Cyclacel Pharma: An Undervalued Company With A Potential Blockbuster Treatment

Submitted by Scott Matusow as part of our contributors program.
Cyclacel Pharmaceuticals (NASDAQ: CYCC) is a development-stage biopharmaceutical company dedicated to the development and commercialization of novel, mechanism-targeted drugs to treat human cancers and other serious diseases. Cyclacel’s strategy is to build a diversified biopharmaceutical business focused in hematology and oncology based on a development pipeline of novel drug candidates. Cyclacel’s clinical development priorities are focused on sapacitabine, an orally available, cell cycle modulating nucleoside analogue. The oral dose availability is one major differentiator Cyclacel offers with its sapacitabine candidate.

In 2007, Dr. Kantarjiian from the Leukemia Department at the University of Texas’s Cancer Center called sapacitabine, “one of the most exciting drugs in development for AML since cytarabine, the current standard of care.” Today we will discuss what is on the horizon for Cyclacel and this drug in the short and long term.

Currently, sapacitabine is being evaluated in the SEAMLESS Phase III trial being conducted under a special protocol assessment (SPA) agreement with the US Food and Drug Administration for the front-line treatment of acute myeloid leukemia (AML) in the elderly. It is also in Phase II studies for AML, myelodysplastic syndromes, non-small cell lung cancer (NSCLC) and chronic lymphocytic leukemia.

In October of last year at the Hematologic Malignancies Conference, Cyclacel announced impressive data regarding survival of elderly patients in its Phase II trial with intermediate-2 or high-risk myelodysplastic syndromes (MDS) after failure of front-line treatment. Per Wikipedia, myelodysplastic syndromes (formerly known as preleukemia) are;

“a diverse collection of blood related medical conditions that involve ineffective production of the myeloid class of blood cells.”

In Cyclacel’s October press conference, the company announced median overall survival to date for the 63 patients in the Phase II study at 252 days or approximately eight months. Median overall survival for 41 out of 63 patients with 10% or more blasts in their bone marrow is 274 days or approximately nine months. This compares to the median survival for patients as defined by the International Prognostic Scoring System (IPSS) at 4.3 to 5.6 months.

SEAMLESS Trial:

In January 11, 2011, the company opened enrollment of the SEAMLESS pivotal Phase III trial for the company’s sapacitabine oral capsules as a front-line treatment of elderly patients aged 70 years or older with newly diagnosed AML who are not candidates for intensive induction chemotherapy.

Cyclacel is looking at giving greater hope to older patients diagnosed with acute myeloid leukemia. Considering the current environment demonstrating a six month survival profile, people are not going to see much of a benefit receiving potentially two months of chemotherapy to live just a little bit past that point. Generally, they will just be going home to try and preserve some quality of life in the time they have left.

In a recent presentation at the BIO CEO & Investor Conference, Cyclacel described why it feels sapacitabine can succeed. The drug uses a lower level of intensity which helps the immune system while treating. The company also notes that most elderly are unable to sustain chemotherapy. In fact, in early data from the company’s Phase III SEAMLESS trial, safety indicators show a sapacitabine/decitabine combination to have a mortality rate in the first two months of 13% versus 36% for chemotherapy and 20% for decitabine alone.

In the investor conference, the company goes on to say that the oral dose of sapacitabine is well tolerated with multiyear maintenance dosing achieved.

Upcoming Catalysts:

In 2013, a couple milestones for the company include:

· A SEAMLESS Phase III enrollment update
· NDSMB (Data and Safety Monitoring Board) review of SEAMLESS
· Updated Phase II data in myelodysplastic syndromes after HMA’s (Hypomethylating Agent)
· Updated Phase I data for sapacitabine and selleciclib in patients with solid tumors

Last week, Cyclacel announced two important additions to its patent portfolio. Within this announcement, CEO Spiro Rombotis commented on this as well as 2013 noteworthy items.

“The grants of the ‘792 and ‘790 patents are important enhancements of sapacitabine’s intellectual property estate. They supplement sapacitabine’s existing composition of matter, dosing regimen and combination treatment patent protection and support US and EU market exclusivity toward the end of the next decade. We are pursuing a broad intellectual property strategy providing us with a strong foundation to achieve our clinical and commercial objectives for sapacitabine and our other assets. As we continue to enroll SEAMLESS, our pivotal Phase III trial of sapacitabine as front-line treatment in elderly patients with acute myeloid leukemia, we look forward to providing additional updates for sapacitabine this year, including Phase II data in myelodysplastic syndromes , AML preceded by MDS, and solid tumors.”

Also related to the intellectual property portfolio is Cyclacel’s patent infringement lawsuit against Celgene (NASDAQ: CELG) which will begin a Markman patent construction hearing on March 16th, 2013. While the final result from this litigation might not be known until the middle of 2014, the case so far looks favorable for Cyclacel. It’s possible that Cyclacel could receive damages upwards of $70M, at least according to a fellow Seeking Alpha author.

Let’s look at the chart:

The chart has been in an uptrend and after forming a wedge, it looks to be set to break out again. The first price level to watch is $6.16-$6.20, then a test of the highs in the $8’s could be in range.

With the high barriers to entry in a very complex field, Cyclacel looks to be undervalued with a market cap of only $52 million if the pipeline drugs can continue to perform in a similar fashion. In my opinion, it might be one of the most undervalued speculation investments around. FDA approval of any of its pipelined drugs could mean 10 times that amount in revenue or more as AML is a hard form of leukemia to treat. The company’s goal is convert AML into a “chronic disease” versus rapidly progressing, fatal disease it is currently.

Disclosure: Long CYCC.