Cyclacel Pharmaceuticals Inc (CYCC) 2010 Q3 法說會逐字稿

Good afternoon. My name is Melissa, and I will be your conference operator today. At this time I would like to welcome everyone to the Cyclacel Pharmaceuticals third quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background. After the speakers' remarks there will be a question and answer session. (Operator Instructions).

I will now turn the conference over to Corey Sohmer. Please go ahead.

Thank you. Good afternoon, and welcome to our quarterly conference call.

On the call today are Spiro Rombotis, President and CEO of Cyclacel Pharmaceuticals; Paul McBarron, Executive Vice President and Chief Operating Officer; and Dr. Judy Chiao, Vice President, Clinical Development and Regulatory Affairs.

During today's call members of our senior management team will review Cyclacel's financial performance and business highlights for the third quarter of 2010.

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 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 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.

At this time I would like to turn the call over to Cyclacel's President and Chief Executive Officer, Spiro Rombotis.

Thank you Corey. Good afternoon to everyone, and thank you for joining us on today's call.

By now we hope you've had the opportunity to review this afternoon's press release. We were very pleased to announce during the quarter that we reached an agreement with the US Food and Drug Administration, or FDA, regarding a special protocol assessment, or SPA, on the design of a pivotal clinical trial, called SEAMLESS, for oral sapacitabine capsules as a front-line treatment in elderly patients aged 70 years or older with newly diagnosed AML who are not candidates for intensive induction chemotherapy.

The SEAMLESS trial is a randomized registration directed Phase 3 clinical trial of sapacitabine.

The primary objective of SEAMLESS is to demonstrate an improvement in overall survival compared against an active control drug.

We have been working diligently to prepare for the study's initiation. Over the last few weeks we have been in discussions with many clinical study sites and investigators.

We were pleased to learn that the key features of the SEAMLESS design are acceptable to AML investigators. These investigators include those who participated in the sapacitabine Phase 2 trials, as well as those new to sapacitabine.

We look forward to report further developments as the study gets underway.

Over the last 12 months, four other drugs competing for the AML indication have failed to reach the market, at least so far. Clofarabine and laromustine were rejected by FDA and its advisory panel at the end of last year. More recently, lintuzumab, clofarabine and [nifedipine] failed to improve over survival in randomized Phase 2 and Phase 3 studies, respectively.

A fifth drug, gemtuzumab ozogamicin -- or GO, as doctors call it -- was withdrawn from the market this past summer after it failed to demonstrate a survival advantage in a confirmatory trial.

These developments may have obvious commercial implications and may also enhance patient enrollment as SEAMLESS gets underway.

If SEAMLESS is successful and a new drug application, or NDA, is approved, sapacitabine may be the first oral agent to reach the market in the AML setting and address an area of unmet medical need.

In addition to our work in AML, we have been making progress with sapacitabine as a second line treatment in patients with myelodysplastic syndromes, or MDS.

At the forthcoming annual meeting of the American Society of Hematology, or ASH, we will release primary endpoint data for one year survival from a Phase 2 trial of sapacitabine in older patients with MDS.

Patients were eligible for this study if they have failed either of the two approved hypomethylating agents, azacitidine or decitabine, or both, in which case we refer to them as double refractory patients.

The Phase 2 MDS study is a three arm study testing different dosing regimens of sapacitabine in this difficult to treat population with the objective of selecting an optimal schedule if more than one schedule is active.

We have also continued to make progress with our Phase 2 study of sapacitabine in non-small cell lung cancer and are approaching completion of this study's initial phase.

In this phase of the study, we're testing escalating doses of sapacitabine in patients who have failed multiple treatments, with the objective of finding the highest dose at which the drug can be given safely to patients with non-small cell lung cancer.

These patients present different treatment challenges than patients with hematologic malignancies.

If it is successful our solid tumor program, including but not limited to non-small cell lung cancer, may open a whole new set of opportunities for further commercial development of sapacitabine. Of relevance to these future prospects is the potential for sapacitabine to be combined with other targeted agents to treat cancer.

A recently published paper demonstrated that sapacitabine works synergistically with histone deacetylase, or HDAC inhibitors, in preclinical models of AML.

Three HDAC inhibitors are commercially available at present.

Another recent publication demonstrated that sapacitabine synergizes with agents interfering with DNA repair, such as ATM, BRCA1 or BRCA2, and [part] inhibitors, some of which are in late stage clinical development.

In addition to our work with sapacitabine, we also look forward to reporting topline results from the APPRAISE non-small cell lung cancer Phase 2b trial with seliciclib, our oral CDK inhibitor.

We have continued to develop our pipeline of CDK inhibitors through our own work and with collaborators.

At this year's American Association for Cancer Research annual meeting, six posters highlighted our diverse oncology targeted pipeline, including data on CYC065, a second-generation CDK inhibitor which demonstrated activity against drug resistant cancers such as breast cancer, resistant to trastuzumab, or Herceptin.

With regard to our commercial products, at the recent annual meeting of the American Society for Therapeutic Radiology and Oncology, we received positive feedback from oncologists, radio therapists, nurses and patients with respect to the clinical benefits of Xclair cream for dermatosis, such as radiation dermatitis, and our Numoisyn product line for xerostomia, or dry mouth.

The underlying demand for these products remains consistent with our experience to date.

Before turning the call over to Paul, I will review our priorities for the next several quarters.

Present Phase 2 one-year survival data of sapacitabine in patients with MDS at the 2010 annual meeting of the American Society of Hematology.

Initiate the SEAMLESS Phase 3 study of sapacitabine in elderly patients with AML.

Report topline results from the APPRAISE non-small cell lung cancer Phase 2b trial of seliciclib.

And report interim data of sapacitabine in patients with non-small cell lung cancer.

At this time, I would like to turn the call over to Paul McBarron to discuss our financial results. Paul?

Thank you Spiro, and good afternoon everyone.

From a financial perspective, we continue to spend our cash resources in an effective manner while focusing our priorities on the advancement of sapacitabine, our lead drug candidate.

We strengthened our balance sheet in October by closing a financing, which brought net proceeds to the company of $14.1 million.

Taken together with our cash and cash equivalents at September 30, we have approximately $33 million of cash.

As you may have seen from today's press release of our consolidated financial statements, for the three months ended September 30, 2010, we reported a net loss applicable to common shareholders of $4 million or $0.11 per share, as compared to a net loss of $3.4 million or $0.15 per share for the same period in 2009.

For the nine months ended September 30, 2010, we reported a net loss applicable to common shareholders of $16.3 million or $0.47 per share, as compared to a net loss of $16.2 million or $0.76 per share for the same period of 2009.

Our total operating expenses for the third quarter increased to $4.2 million, compared to $3.7 million for the same period in 2009.

And our research and development expenses were $1.5 million, as compared to $1.4 million for the third quarter of 2009.

Selling, general and administrative expenses were $2.7 million, compared to $2.2 million for the third quarter of 2009 due to an increase in professional and consultancy costs.

In conclusion, we continue to be disciplined in managing our cash resources, and we ended the third quarter with $18.5 million.

As mentioned, in early October we received net proceeds of $14.1 million from a financing transaction, with the potential to receive an additional $6.5 million in net proceeds if investors choose to exercise their right to purchase additional units in the nine-month period following closing.

Our cash resources on a pro forma basis -- that is, taking aggregate of our cash and cash equivalents at September the 30th and the financing proceeds in October -- stand at $32.6 million.

Before I turn the call back to the operator for questions, I would like to mention that our President and CEO, Spiro Rombotis, will be presenting at the upcoming Lazard Capital Markets seventh annual healthcare conference next Wednesday, November 17.

Operator, please open the lines for questions.

(Operator Instructions) Francis (inaudible), Morgan Stanley.

(technical difficulty) preferred shareholders and that whole process of Board of Directors being elected?

I'm sorry. We didn't hear the first part of your question. Would you be so kind to repeat?

I apologize. Can you offer any insight on -- to what the status is with the preferred shareholders and where that is going as far as trying to get people elected to the Board of Directors?

All we have said is a matter of public record. The preferred shareholders are entitled to appoint two Directors in an expanded Board of nine members, from the current seven. This right crystallized in August of this year.

As you know, the proxy process that the company and the preferred Directors were nominated for was not successful in reaching a quorum, and for this reason, after an adjournment for about 30 days, the company made a decision to not adjourn further this process until perhaps the annual meeting has taken place early next year.

So this is where that discussion stands.

Obviously we take the rights of our preferred shareholders very seriously, in exactly the same way we take the common shareholder rights, and we look forward to further developments in this matter.

Okay. So you don't see anything really taking place until the annual meeting?

I can't speak to that. This is up to the preferred shareholder class.

Okay, very good. Can you comment on anything as far as looking at the idea of the world of either partnering or something for the company to facilitate some of our studies?

Well, as we have discussed many times before in this forum, partnering opportunities are something we do not discuss until after those deals are signed.

But what we can say is that sapacitabine is a very exciting asset. This appears to be a drug now that originally faced substantial competition, and as I mentioned earlier in my remarks, at least for the moment, some of this competition has encountered difficulties, which in the very least should be of help to us in terms of our ability to enroll the SEAMLESS Phase 3 trial.

At any point in time during this process, parties may decide to approach us and to have further discussions, but as you can understand, we cannot have a detailed explanation of these discussions in an open forum.

Understood. I look forward to your success.

Tim Braum, private investor.

I just wanted to comment on your SPA that you're working with the FDA with your Phase 3 trial drug coming up. You've already mentioned how it's giving you an advantage, and I just wanted to ensure and compliment your company for actually going and getting a SPA so you can actually work with the FDA and get approval.

Pretty much my question was answered by the Morgan Stanley gentleman, and that was as far as partnering with a larger pharmaceutical company, shall we get approval from the NDA that is submitted, as far as the options and things so we can hit the market really well, since it seems some of the competition has been sidelined with FDA rejections. And that was pretty much -- my question was as far as on additional pharmaceutical companies that have shown interest in our company and in any potential buyout of our company, or relationships and how that goes with you in your Board of Directors.

Thank you for your question. We cannot discuss partnering, ongoing processes that may be taking place in any time. As I mentioned, we'd only announce those after they are signed.

There is no question that you have a point with which I totally agree, that receiving a SPA agreement from the FDA reduces the risk that if the company or any company invests in a pivotal study development for a compound, they arrive at the finish line and the regulators have potentially decided to change their mind.

It does not eliminate this risk, but it does reduce it a lot. And that clearly is an important for the Cyclacel team and Dr. Chiao, who is sitting across the table from me, for achieving that SPA agreement.

Thank you very much. That's a great achievement, gentlemen. Keep up the great work.

Thank you.

(Operator Instructions) [Kevin Fields], [Kel-Craig].

Hello gentlemen and ladies. My question is quite simple in nature. I was just thinking that with all of the good fortune that we have all shared in, the SPA for example, and the fact that our competitors have basically imploded, why hasn't that really been reflected in the current PPS or the stock price, as it is?

Mr. Fields, we cannot comment on what moves stock prices up or down now. We can therefore only answer questions related to our drug development program and business issues.

Stock market gyrations are certainly beyond our control, so I'm not sure I can give you any more insight as to what happens to the stock price over time.

If you have a question on our business, I will be happy to answer it, or any of my colleagues, for that matter.

No, you answered it. Thank you.

Edward Schwartz, private investor.

This is for Spiro Rombotis. Over the past year I think you've had to issue secondary offerings to raise capital, and you have chosen not to pay the interest to the preferred shareholders. Mr. Rombotis, how do you justify a $500,000 a year salary, where you're not paying your shareholders and investors?

Mr. Schwartz, thank you very much for your question. I'm not going to comment on this question.

Well, I'd like to say that I think that is an awfully high salary where you're not paying your prepared shareholders. And maybe that is the reason why your stock is trading at such a low level. Thank you.

Thank you sir.

At this time there are no further questions. I will turn it back to management for closing remarks.

Thank you operator. And thank you for joining us for today's quarterly review conference call.

In closing we're excited to have reached a SPA agreement with the FDA and are now working hard to open the SEAMLESS Phase 3 trial in front-line AML.

We appreciate the support of the institutional investors who participated in our recent financing and believe that our pipeline, led by sapacitabine, in development for multiple indications, has outstanding growth potential.

Thank you for your continued support of our efforts.

Operator, at this time please conclude the call.

Thank you for participating in today's conference call. You may now disconnect.