Upcoming AML Treatments - Which Company Will Fly?

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A sentiment shift seems to be occurring for potential upcoming treatments for AML (acute myeloid leukemia), and now is the time to explore if Cyclacel (NASDAQ:CYCC) or Sunesis (NASDAQ:SNSS) could triple within one year.

AML is a disease that impacts mature adults, generally in their late 60s (oftentimes much older) and beyond. It is a rapidly progressing blood cancer that can quickly kill. There are two classes of drugs considered as front-line treatments, anthracyclines and nucleoside analogues.

Sunesis is currently conducting a Phase III study for vosaroxin (the Valor study) in combination with cytarabine (a nucleoside analogue) in patients with relapsed or refractory AML. Information about the drug and the clinical trials can be found here. This is considered a "second line" treatment for AML patients. This population is obviously smaller than the initial population eligible to respond to front-line treatments.

While Phase II results suggest favorable responses to non-small cell and small-cell lung cancers, the only results with near-term impact occurred in AML patients treated with vosaroxin combined with cytarabine. This makes sense, as the method of action for SNSS's drug mainly works when combined with other therapies. That could pose a big problem as a competitor in Cyclacel seems to have a very safe (safer than SNNS's drug) and well-tolerated, effective "front-line" treatment that can be administered with a unique form-factor -- oral dose.

SNSS does have a leg up on CYCC in the partner arena. However, the early partnering with Millenium and Biogen that SNSS agreed to may not pay off for investors. SNSS partnering was mainly development-associated, and while the drug progressed the company continued funding rounds, further diluting shares and giving away some potential future profit.

CYCC's drug is catching up and its latest conference call and financial reports suggest no funding required through 2013. While funding may still ultimately occur, that is what development stage is all about -- especially when not partnered. Fortunately, CYCC seems to have controlled cash on hand and has acquired additional public funding for development programs.

CYCC recently conducted a 1:7 reverse stock split, which seems to have consolidated shares nicely. It also appears as if CYCC is waiting to find the right strategic partner, more for commercialization vs. development. Remember, SNSS went the opposite direction, with development partners early -- a common strategy for drugs that present an early market limit or higher safety/efficacy risk.

As for CYCC's lead drug, sapacitabine, it could emerge the winner in the AML space and define new paths for therapy in far larger oncology-related markets (MDS, NSCLC, and used in combination with another CYCC drug to fight solid tumors). Sapacitabine's method of action and form factor make it best in class and applicable to these much larger markets.

As for AML, CYCC began the SEAMLESS pivotal Phase III trial for the company's sapacitabine oral capsules as a front-line treatment in early 2011. SEAMLESS is conducted under a Special Protocol Assessment, or SPA, agreement with the FDA. SNSS's drug is not under SPA, nor can it be taken as a front-line treatment.

Updated Phase II results showed favorable survival rates, which can be found here. While this article will not regurgitate clinical trial results, patients and physicians at enrollment centers are experiencing better data with each new report CYCC issues. The drug is also proving to be very safe, and easy to self-administer. While slower to get things moving the SNSS, it is clear CYCC has hit its stride in terms of development. An upcoming catalyst will be updated Phase III enrollment information, likely before end of 2012.

However, another catalyst for CYCC may finally come from the partner area. Many have speculated that the Celgene (NASDAQ:CELG) may want to mitigate legal risk by simply acquiring or partnering with CYCC. This scenario has merit and should not be ignored. The two are basically fighting each other over the rights to use CYCC patents. At the end of the day, until proven otherwise, they are valid CYCC patents -- potentially deserving of royalty.

Regardless of speculation about how legal proceedings may play out, it's hard to ignore synergies between CYCC's IP and drug developmental efforts with CELG's efforts in the MDS space. CELG and many other large biotechs could leverage the unique delivery and safety profile of sapacitabine in five ways: AML (one to two years); MDS (two to three years); NSC and SM cancers; solid tumors; and combined with their own already marketed drugs for multiple indications. A strategic business development scenario could pay off with the AML indication alone.

The Wall Street financial models I refer to on CYCC come from Lazard Capital Markets and Leerink Swann, and for SNSS are formulated by Cowen & Company, Leerink Swann and Wedbush. Rather than recreate models (they are copyrighted), I will reference these existing models. I tend to believe the SNSS estimates are too heavy, with a more likely fair value around $5 after all is said and done. The reasoning is because the market is simply too limited and the drug not compelling enough to be a best-in-class therapy. The $8-plus models just don't take potential success of CYCC's drug into account, even if timing plays out to be second to market, which is not certain at all given CYCC's shorter regulatory path. CYCC's average Wall Street 12-month SP calculation is $17.50 (nearly a triple on a reverse split adjusted basis), which I believe fair if there is no partner catalyst within the next 12 months. However, if some news enters on the bus-dev front in 2013, a triple could get to $25 pretty quickly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Steve Rosenman helped create a support arm for the Oncology Nurse Network, a national organization of more than 20,000 oncology nurses and NPs, while working for nearly five years accessing market opportunities related to oncology drug side effects.