatory affairs. As announced in today's press release, Spiro Rombotis, our President and Chief Executive Officer is on medical leave and will resume his duties in early September, 2012. Paul McBarron, our Executive Vice President of Finance and Chief Operating Officer will perform additional duties during Mr. Rombotis' medical leave including conducting this call.

At this time, I would like to turn the call over to Mr. Paul McBarron, our Executive Vice President, Finance and Chief Operating Officer.

Paul McBarron

Thank you, Corey and good afternoon, everyone. As mentioned by Corey I have been asked to temporarily assume some additional duties of Spiro's during his medical leave. We wish Spiro a rapid recovery and expect that he will resume his duties in early September. It is a pleasure to update you this afternoon on our corporate progress and financial results for the second quarter ended June 30, 2012.

First, we are pleased to report that during this last quarter, we continue to open new study sites in the U.S., bringing the total to 35 and enroll patients in the SEAMLESS Phase III trial. We're making steady progress in terms of enrollment towards the second planned periodic safety review to be performed by the independent Data Safety Monitoring Board or DSMB in late 2012 or early 2013.

As a reminder, SEAMLESS is a randomized Phase III registration-directed trial under a SPA, or Special Protocol Assessment agreement with the FDA, testing our lead product candidate oral sapacitabine capsules as frontline treatment in acute myeloid leukemia or AML. SEAMLESS is expected to enroll approximately 485 elderly patients, aged 70 years or older, who are not candidates for, or have refused intensive induction therapy. There is a high unmet medical need for the treatment of elderly patients with AML, as the disease is associated with high mortality and poor quality of life. Currently, there is no standard treatment for this group of patients.

In addition to SEAMLESS, we are working with collaborators in investigated sponsored studies to explore sapacitabine in other indications. These studies are where we supply drug product and the cost of the studies are borne by the investigators. These include the Phase II/III Pick a Winner or LI-1 low intensity trial run by the International Cooperative Leukemia Group chaired by Professor Alan Burnett. This is a randomized trial comparing sapacitabine to low-dose cytarabine in patients aged 60 years or older with previously untreated AML or high-risk myelodysplastic syndromes, MDS, who are unfit for intensive chemotherapy. The Phase II part of this study has been completed and over 100 patients have been enrolled. The principal investigator of LI-1 has verbally indicated that based on the observed number of events in the study, the study DSMB is expected to meet later this year to assess overall survival as per protocol.

Another investigated sponsored Phase II study, evaluating sapacitabine, in combination with cyclophosphamide and rituximab is being conducted by the Department of Leukemia at the University of Texas and the Anderson Cancer Center. This study is enrolling patients with previously treated chronic lymphocytic leukemia or small lymphocytic leukemia who carry the 11q22-23 deletion. Deletion of chromosome 11q22-23 is associated with the ATM mutation, an important regulator of the HRR DNA repair pathway.

In June, we reported new data at the American Society of Clinical Oncology Annual Meeting on ongoing studies conducted by Cyclacel. In the Phase II randomized trial of all sapacitabine capsules in all the patients with MDS after treatment failure of frontline hypomethylating agents such as azacitidine or Victoza and/or decitabine Dacogen were reported median overall survival for all patients at 252 days or approximately 8.4 months. We will initiate regulatory discussions regarding an appropriate registration plan in this setting after dosing schedule MDS is selected.

At ASCO, we also reported data from an ongoing Phase I study of sapacitabine in combination with seliciclib in heavily pretreated patients with advanced solid tumors. Among 19 patients treated at the maximum tolerated dose or MTD, 3 partial responses occurred in patients with breast, ovarian and pancreatic cancer and one stable disease in a patient with ovarian cancer. Thirteen out of the 19 patients are BRCA-mutation carriers. All 4 responding patients were part inhibitor naive BRCA-mutation carriers.

Also in April, the U.S. Patent and Trademark Office issued a U.S. patent number 8124593, which grant claims to specified method of administration of sapacitabine and extends existing composition of matter U.S. patent protection and support U.S. market exclusivity after 2030. Regarding our earlier translational research and pipeline in April 2012 at the annual meeting of the American Association of Cancer Research, we presented preclinical results for 3 of our compounds, sapacitabine, Aurora A kinase inhibitors, including CYC116 and Polo-Like Kinase 1 inhibitor.

I will now turn the call over to Judy,, who will provide further details and review our clinical progress. Judy?

Judy H. Chiao

Thank you, Paul. SEAMLESS is a 2-arm randomized trial comparing the regiment of sapacitabine dosed in alternating cycles with decitabine versus decitabine alone. The study is being conducted under SPA or Special Protocol Assessment agreement we reached with the U.S. FDA. The randomized stage of SEAMLESS was initiated last October following a favorable review of the available data from a pilot Phase I/II study and the lead in part of SEAMLESS by the independent safety monitoring committee.

The primary endpoint of the study is an improvement in overall survival. An interim analysis for futility by the DSMB is planned when 212 events have occurred. In addition, several safety reviews are planned by the DSMB after each group of approximately 100 patients have had 60 days of follow-up. We anticipate the next planned safety review in late 2012 or early 2013.

We continue to be encouraged by the support and interest in the SEAMLESS study, and we will continue to recruit and open sites to reach our target of approximately 40 clinical centers this year. At present, we have 35 sites opened in the U.S. Once we accumulate a few quarters of patient enrollment experience, we will determine whether to expand the study outside the United States.

In this respect, we are encouraged that recently the European CHMP or the Committee for Medicinal Products for Human use recommended decitabine for approval for patients aged 65 years and older with AML. As you know, decitabine is used in both arms of SEAMLESS.

In parallel with enrolling patients in SEAMLESS and in addition to investigator-sponsored studies, we're also evaluating sapacitabine's therapeutic utility in other potential indication, both as a single agent and in combinations. Sapacitabine's activity in both hematological malignancy and solid tumors is a key differentiator for this unique oral agent.

As Paul mentioned, we reported new data at ASCO, and I will give you some additional details on the sapacitabine studies. In an open-label multi-center Phase II study, we randomized 63 patients aged 60 years or older with MDS of intermediate 2 or high-risk classification by the International Prognostic Scoring System or IPSS at the study entry to receive sapacitabine every 4 weeks on 1 of the 3 dosing schedules. The primary efficacy endpoint of the study is one-year survival with the objective of identifying dosing schedule that produces a better 1 year survival rate in the event all free dosing schedules are active. All patients in the study progressed after receiving azacitidine, decitabine or both agents.

The median survival for all 3 arms is 252 days, approximately 8 months. Published studies show a median overall survival for patients after treatment failure of hypomethylating agents ranges from 4.3 to 5.6 months. Complete remissions and major hematological improvements in platelet counts and neutrophils secondary efficacy endpoint a study was observed on all 3 dosing schedules. The 30-day mortality from all causes is 5%. 41% of all patients received 4 or more cycles. More than 34% of the patients was still alive at the time of reporting at ASCO and longer follow-up is needed to assess one-year survival and overall survival.

Once we have determined the dosing schedule for MDS, we will initiate discussions with the regulators to agree on the registration pathway. We also reported data at ASCO on a Phase I study of sapacitabine in combination with seliciclib in patients with advanced solid tumors, which is ongoing at the Dana-Farber Cancer Institute. As of ASCO, 34 heavily pretreated patients with advanced solid tumors have been treated with escalating doses and the maximum tolerated dose for sequential administration of sapacitabine and seliciclib was determined.

Among 19 patients treated at the MTD, 3 partial responses occurred in patients with breast, ovarian and pancreatic cancer and one stable disease in a patient with ovarian cancer. 13 out of the 19 patients are BRCA-mutation carriers, of which, 7 were poly ADP-ribose polymerase inhibitor naive, the so called PARP inhibitor naive, and 6 had prior PARP inhibitor treatment. All 4 responding patients were PARP inhibitor naive BRCA-mutation carriers. Stable disease was achieved in 6 additional patients treated with the other dosing schedules. The number of treatment cycles administered ranges from 2 to over 15 cycles. The breast cancer patients who achieved partial remission remained on study with over 15 cycles and both ovarian cancer patients remained on study with over 2 and 12 cycles, respectively. We will continue follow-up of patients.

We are encouraged that the data shows the potential for life extensions of sapacitabine as a pipeline within the drug is starting to emerge.

Let me now turn to call back over to Paul who will review the company's financials. Paul?

Paul McBarron

Thank you, Judy. As you saw from today's press release, regarding our consolidated financial statements for the 3 months ending June 30, 2012, we reported a net loss applicable to common shareholders of $3.8 million or $0.06 per basic and diluted share compared to a net loss of $3.7 million or $0.08 per basic and diluted share for the same quarter 2011.

For the 6 months ending June 30, 2012, we reported a net loss applicable to common shareholders of $6.9 million or $0.12 per basic and diluted share compared to a net loss of $8.5 million or $0.18 per basic and diluted share for the same period of 2011.

Research and development expenses decreased from $1.9 million in the 3 months ended June 30, 2011, to $1.6 million for the 3 months ended June 30, 2012. Research and development expenses decreased from $4.9 million for the 6 months ended June 30, 2011, to $3.1 million for the 6 months ended June 30, 2012. The 6 months decrease in costs of $2 million was mainly due to $1.6 million of contractual expenses recognized during the 3 months ended March 31, 2011, resulting from a milestone payment treated by the opening of enrollment in our SEAMLESS trial pursuant to the Daiichi-Sankyo license.

Selling, general and administrative expenses or SG&A for the second quarter of 2012 were $2.4 million as compared to $2 million for the second quarter 2011. SG&A for the 6 months ended June 30, 2012, were $4.3 million as it compared to $3.8 million for 6 months ended June 30, 2011.

With regard to our commercial products. Total net sales of Xclair Cream and Numoisyn products were $0.2 million and $0.1 million for the 3 months ended June 30, 2011 and 2012, respectively. Total sales for the 6 months ended June 30, 2011, and 2012 were $0.4 million and $0.3 million, respectively. As indicated in today's press release we reached an agreement with Sinclair Pharmaceuticals Limited to return to them the distribution rights for the Xclair Cream and Numoisyn products.

Until the return of rights back to Sinclair is completed and in line with our commitment to serving patients in need, we will continue to provide support to patients with cancer and other conditions and the medical professions caring for them. We rely on these products to provide relief from radiation dermatitis and xerostomia.

We expect our cash resources are sufficient to meet anticipated short-term working capital needs and fund ongoing sapacitabine clinical trials for at least the next 12 months.

Now before I open the call for questions, I would like to briefly review our priorities for the remainder of 2012. Continue enrollment in the SEAMLESS pivotal Phase III study of sapacitabine in AML, report survival data from the Pick a Winner LI-1 randomized study of sapacitabine versus low dose cytarabine and other investigator-sponsored studies as they become available. Report updated Phase II sapacitabine data in second line MDS following previous treatment with hypomethylating agents. Report updated Phase II sapacitabine data in AML preceded by MDS following previous treatment with hypomethylating agents for the preceding MDS. Report updated Phase II sapacitabine data in non-small cell lung cancer and report updated phase I sapacitabine and seliciclib combination data in patients with solid tumors.

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

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Steve Yu [ph] of Lazard Capital Markets.

Unknown Analyst

I was wondering, could you comment on the implication of the recent future of the opinion on Dacogen and how it may impact your development plans?

Paul McBarron

Steve, thanks very much for your question. I'll tell you we're encouraged that the CHMP gave a positive opinion. We'll have to wait for the commission to ratify that sometime I think by the end of September. But clearly the recommended use of decitabine for these patients over 65 years or older, given it's both in the 2 arms of SEAMLESS is encouraging. And I think the appeal of SEAMLESS to both U.S. and non-U.S. investigators will be further enhanced by the positive opinion from the CHMP.

Unknown Analyst

Okay. And the 11q22-23 deletion that you mentioned could you tell me what the estimated prevalence in the general CLL population? Does it vary between whether a patient is treatment naive versus refractory patients?

Paul McBarron

Judy, do you have an answer to that question?

Judy H. Chiao

Well, not off hand. We certainly will be happy to get back to you, if possible, afterwards, with the frequency.

Unknown Analyst

Okay. Then if I can get another quick question in, could you provide an update on the litigation that is ongoing with Celgene?

Paul McBarron

Steve, clearly you understand that as this is under legal review, there's only limited information that we can disclose. This litigation you mentioned refers to alleged infringement of 4 Cycalcel-owned patents. To be clear that these 4 patents in the case directly involve the use of administration of romidepsin, or ISTODAX. They have no relation to sapacitabine or other Cyclacel products. But the case is currently pending in the United States District Court in the district of Delaware. There is -- the document is open for public inspection and there is a schedule there, as well, for the process and there are certain times the discovery and pre-trial activity, which are all ongoing and there's a schedule in terms of when the jury trial will be finalized. But clearly, as we look at these, it's something you really want to be settling.

Operator

Your next question comes from Steve Rosenman [ph] of AMS [ph].

Unknown Analyst

I know that the news has been out there for a little while, but congratulations on the patents. It's pretty good [indiscernible]. You mentioned some collaborations to advance sapacitabine. I was wondering, in general, if you can describe how active the business development or strategic collaboration front is and has it -- have you seen it been on the increase recently?

Paul McBarron

Well, I think the collaborations both Judy and I discussed were collaborations with investigators and physicians to progress sapacitabine different indications as opposed to business development. For example, the Pick a Winner LI-1 study, which is being run by the U.K. Cooperative, allows us to look at sapacitabine in a different AML patient population, as well as the CLL that we discussed.

Unknown Analyst

Do you see any more on the business development front?

Paul McBarron

Well, I think as you'd understand that we don't generally comment on whether we're having partner discussions or not. But I think in framing sapacitabine in this respect I would, I think, reiterate Judy's remarks that sapacitabine is unique in this activity in both blood cancers as well as solid tumors. We do hold worldwide rights. And I think as you mentioned the patent and the IP covering -- extended to 2030 certainly presents us a very nice value proposition.

Operator

[Operator Instructions] This concludes today's question-and-answer session. I will now turn the floor back over to management for any closing remarks.

Paul McBarron

Thank you very much. In closing, if the SEAMLESS trial is successful, sapacitabine would address a major unmet medical need for patients as a frontline treatment in elderly patients with newly diagnosed AML, who are not candidates for intensive induction chemotherapy. We believe that sapacitabine along with our pipeline represents outstanding growth opportunities for Cyclacel. Thank you for your continued support of our efforts. And operator, at this time, would you please conclude the call?

Operator

This does conclude today's conference call. You may now disconnect. Thank you for your participation.

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