Cyclacel(CYCC) - 2021 Q4 - Annual Report

PART I - The company is a clinical-stage biopharmaceutical firm developing cancer medicines based on cell cycle, transcriptional regulation, and mitosis control biology[14] - The main clinical programs are evaluating fadraciclib (CDK2/9 inhibitor) and CYC140 (PLK1 inhibitor) in various cancers[15] - Cyclacel's strategy involves building a diversified pipeline, retaining commercialization rights, and entering into selective partnerships[16] Business Cyclacel is a clinical-stage biopharmaceutical company developing cancer medicines focused on cell cycle, transcriptional regulation, and mitosis control biology Clinical Development Pipeline The company's pipeline focuses on oral formulations of fadraciclib and CYC140 in Phase 1/2 studies for various cancers Clinical Development Pipeline Summary | Program | Drug Candidate | Indication | Phase | | :--- | :--- | :--- | :--- | | Transcriptional Regulation | Fadraciclib (oral) | Solid tumors | Phase 1/2 (in progress) | | | Fadraciclib (oral) | Leukemias | Phase 1/2 (in progress) | | Mitosis Regulation | CYC140 (oral) | Solid tumors | Phase 1/2 (in progress) | | | CYC140 (oral) | Leukemias | Phase 1/2 (in planning) | | DNA Damage Response | Sapacitabine (oral) | AML/MDS with venetoclax | Phase 1/2 (recruitment completed) | - The company has transitioned its lead drug candidates, fadraciclib and CYC140, from intravenous to oral administration for current and planned Phase 1/2 clinical studies[24] - Cyclacel retains all global marketing rights for its clinical-stage compounds, with the exception of sapacitabine in Japan[26] Transcriptional Regulation Program - Fadraciclib Fadraciclib is a selective CDK2/9 inhibitor targeting cancer pathways, with two oral Phase 1/2 trials underway for solid tumors and leukemias - Fadraciclib is a selective CDK2/9 inhibitor that causes apoptotic death in cancer cells by suppressing the MCL1-mediated survival pathway and can reverse drug resistance associated with cyclin E addiction[38] - A Phase 1/2 trial (CYC065-101) is evaluating oral fadraciclib in patients with various solid tumors and lymphomas, including breast, colorectal, and ovarian cancers, with a basket cohort for patients with specific biomarkers (MCL1, MYC, cyclin E)[41] - A separate Phase 1/2 trial (CYC065-102) is evaluating oral fadraciclib in patients with leukemias (AML, CLL) and MDS, both as a single agent and in combination with other therapies[50][51][53] - Preclinical data indicate fadraciclib may be effective against KRAS-mutated cancers (colorectal, lung, pancreatic) and can synergize with venetoclax in leukemia models[58][61] Mitosis Regulation Program - CYC140 CYC140 is a novel, selective PLK1 inhibitor with potent anti-cancer activity, currently in a Phase 1/2 trial for solid tumors - CYC140 is a novel, selective PLK1 inhibitor with potent anti-cancer activity demonstrated in preclinical models[66] - A Phase 1/2 registration-directed trial (CYC140-101) is underway to evaluate oral CYC140 in advanced solid tumors and lymphomas, with plans for a subsequent study in hematological malignancies[68][69] - Preclinical data show CYC140 preferentially induces growth inhibition and cell death in malignant cells compared to non-malignant cells[71][72] DNA Damage Response Program - Sapacitabine Sapacitabine is an orally available nucleoside analog, with a Phase 3 trial not meeting its primary endpoint but showing subgroup potential, and a Phase 1/2 combination study completed - The randomized Phase 3 SEAMLESS trial of sapacitabine in elderly AML patients did not meet its primary endpoint of overall survival, but showed a trend toward improvement in a subgroup with low baseline white blood cell counts[81] - The company has received consistent scientific advice from three European regulatory authorities regarding a potential approval pathway for sapacitabine based on subgroup analyses from the SEAMLESS trial[83] - A Phase 1/2 study evaluating an oral combination of sapacitabine with venetoclax in patients with relapsed or refractory AML or MDS has dosed 13 patients[77] Competition The company faces intense competition from large pharmaceutical and biotech firms with greater resources in the highly competitive biopharmaceutical industry - The company faces intense competition from commercial, pharmaceutical, and biotechnology companies, many of which have significantly greater financial and development resources[128] - Competitors with CDK or MCL1 inhibitors include Amgen, AstraZeneca, Eli Lilly, Pfizer, and Novartis. Cardiff Oncology has a competing PLK1 inhibitor in trials[129] Risk Factors The company faces significant risks including uncertain clinical trial outcomes, reliance on third parties, extensive regulation, financial losses, and intellectual property challenges Risks Associated with Development and Commercialization of Our Drug Candidates Success depends on clinical trial outcomes, third-party reliance, regulatory approvals, market acceptance, and intense competition, all posing significant risks - Clinical trials are expensive, time-consuming, and subject to delays and uncertain outcomes. The SEAMLESS Phase 3 study failing to meet its primary endpoint is cited as an example of negative results[142] - The company has no manufacturing capacity and relies on third-party manufacturers for clinical and potential commercial supply, creating dependence and risk of delays or shortages[148] - Drug candidates are subject to extensive, costly, and time-consuming regulation by the FDA and EMA, with no guarantee of approval[151] - The company faces intense competition from numerous companies with greater resources, and its drug candidates may be rendered obsolete or noncompetitive[155] Risks Related to Our Business and Financial Condition The company has a history of operating losses, requires substantial additional funding, and faces risks from economic conditions and the COVID-19 pandemic - The company has a history of operating losses, with an accumulated deficit of $385.0 million as of December 31, 2021, and may never become profitable[179] - Substantial additional capital will be required to complete drug development. Future financing may not be available on reasonable terms and could cause significant stockholder dilution[173] - The COVID-19 pandemic has adversely affected clinical trials by delaying operations and impacting patient recruitment and enrollment[188] - The United Kingdom's withdrawal from the European Union (Brexit) could disrupt markets, change tax benefits, and lead to legal uncertainty and increased regulatory complexity[176] Risks Related to our Intellectual Property Commercial success relies on obtaining and defending patent and trade secret protection, but faces risks of invalidation, infringement claims, and difficulty protecting proprietary information - Commercial success depends on obtaining and maintaining patent and trade secret protection, but legal protections are limited and may not provide a competitive advantage[191][193] - The company may be subject to costly litigation or other proceedings relating to intellectual property rights, which could result in substantial damages or prevent commercialization of products[197] - Third-party intellectual property rights could increase costs or prevent the commercialization of drug candidates, potentially requiring the company to obtain licenses or redesign products[195] Properties The company leases its corporate headquarters in Berkeley Heights, New Jersey, and considers its current facilities adequate for business needs - The company leases its corporate headquarters in Berkeley Heights, New Jersey, and considers its current facilities adequate[222] Legal Proceedings As of December 31, 2021, Cyclacel Pharmaceuticals, Inc. was not a party to any material legal proceedings - As of December 31, 2021, the company was not party to any material legal proceedings[223] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'CYCC', with no anticipated common stock dividends, but required preferred stock dividends - Common stock is traded on The Nasdaq Capital Market under the symbol "CYCC"; preferred stock trades under "CYCCP"[226] - As of March 24, 2022, there were 9,993,135 shares of common stock outstanding[227] - The company has never paid cash dividends on common stock and does not plan to in the foreseeable future, but is required to pay dividends on its Preferred Stock[229] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $18.9 million in 2021 due to increased R&D and G&A expenses, with existing cash sufficient into mid-2023 Results of Operations In 2021, the company reported no revenues, a 225% surge in R&D expenses, a 27% rise in G&A expenses, and a significant increase in income tax benefit - There were no revenues for the years ended December 31, 2020 and 2021[246] Research and Development Expenses (in thousands) | Program | 2020 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Transcriptional Regulation (fadraciclib) | $3,665 | $11,105 | $7,440 | 203% | | Anti-mitotic (CYC140) | $579 | $3,579 | $3,000 | 518% | | DNA Damage Response (sapacitabine) | $203 | $301 | $98 | 48% | | Other R&D | $312 | $492 | $180 | 58% | | Total R&D Expenses | $4,759 | $15,477 | $10,718 | 225% | General and Administrative Expenses (in thousands) | Period | Amount | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | Year ended Dec 31, 2020 | $5,877 | | | | Year ended Dec 31, 2021 | $7,461 | $1,584 | 27% | Income Tax Benefit (in thousands) | Period | Amount | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | Year ended Dec 31, 2020 | $1,236 | | | | Year ended Dec 31, 2021 | $3,847 | $2,611 | 211% | Liquidity and Capital Resources As of December 31, 2021, the company had $36.6 million in cash, with net cash used in operations increasing, and believes existing funds are sufficient through mid-2023 but not for full development Key Liquidity Measures (in thousands) | Measure | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $33,406 | $36,559 | | Total working capital | $32,983 | $35,648 | Summary of Cash Flows (in thousands) | Activity | 2020 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,934) | $(18,540) | | Net cash used in investing activities | $(96) | $(27) | | Net cash provided by financing activities | $29,504 | $21,737 | - Management believes existing funds are sufficient to finance operations through mid-2023, but are not sufficient to complete development and commercialization of any drug candidates[275] Critical Accounting Policies and Estimates Key accounting policies include Accrued Research and Development Costs and Stock-based Compensation, both requiring significant estimates and judgments - Accrued Research and Development Costs are a critical estimate, involving judgments about the level of services performed by CROs and other vendors before invoices are received. The accrual was $2.3 million as of Dec 31, 2021[284][288][289] - Stock-based Compensation is another critical policy, requiring the use of the Black-Scholes model to estimate the fair value of stock options, which involves assumptions for volatility, term, interest rates, and dividend yields[290] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements and the independent auditor's unqualified opinion, highlighting clinical trial accrual as a critical audit matter Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $33,406 | $36,559 | | Total current assets | $35,469 | $40,942 | | Total assets | $36,802 | $42,587 | | Liabilities & Equity | | | | Total current liabilities | $2,486 | $5,294 | | Total liabilities | $3,543 | $5,324 | | Total stockholders' equity | $33,259 | $37,263 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Research and development | $4,759 | $15,477 | | General and administrative | $5,877 | $7,461 | | Operating loss | $(10,636) | $(22,938) | | Net loss | $(8,445) | $(18,887) | | Net loss per share | $(3.42) | $(2.14) | - The independent auditor, RSM US LLP, issued an unqualified opinion, stating the financial statements are fairly presented. The auditor identified 'Clinical Trial Accrual and Expenses' as a critical audit matter[299][303][304] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes reported - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[487] - Based on an assessment using the COSO framework, management determined that the company's internal control over financial reporting was effective as of December 31, 2021[493] - This annual report does not include an attestation report from the independent public accounting firm regarding internal control over financial reporting, as permitted for smaller reporting companies[494] PART III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Accountant Fees Information for these items is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders[499][500][502] PART IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including financial statements, corporate governance documents, material contracts, and executive certifications - This section provides a list of all exhibits filed with the Form 10-K, including financial statements, corporate governance documents, material contracts, and executive certifications[508][509]