CYCLACEL PHARMACEUTICALS, INC. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including, without limitation, Management's Discussion and Analysis of Financial Condition and Results of Operations, contains "forward-looking statements" within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend that the forward-looking statements be covered by the safe harbor for forward-looking statements in the Exchange Act. The forward-looking information is based on various factors and was derived using numerous assumptions. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are usually accompanied by words such as "believe," "anticipate," "plan," "seek," "expect," "intend" and similar expressions. Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors, including those set forth in Part I, Item 1A, entitled "Risk Factors," of our Annual Report on Form 10-K for the year endedDecember 31, 2021 , as updated and supplemented by Part II, Item 1A, entitled "Risk Factors," of our Quarterly Reports on Form 10-Q, and elsewhere in this report. In addition, while we expect the coronavirus pandemic to have an impact on our business operations and financial results, the extent of the impact on our clinical development and regulatory efforts, our corporate development objectives, our financial position and the value of and market for our common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, the emergence of new geographic hotspots, the re-emergence of subsequent outbreaks, travel restrictions, quarantines, social distancing and business closure requirements inthe United States and in other countries, and the effectiveness of actions taken globally to contain and treat the disease. These factors as well as other cautionary statements made in this Quarterly Report on Form 10-Q, should be read and understood as being applicable to all related forward-looking statements wherever they appear herein. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our judgment as of the date hereof. We encourage you to read those descriptions carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by law. Such forward-looking statements are not guarantees of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking statements. In this report, "Cyclacel ," the "Company," "we," "us," and "our" refer toCyclacel Pharmaceuticals, Inc.
Overview
We are a clinical-stage biopharmaceutical company working to develop innovative cancer medicines based on cell cycle, transcriptional regulation and mitosis control biology. We are a pioneer company in the field of cancer cell cycle biology with a vision to improve patient healthcare by translating insights in cancer biology into medicines that can overcome resistance and ultimately increase a patient's overall survival. Our primary focus has been on our transcriptional regulation program, which is evaluating fadraciclib, a CDK2/9 inhibitor, in solid tumors and hematological malignancies. In addition, the anti-mitotic program is evaluating CYC140, a PLK1 inhibitor, in advanced cancers. We are evaluating oral fadraciclib and CYC140 in Phase1/2 streamlined studies the aim of which is to assess safety and identify signals of clinical activity which may lead to registration-enabling outcomes.
Fadraciclib Phase 1/2 Study in Advanced Solid Tumors and Lymphomas (065-101; NCT#04983810)
In this ongoing study, seventeen patients have been treated in five dose escalation levels so far. The proof-of-concept stage includes 7 histologically defined cohorts thought to be sensitive to the drug's mechanism: breast,
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colorectal (including KRAS mutant), endometrial/ uterine, hepatobiliary, ovarian cancers and lymphomas. An additional basket cohort will enroll patients regardless of histology with biomarkers relevant to the drug's mechanism, including MCL1, MYC and/or cyclin E amplified.
Fadraciclib Phase 1/2 Study in Hematological Malignancies (065-102; NCT#05168904)
In this ongoing study six patients have been treated in the first dose escalation level. The proof-of-concept stage, where fadraciclib will be administered both as a single agent as well as in combination, includes 7 histologically defined cohorts which will include patients with acute myeloid leukemia (AML) or myelodysplastic syndromes (MDS) who have an inadequate response or have progressed on venetoclax combinations with hypomethylating agent (HMA) or low dose Ara C; relapsed/refractory AML or MDS patients. The trial will also include patients with CLL who have progressed after at least two lines of therapy including a BTK inhibitor and/or venetoclax.
CYC140 Phase 1/2 Study in Advanced Solid Tumors and Lymphomas (140-101; NCT#05358379)
The first patient was dosed in this study inApril 2022 , with a total of three patients treated in the first dose escalation level. Similar to fadraciclib this Phase 1/2 registration-directed trial uses a streamlined design and will first determine in a dose escalation stage the recommended Phase 2 dose (RP2D) for single-agent CYC140. Once RP2D has been established, the trial will immediately enter into proof-of-concept, cohort stage, using a Simon 2-stage design. In this stage CYC140 will be administered to patients in up to 7 mechanistically relevant cohorts including patients with bladder, breast, colorectal (including KRAS mutant), hepatocellular and biliary tract, and lung cancers (both small cell and non-small cell), as well as lymphomas. An additional basket cohort will enroll patients with biomarkers relevant to the drug's mechanism, including MYC amplified tumors. The protocol allows for expansion of individual cohorts based on response which may allow acceleration of the clinical development and registration plan for CYC140.
We currently retain virtually all marketing rights worldwide to the compounds associated with our drug programs.
Results of Operations
Three and Six Months Ended
Revenues
Revenues for each of the three and six months ended
The future
There are no active collaboration, licensing, or clinical supply agreements and we do not anticipate any revenues for the foreseeable future.
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Research and development expenses
From our inception, we have focused on drug discovery and development programs, with a particular emphasis on orally available anticancer agents, and our research and development expenses have represented costs incurred to discover and develop novel small molecule therapeutics, including clinical trial costs for fadraciclib and CYC140, as well as other compounds such as sapacitabine and seliciclib. We have also incurred costs in the advancement of product candidates toward clinical and preclinical trials and the development of in-house research to advance our biomarker program and technology platforms. We expense all research and development costs as they are incurred. Research and development expenses primarily include:
? Clinical trial and regulatory-related costs;
? Payroll and personnel-related expenses, including consultants and contract
research organizations;
? Preclinical studies, supplies and materials;
? Technology license costs;
? Stock-based compensation; and
? Rent and facility expenses for our offices.
The following table provides information with respect to our research and
development expenditures for the three and six months ended
Three Months Ended Six Months Ended
June 30, Difference June 30, Difference
2022 2021 $ % 2022 2021 $ %
Transcriptional Regulation
(fadraciclib) $ 2,583 $ 2,776 $ (193) (7) $ 6,228 $ 4,439 $ 1,789 40
Anti-mitotic (CYC140) 1,459 1,107 352 32 2,581 1,785 796 45
DNA Damage Response
(sapacitabine) 11 80 (69) (86) 51 173 (122) (71)
Other research and
development expenses 152 138 14 10 299 270 29 11
Total research and
development expenses $ 4,205 $ 4,101 $ 104 3 $ 9,159 $ 6,667 $ 2,492 37
Total research and development expenses for the three and six months ended
Research and development expenses increased by$2.5 million from$6.7 million for the six months endedJune 30, 2021 to$9.2 million for the six months endedJune 30, 2022 . Expenditure for the transcriptional regulation program increased by$1.8 million for the six months endedJune 30, 2022 , relative to the respective comparative period. This was due to an increase in clinical trial costs of$2.2 million associated with the progression of clinical trials for the evaluation of fadraciclib in Phase 1/2 studies, offset by a decrease in non-clinical expenditure of$0.4 million . Research and development expenses relating to CYC140 increased by$0.8 million for the six months endedJune 30, 2022 , relative to the respective comparative period. This was due to an increase in clinical trial costs of$1.4 million associated with the progression of clinical trials for the evaluation of CYC140 in Phase 1/2 studies, offset by a decrease in non-clinical expenditure of$0.6 million .
The future
We continue to anticipate that overall research and development expenses for
the year ended
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General and administrative expenses
General and administrative expenses include costs for administrative personnel,
legal and other professional expenses and general corporate expenses. The
following table summarizes the general and administrative expenses for the
three and six months ended
Three Months Ended Six Months Ended
June 30, Difference June 30, Difference
2022 2021 $ % 2022 2021 $ %
Total general and
administrative expenses $ 1,580 $ 1,999 $ (419) (21) $ 3,185 $ 3,738 $ (553) (15)
Total general and administration expenses for the three and six months ended
June 30, 2022 represented 27% and 26% of our operating expenses respectively
representing a decrease over the respective prior periods.
During both the three and six months ended June 30, 2022 , the decrease in
general and administrative expenses was primarily due to a $0.4 million reverse
premium in relation to assignation of the lease facility in Dundee, Scotland
which was recognized during the second quarter of 2021. The decrease in general
and administrative expenses during the six months ended June 30, 2022 relative
to the corresponding prior year period was also a result of reductions in legal,
professional and recruitment costs relating to expansion of the clinical team
that were incurred in the first half of 2021.
The future
We expect general and administrative expenditures for the year ended
Other income (expense), net
The following table summarizes other income for the three and six months ended
Three Months Ended Six Months Ended
June 30, Difference June 30, Difference
2022 2021 $ % 2022 2021 $ %
Foreign exchange gains $ 209 $ (13) $ 222 (1,708) $ 238 $ (3) $ 241 (8,033)
Interest income 17 4 13 325 21 8 13 163
Other income, net - 18 (18) (100) 1,280 144 1,136 789
Total other income $ 226 9 $ 217 2,411 $ 1,539 149 $ 1,390 933
Total other income increased by $1.4 million from $0.1 million for the
six months ended June 30, 2021 to $1.5 million for the six months ended June 30,
2022 . Other income relates to royalties receivable under a December 2005 Asset
Purchase Agreement, or APA, whereby Xcyte Therapies, Inc. , or Xcyte (a business
acquired by us in March 2006 ) sold through the APA and other related agreements
certain assets and intellectual property which are not related to our product
development plans to ThermoFisher Scientific Company , or TSC . Accordingly, we
presented $1.3 million and $144,000 as other income received from TSC during the
six months ended June 30, 2022 and 2021 respectively.
Foreign exchange gains (losses)
Foreign exchange gains increased by$0.2 million , from a loss of$3,000 for the six months endedJune 30, 2021 , to a gain of$0.2 million for the six months endedJune 30, 2022 . 23 Table of Contents The future Other income (expense), net for the year endedDecember 31, 2022 , will continue to be impacted by changes in foreign exchange rates and the receipt of income under the APA. As we are not in control of sales made by TSC, we are unable to estimate the level and timing of income under the APA, if any. Because the nature of funding advanced through intercompany loans is that of a long-term investment, unrealized foreign exchange gains and losses on such funding will be recognized in other comprehensive income until repayment of any intercompany loan becomes foreseeable.
Income tax benefit
Credit is taken for research and development tax credits, which are claimed from
the
The following table summarizes total income tax benefit for the three and six
months ended
Three Months Ended Six Months Ended
June 30, Difference June 30, Difference
2022 2021 $ % 2022 2021
$ %
Total income tax benefit
The total income tax benefit, which comprised of research and development tax credits recoverable, increased by approximately$0.5 million from$1.6 million for the six months endedJune 30, 2021 to$2.1 million for the six months endedJune 30, 2022 . The level of tax credits recoverable is linked directly to qualifying research and development expenditure incurred in any one year and the availability of trading losses.
The future
We expect to continue to be eligible to receiveUnited Kingdom research and development tax credits for the foreseeable future and will continue to elect to receive payment of the tax credit. The amount of tax credits we will receive is entirely dependent on the amount of eligible expenses we incur and could be restricted by any future cap introduced by HMRC. As we expect our eligible expenses to be higher in the fiscal year endedDecember 31, 2022 , the level of tax credits recoverable is anticipated to be higher in 2022 compared to the prior year.
Liquidity and Capital Resources
The following is a summary of our key liquidity measures as ofJune 30, 2021 and 2022 (in $000s): June 30, 2022 2021 Cash and cash equivalents$ 29,077 $ 43,639 Working capital: Current assets$ 32,077 $ 46,203 Current liabilities (5,026) (3,118) Total working capital$ 27,051 $ 43,085
Since our inception, we have relied primarily on the proceeds from sales of common and preferred equity securities to finance our operations and internal growth. Additional funding has come through research and development tax credits, government grants, the sale of product rights, interest on investments and licensing revenue. We have incurred significant losses since our inception. As ofJune 30, 2022 , we had an accumulated deficit of$393.6 million . 24 Table of Contents Cash Flows
Cash from operating, investing and financing activities for the six months ended
Six Months Ended June 30,
2022 2021
Net cash used in operating activities
(7) (16)
Net cash provided by financing activities 1,424 17,946 Operating activities
Net cash used in operating activities increased by$0.9 million , from$7.8 million for the six months endedJune 30, 2021 to$8.7 million for the six months endedJune 30, 2022 . The increase in cash used by operating activities was primarily the result of a change in working capital of$0.9 million , a change in lease liability of$0.1 million , and an increase in net loss of$0.1 million , offset by an increase of stock compensation expense of$0.2 million .
Investing activities
Net cash used by investing activities decreased by$9,000 for the six months endedJune 30, 2022 due to capital expenditures on information technology (IT) during the respective comparative period.
Financing activities
Net cash provided by financing activities was$1.4 million for the six months endedJune 30, 2022 as a direct result of receiving approximately$1.5 million , net of expenses, from the issuance of common stock under the Sales Agreement withCantor Fitzgerald & Co. , offset by dividend payments of approximately$0.1 million to the holders of our 6% Preferred Stock. Net cash provided by financing activities was$17.9 million for the six months endedJune 30, 2021 as a direct result of receiving approximately$13.5 million in net proceeds from the issuance of common stock under an underwriting agreement withOppenheimer & Co. Inc. , and approximately$4.5 million from warrant exercises associated with a co-placement agency agreement withRoth Capital Partners, LLC ,Ladenburg Thalmann & Co. Inc. , andBrookline Capital Markets , a division ofArcadia Securities, LLC , offset by dividend payments of approximately$0.1 million to the holders of our 6% Preferred Stock.
Operating Capital and Capital Expenditure Requirements
We expect to continue to incur substantial operating losses in the future and cannot guarantee that we will generate any significant product revenues until a product candidate has been approved by theFood and Drug Administration ("FDA") orEuropean Medicines Agency ("EMA") in other countries and successfully commercialized. We believe that existing funds together with cash generated from operations, such as recent financing activities and the R&D tax credit, are sufficient to satisfy our planned working capital, capital expenditures and other financial commitments into the second half of 2023. However, we do not currently have sufficient funds to complete development and commercialization of any of our drug candidates. Current business and capital market risks could have a detrimental effect on the availability of sources of funding and our ability to access them in the future, which may delay or impede our progress of advancing our drugs currently in the clinical pipeline to approval by the FDA or EMA for commercialization. Additionally, we plan to continue to evaluate in-licensing and acquisition opportunities to gain access to new drugs or drug targets that would fit with our strategy. Any such transaction would likely increase our
funding needs in the future.
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Our future funding requirements will depend on many factors, including but not limited to:
? the rate of progress and cost of our clinical trials, preclinical studies and
other discovery and research and development activities;
? the costs associated with establishing manufacturing and commercialization
capabilities;
? the costs of acquiring or investing in businesses, product candidates and
technologies;
? the costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
? the costs and timing of seeking and obtaining FDA and EMA approvals;
? the effect of competing technological and market developments; and
? the economic and other terms and timing of any collaboration, licensing or
other arrangements into which we may enter; the extent to which the coronavirus impacts our financial condition and
operations, which will depend on future developments that are highly uncertain
and cannot be predicted with confidence, including the ultimate duration of the
? pandemic, the emergence of new geographic hotspots, the re-emergence of
subsequent outbreaks, travel restrictions, quarantines, social distancing and
business closure requirements in
the effectiveness of actions taken globally to contain and treat the disease.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. Although we are not reliant on institutional credit finance and therefore not subject to debt covenant compliance requirements or potential withdrawal of credit by banks, we are reliant on the availability of funds and activity in equity markets. We do not know whether additional funding will be available on acceptable terms, or at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or make changes to our operating plan. In addition, we may have to partner one or more of our product candidates at an earlier stage of development, which would lower the economic value of those programs to us.
Impact of COVID-19
The COVID-19 pandemic has led to global supply chain challenges, which have
negatively impacted the availability and cost of materials. The global outbreak
of COVID-19 has also adversely affected our clinical trials with regards to the
pace of patient enrollment as a result of restrictions on travel and/or
transport of clinical materials, as well as diversion of hospital staff and
resources to COVID-19 infected patients. The extent to which COVID-19 will
continue to impact our business will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, such as the duration
of the pandemic, the severity of COVID-19 or new variants or the effectiveness
of actions to contain and treat COVID-19 and its variants, particularly in the
geographies where we or our third-party suppliers, contract manufacturers, or
contract research organizations operate. At this time, we are unable to fully
estimate the impact of the pandemic or current geopolitical turmoil on its
financial condition or operations, but either or both could materially affect
our ability to raise future capital or to conduct clinical studies on a timely
basis.
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Critical Accounting Policies and Estimates
Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our consolidated financial statements. We evaluate our estimates, judgments, and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. A summary of our critical accounting policies is presented in Part II, Item 7, of our Annual Report on Form 10-K for the year endedDecember 31, 2021 and Note 2 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. There have been no material changes to our critical accounting policies during the three months endedJune 30, 2022 .
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