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CYCC What Future?

Cyclacel Pharmaceuticals, Inc. (NASDAQ:CYCC) is a development-stage biopharmaceutical company developing oral therapies that target the various phases of cell cycle control for the treatment of cancer.

After ASCO, the subsequent decrease in the share price and the recent underwritten offering is now time to the shareholders ask themselves about the future value of Cyclacel Pharmaceuticals.

In order to understand CYCC potential value, i'll first analyse their portfolio, or in the biotech sector their pipeline:

  • Phase III: Sapacitabine oral capsules for the treatment of elderly patients aged 70 years or older with newly diagnosed AML (acute myeloid leukemia ) under a Special Protocol Assessment agreement with the U.S. Food and Drug Administration;
  • Phase II: Sapacitabine for the treatment myelodysplastic syndromes (NYSE:MDS)
  • Phase II: Sapacitabine for the treatment of non-small cell lung cancer (NSCLC)
  • Phase II: Seliciclib for the treatment of non-small cell lung cancer (NSCLC)
  • Phase II: Seliciclib for the treatment  nasopharyngeal cancer(NYSE:NPC)
·         Phase II: For the treatment of solid tumors
·         Phase I: For the treatment of solid tumors

Cyclacel Pharmaceuticals advantage is based on this solid and diverse oncology pipeline that will certainly help CYCC to add value to the shareholders, but when and at what price…?

The question don’t have an immediate response, it depends how the company will be able to administrate their financial resources into their pipeline studies, regulatory procedures and at the end marketing successful the product “the ultimate goal”.

In this kind of biopharmaceutical companies, their intrinsic and present value are usually related to the future potential of their novel drugs and their ability to make profits in the competitive healthcare market. Today CYCC has a market capitalization around 58million dollars and actual share price of $1.20:  it seems that the entire pipeline are not at all reflected in current price. Why?

1.      The new drugs are not producing good results in the differents evaluation phases;
2.      Or the results are good, but the company are not having momentum or the catalyst to increase the share price near term.

My focus will be based on the second answer. So far, their advance drug Sapacitabine with SEAMLESS Phase 3 trial open and enrolling patients with acute myeloid leukaemia, appear to have good levels of safety and effectiveness responses in the pilot study. Accordingly the press release of 6 June 2011:

"Based on the interim results reported at ASCO, the sequential administration  of sapacitabine and  decitabine appears safe and active in elderly patients with newly diagnosed AML".
The treatment regimen under evaluation in this pilot study is being used as one of the arms in SEAMLESS, the registration-directed, Phase 3 study of sapacitabine in elderly patients with newly diagnosed acute myeloid leukemia (AML) who are not candidates for or have refused induction chemotherapy.  SEAMLESS is being conducted under a Special Protocol Assessment agreement that Cyclacel reached with the US Food and Drug Administration.

However more time will be required to prove the real value of the new drug, Sapacitabine, with older patients (aged 70 years or older). And more time means that the patients still remain alive for a longer period of time. 

My opinion is that something is not quiet clear in the current value of CYCC: if you look to AEZS, ZLCS and PPHM, for example, apart differences in the potential of their drugs, they are companies with market capitalization around 200M, 267M and133 million dollars with drugs in the phases III and phases II, more than the double of CYCC value.

Looking also to their last balance sheet, CYCC should have now around 30 million in cash and equivalents, that puts the company in good position to go along the Sapacitabine oral capsules  Phase 3 trial. 
However, and accordingly their rate of burning money each quarter (around 3 to 4 million dollars) i am expecting a new offering at the end of phase III and FDA filling.
(Note: with a good phase III results this dilution could go at higher prices and i wouldn’t be suprised, if the filling of Sapacitabine oral capsules for the treatment of AML to the FDA will be achieved with a partnership and an upfront payment.)

My opinion is that CYCC is an undervalue oncology company and the longs will be rewarded with the addressing of good phase III results by the company and the FDA filling. Therefore, the last underwritten offering at price off 1,36 could be a good entry point to the new investors.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CYCC over the next 72 hours.