Cyclacel Pharmaceuticals Inc (CYCC) 2008 Q4 法說會逐字稿

Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to the Cyclacel Fourth Quarter and full year 2008 earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions). Thank you, Mr. Sohmer you may begin your conference.

Thank you, operator. On the call today are Spiro Rombotis, President and CEO of Cyclacel Pharmaceuticals, Paul McBarron, Executive Vice President, Finance and Chief Operating Officer, and Dr. Judy Chiao, Vice President Clinical Development and Regulatory Affairs. Before we turn the call over to Spiro, I will read the Company's Safe Harbor Statement.

Some of the information on this call may contain forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 about financial results and estimates, business strategy, clinical trial plans and Research and Development programs of Cyclacel Pharmaceuticals Inc. By their nature, forward-looking statements and forecasts involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.

A number of factors could cause actual results and developments to differ materially and are discussed under the Risk Factors in the registration statement on Form 10-K and in other reports of Cyclacel filed with the SEC. The information in this presentation is current as of this date. Cyclacel does not take any responsibility to update such information.

At this time I would like to turn the call over to Spiro Rombotis.

Thank you, Corey. And thank you to everyone for joining us on the call today. In addition to the information provided in today's Press Release, we wanted to highlight certain milestones that we achieved in 2008 and the first part of 2009 which we believe illustrate the prospects and focus of our business for the next 12 months.

Our principal business objective at Cyclacel is to bring Sapacitabine, our orally available nucleoside analog to market as an important therapeutic advance for patients with unmet medical needs. In particular, we have progressed our Sapacitabine program to the point of planning a pivotal trial for the treatment of hematological malignancies. In January 2009, we meet with FDA in an end of Phase II meeting to discuss our proposed registration plan for Sapacitabine. We were encouraged by this discussion with FDA. Our proposed plan consists of treating in an open label single arm pivotal trial, approximately 100 patients with acute myeloid leukemia or myelodysplastic syndromes on a dosing regiment to be selected from our ongoing randomized Phase II Study of oral Sapacitabine in elderly patients.

We anticipate starting enrollment of patients in a pivotal study of Sapacitabine within 2009. If results of our pivotal study are positive, they may serve as the basis of an NDA filing in 2010 and may support expanded investigation of Sapacitabine in additional indications. We will require additional meetings and dialogue with FDA before any NDA filing. We expect to report interim efficacy and safety data from our randomized Phase II study at upcoming scientific meetings. Thus far, we have observed complete remissions, or CR's, at all dosing schedules tested and have been encouraged by the durability of these remissions.

In addition to interim data, we continued to expect reporting read outs on the primary end points on one year survival after October 2009, or approximately one year after the last patient was randomized and began treatment with Sapacitabine. In addition, we continue to enroll patients in a randomized Phase II study of Sapacitabine as a second line therapy in patients with MDS and separately in another Phase II study in patients with CTCL. Both of these Phase II studies have enrolled approximately 50% of their target number of patients. In early 2009, we also commenced a Phase II dose escalating study of Sapacitabine in non-small cell lung cancer patients who have had one prior chemotherapy. We would like to thank our clinical investigators, their staff, and patients, for helping us reach these milestones in the development of Sapacitabine.

Turning to Seliciclib, you may recall we have been following patients entered the randomized portion of a double-blinded placebo controlled APPRAISE Phase IIB trial of Seliciclib in non-small cell lung cancer. We expect read out on the primary end point of progression free survival around the third quarter of 2009. We are also following our patients in the recently completed leading portion of randomized Phase II study of Seliciclib in patients with first metastatic nasopharyngeal cancer with a primary objective of progression free survival. We expect to report safety and efficacy data from this study at upcoming scientific meetings.

We recently announced peer reviewed publication of an investigator sponsored Phase I study reporting pharmacodynamics effects of Seliciclib in treatment naive patients with undifferentiated nasopharyngeal cancer. The data was published in the February 2009 issue of the Journal Clinical Cancer Research in a study lead by [Boon Share Go], MD and colleagues at National University Hospital, Singapore. The primary objective of this Phase I study was to evaluate biomarker changes after administration of oral Seliciclib as a single agent in patients with undifferentiated nasopharyngeal cancer who did not receive prior chemotherapy.

13 patients were treated at a dose level of 400-milligram twice a day, which was well tolerated with no significant toxicity. Three patients treated at 800-milligrams twice a day did not tolerate this dose level. Clinical evidence of tumor shrinkage, defined as a reduction of more than 25% in palpable cervical lymph nodes, was observed in seven of 14 evaluable patients.

Clear reductions in nasopharyngeal tumor size were seen by endoscopy in one patient and radiographic evidence of tumor necrosis in the cervical lymph nodes in the further two patients. We have also been enrolling patients in our Phase I study of CYC116, our Aurora A and B and VEGFR-2 inhibitor. We expect to provide an update on this program once we complete analyzing data from the Phase I study.

I will now turn to the progress made by ALIGN Pharmaceuticals, our commercial subsidiary. We are pleased to report the pharmaceutical sales force launched in selected territories in the US Xclair and Numoisyn and began promoting these products to oncologists and radiotherapists. During the year, a randomized placebo controlled study was published in reputable scientific journal providing further evidence that Xclair is safe and effective in treating Dermatosis and in particular radiation Dermatitis. We are building brand recognition for both products as evidenced by the responses of physicians and nurses and their interest in adopting these products for every day clinical use. Xclair for example, is listed as the preferred product for treating Dermatosis on the formularies of several prestigious cancer centers.

We recorded full year revenue for ALIGN of approximately $0.8 million based on prescription data acquired from a third party vendor. As a reminder, we have adopted a conservative revenue recognition policy for 2008 using third party information. This data lags actual shipments by about six weeks and sampling may not overlap our actual sales territories. As a result, we have deferred booking additional revenue of about $0.1 million.

Our commercial operation is building on our Management teams Sales and Marketing experience, while generating modest revenues to support itself and in the future help offset pipeline development costs. It is also increasing Cyclacel's visibility among cancer opinion leaders and trade channels enabling strategic alternatives for our commercialization plan and partnering discussions.

At this point, I will turn the call over to Paul McBarron for a brief review of our financial performance. Paul?

Thank you, Spiro. For the Fourth Quarter of 2008, we reported a net loss of $7.9 million or $0.39 per share compared to a net loss in the Fourth Quarter of 2007 of $11.4 million or $0.56 per share. The total Research and Development expenses in the Fourth Quarter of 2008 were $3.2 million compared to $6.8 million in the Fourth Quarter of 2007. The decrease in R&D expenses in the Fourth Quarter compared to the same period in 2007 was primarily due to the lower employment and related costs following the workforce reduction in September last year. And to a lesser extent the appreciation of the US dollar against the British pound during the Fourth Quarter of 2008 as compared to 2007.

Total selling, general and administrative expenses amounted to $4 million for each of the four quarters of 2008 and 2007. For the Fourth Quarter of 2008, we recorded $0.3 million of net product sales of Xclair and Numoisyn, with the full year sales as previously mentioned at $0.8 million. For the year-ended December 31st, 2008, we reported a net loss of $40.4 million or $1.98 per share compared to a net loss for 2007 of $24.1 million or $1.21 per share. Total R&D expenses for the year-ended December 31st, 2008, were $18.9 million, compared to $19.6 million for the 2007 comparative period.

The decreased spending in 2008 compared to 2007 was primarily due to a decrease in pre-clinical and clinical trial expenses with respect to the CYC116 program and the cost savings from the workforce reduction in September 2008 offset by an increase in spending on the expansion of the Sapacitabine program to explore MDS as well as pre-clinical and product scale up. Total SG&A expenses for the year-ended December 31st, 2008, were $15.4 million compared to $12 million for 2007. The increased spending in 2008 compared to the same period in 2007 was primarily due to launch activities and related sales and marketing expenses of ALIGN. And this included nine months of amortization expense of $0.7 million related to intangible assets associated with the ALIGN acquisition in October 2007.

I would like to spend a moment to describe and explain the accounting related to both goodwill and intangible assets and the foreign exchange movements that are included in the financial results. Firstly, goodwill and intangible assets. As a consequence of the reduction in market capitalization of the Company during 2008, and our annual impairment review, we fully impaired goodwill acquired in the Xcyte and ALIGN transactions totaling approximately $4.3 million and intangible assets acquired in the ALIGN transaction totaling approximately $3.6 million. These non-cash amounts taken together is a $7.9 million you will see in our consolidated Statement of Operations on the goodwill and intangible impairment line. The goodwill was impaired in accordance with FAS 142, goodwill and other intangible assets, while the intangible assets were impaired in accordance with FAS 144, accounting for the impairment of disposal of long lived assets.

Regarding foreign exchange, during the year-ended December 31st, 2008, there were an unfavorable unrealized foreign exchange movements of approximately $17.2 million on intercompany loans between Cyclacel and its fully owned UK subsidiary, due to the increase in the strength of the US dollar against the British pound. While this non-cash item, $4.8 million is reported in the consolidated Statement of Operations within the line item foreign exchange gains and losses of $4.5 million with the offset of a realized gain of $0.3 million on transactions in the year in respect to underlying operations. The remaining $12.4 million is recognized on the Balance Sheet within stockholders equity and other comprehensive loss as these loans are considered as long term.

Turning to our Treasury Management we recorded interest income of $1.4 million in 2008 as compared to $3.6 million in 2007. This reduction was as a result of the Company taking a conservative position and reinvesting maturing short-term investments into cash and cash equivalents in 2008 which had a lower interest yield for security purposes together with lower average cash, cash equivalent and short-term investment balances during 2008 versus 2007.

Cash, cash equivalents and short-term investments totaled $25.7 million as of December 31st, 2008. The Company continues to thoughtfully consider appropriate ways to conserve its cash resources and expects that its cash resources will be sufficient to fund operations under current spending assumptions into the Second Quarter of 2010.

I'll now hand the call back to the operator.

(Operator Instructions). Your first question comes from the line of [Glen Jelic] with Needham & Company.

Hi, good afternoon. First I'd like to sort of discuss the A&L program with Sapacitabine. How do you define your registrational strategy for Sapacitabine in AML in terms of the competitive space in AML for elderly AML population?

Thank you for the question, Glen. I think the best way to answer your question is that there are a number of agents in front of the FDA for the indication of elderly AML. But in our view there are no orally available agents with the properties of Sapacitabine at this moment within the clinical trial horizon. [Producers don't] believe that the definition of competitive compounds is difficult to achieve in a succinct way as drugs have not necessarily been given in contrast to each other but possibly in consequence to each other. Either in sequential protocols or in potentially other yet to be seen appropriate regiments once physicians have a chance to use those regiments. At the moment there is no approved therapy, however, for the vast majority of these patients because as you know they are deemed to be untreatable by their physicians. As they tend to be too frail to tolerate existing chemotherapy. So we'll have to wait for a few quarters or perhaps years before the picture becomes clear as to what indeed would be the competitive entities in this area.

And in terms of the pivotal trial, I was wondering if you can give clarification about the combination of both AML and MDS patients? Will it be about 100 AML patients that will actually be sort of the data set and will it be an overall survival end point?

Judy?

The registration study for AML MDS single arm nature will have the end point of response rate. The exact sample size will be based upon the expected efficacy and activity level and will be worked out in consultations with out statistician in emergent data from our randomized Phase II trials.

And how does the response rate for MDS relate to that response rate for AML in terms of an end point, as their different diseases?

Well, I think that's a good question. I do not think that the response rate of either MDS AML can be mixed together if that's what your question is.

Yes.

The disease is -- no. We're not saying that we're going to mix them together and use the same end point. That's not what it is.

Thank you very much and one last clinical question. On the Seliciclib NPC program, when do you think we could expect the next data point? Any further granularity on that?

As we said, Glen, we will report the data at upcoming scientific meeting and there will be a Press Release to this effect soon.

Thank you very much and I'll get back into the queue.

Thank you, Glen.

The next question comes from the line of Terrence Flynn with Lazard Capital.

Hi, good afternoon. Thanks for taking the question. Just wondering how much of the design of your pivotal AML trial for Sapacitabine is predicated on the I guess one, the outcome of the September ODAC panel for Clolar? And then two on the overall survival rate at one year from your Phase II trial which you said you're expecting around October?

Right. Thank you for the question, Terrence. First of all, we do not depend on the survival study outcome, the primary end point being one year survival that will come out in October or later of 2009. As Judy already answered in response to the previous question, our primary end point in the pivotal trial is based on response. And that data is available to us today and will be reported in upcoming scientific meeting for everyone to see. As to other drugs in this space, I really cannot comment until we actually have the comments by FDA and the responses posted, at which point we can have an intelligent discussion.

Okay, but do you expect that panel to have a bearing on the response rate that you're going to use for the end point of your study? Or would you expect to have clarity I guess before the timing of that panel?

It's unclear when we'll have clarity, but certainly we feel very comfortable that our discussions with regulators so far we have the plan forward. What happens after the panel will only be known to us after we know what happens in the panel. At this point, it's very hard to tell whether any decisions or indeed recommendations by a panel to the agency will have a bearing on the drugs. It is our understanding that the agency reviews every drug on its own merits. And that there for may or may not be of relevance to this important question you pose.

Okay, and then what are your thoughts on an SPA for the pivotal?

At this point we have not made any announcements about pursuing an SPA. This of course is a desirable outcome for any Company in our space but it does come with a penalty since the FDA at the moment is very busy. We will therefore make a decision and announce it probably at the time that we have clarified our precise design for the pivotal study.

Okay, great. Thanks a lot.

Thank you, Terrence.

Your next question comes from the line of George Zavoico with Westport Capital Markets.

Hi, Spiro. And Judy, and Corey, and Paul. I have a question about the ALIGN business. Is it progressing and advancing as you expect and how close do you think you are until it breaks even?

Thank you for the question, George. We are seeing progress in terms of market share growth, in terms of the Fourth Quarter 2009, excuse me, 2008, versus the same quarter 2007. We continue to gain market share as far as we can trust third party information. And we continued to achieve major successes like getting the product listed in formularies of major centers. For example, Xclair is the only product for indication on radiation Dermatitis listed on formulary at such centers as MD Anderson and Cornell Weill Medical Center in New York. This suggests to us that this is a product with enormous appeal to investigators, nurses, as well as patients and we there for expect that it will continue to sequentially record incremental sales. As far as the breakeven question you pose is concerned, we estimate this to happen within 2009 and will give further guidance as data comes through the course of the year.

Okay, thank you. Good luck with it.

Thank you, George.

(Operator Instructions). There are no audio questions at this time.

Thank you, operator, and thank you all for participating in today's call, and our review of today's earnings announcement. We look forward to seeing and talking to many of you soon and keeping you up-to-date on our progress. Operator, at this time, please end the call.

This concludes today's conference call. You may now disconnect your lines.