What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-14 compared with 2020-11-12 · 39 added, 98 removed, 95 unchanged (59% of the section changed)

16 unchanged sentences

In this report, “Cyclacel,” the “Company,” “we,” “us,” and “our” refer to Cyclacel Pharmaceuticals, Inc.

Through September 30, 2020, our primary focus has been on our transcriptional regulation program, where we are evaluating fadraciclib (also known as CYC065), our cyclin dependent kinase, or CDK, inhibitor, as a single agent and in combination with venetoclax in Phase 1 studies in patients with solid tumors and hematological malignancies.

In our anti-mitotic program, we are evaluating CYC140, a polo-like kinase inhibitor, in a Phase 1 study in patients with hematological malignancies.

In our DNA damage response, or DDR, program, we are evaluating sapacitabine in combination with venetoclax in Phase 1 studies in patients with hematological malignancies and in combination with our CDK inhibitor seliciclib in Phase 1 studies in patients with solid tumors.

Cyclacel’s strategy is to build a diversified biopharmaceutical business focused in hematology and oncology based on a pipeline of novel drug candidates.

Through March 31, 2021, our primary focus has been on our transcriptional regulation program which is evaluating fadraciclib as a single agent in solid tumors and in combination with venetoclax in patients with relapsed or refractory AML/MDS and CLL.

The anti-mitotic program is evaluating CYC140, a PLK1 inhibitor, in advanced leukemia/MDS patients.

The DNA damage response program is evaluating an oral combination of sapacitabine and venetoclax in patients with relapsed or refractory AML/MDS and an investigator sponsored trial is evaluating an oral combination of sapacitabine and olaparib in patients with BRCA mutant breast cancer.

Cyclacel currently retains virtually all marketing rights worldwide to the compounds associated with the Company’s drug programs.

Results of Operations

Three Months Ended September 30, 2019 and 2020

Three Months Ended March 31, 2020 and 2021

Results of Continuing Operations

Revenues for the three months ended September 30, 2019 and 2020 were $0 and $0.

Revenues for each of the three months ended March 31, 2020 and 2021 were $0.

There are no active collaboration, licensing, or clinical supply agreements and there will be no revenues for the foreseeable future.

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● Rent and facility expenses for our offices and laboratories.

The following table provides information with respect to our research and development expenditures for the three months ended September 30, 2019 and 2020 (in $000s except percentages):

The following table provides information with respect to our research and development expenditures for the three months ended March 31, 2020 and 2021 (in $000s except percentages):

Three Months Ended

September 30,

Transcriptional Regulation (fadraciclib)

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Total research and development expenses

Total research and development expenses represented 45% and 42% of our operating expenses for the three months ended September 30, 2019 and 2020, respectively.

Research and development expenses remained flat at $1.1 million for the three months ended September 30, 2019 and 2020.

Research and development expenses relating to transcriptional regulation increased by approximately $0.1 million for the three months ended September 30, 2020 as progress continues in the clinical evaluation of fadraciclib.

We anticipate that overall research and development expenses for the year ended December 31, 2020 will remain relatively flat compared to the year ended December 31, 2019, as we progress the clinical development of fadraciclib and our other clinical-stage drugs.

Total research and development expenses represented 46% and 60% of our operating expenses for the three months ended March 31, 2020 and 2021, respectively.

Research and development expenses increased by $1.5 million from $1.1 million for the three months ended March 31, 2020 to $2.6 million for the three months ended March 31, 2021.

Research and development expenses relating to transcriptional regulation increased by $0.8 million from $0.9 million for the three months ended March 31, 2020 to $1.7 million for the three months ended March 31, 2021, as the clinical evaluation of fadraciclib progressed.

Research and development expenses relating to CYC140 increased by $0.5 million from $0.2 million for the three months ended March 31, 2020 to $0.7 million for the three months ended March 31, 2021, as the pre-clinical evaluation and clinical trial supply manufacture of CYC140 progressed.

We anticipate that overall research and development expenses for the year ended December 31, 2021 will increase compared to the year ended December 31, 2020 as we progress our clinical development programs.

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 months ended September 30, 2019 and 2020 (in $000s except percentages):

The following table summarizes the general and administrative expenses for the three months ended March 31, 2020 and 2021 (in $000s except percentages):

Three Months Ended

September 30,

Total general and administrative expenses

Total general and administration expenses represented 55% and 58% of our operating expenses for the three months ended September 30, 2019 and 2020, respectively.

General and administrative expenses increased by $0.2 million for the three months ended September 30, 2019 and 2020 due to an increase in professional costs.

We expect general and administrative expenditures for the year ended December 31, 2020 to increase slightly compared to our expenditures for the year ended December 31, 2019 due to increased legal and professional costs.

Total general and administration expenses represented 54% and 40% of our operating expenses for the three months ended March 31, 2020 and 2021, respectively.

General and administrative expenses increased by $0.4 million for the three months ended March 31, 2021 due to an increase in legal, professional and recruitment costs relating to expansion of the clinical team.

We expect general and administrative expenditures for the year ended December 31, 2021 to reduce slightly compared to our expenditures for the year ended December 31, 2020, due to lower recruitment and professional costs.

Other income (expense), net

The following table summarizes other income for the three months ended September 30, 2019 and 2020 (in $000 except percentages):

The following table summarizes other income for the three months ended March 31, 2020 and 2021 (in $000 except percentages):

Three Months Ended

September 30,

Foreign exchange gains (losses)

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Total other income

Total other income decreased by approximately $140,000 from $174,000 for the three months ended September 30, 2019 to $35,000 for the three months ended September 30, 2020.

Total other income decreased by $774,000 from $914,000 for the three months ended March 31, 2020 to $140,000 for the three months ended March 31, 2021.

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 the Company in March 2006) sold certain assets and intellectual property to ThermoFisher Scientific Company, or TSC (formerly Invitrogen Corporation) through the APA and other related agreements.

The assets and technology were not part of the Company’s product development plan following the transaction between Xcyte and Cyclacel in March 2006.

Accordingly, the company recognized $53,000 and $56,000 of other income arising from sales related to this transaction during the three months ended September 30, 2019 and 2020 respectively.

Accordingly, the company presented $817,000 and $126,000 as other income arising from sales related to this transaction during the three months ended March 31, 2020 and 2021 respectively.

Foreign exchange gains (losses)

Foreign exchange gains decreased by approximately $104,000, from a gain of $79,000 for the three months ended September 30, 2019, to a loss of $25,000 for the three months ended September 30, 2020.

Foreign exchange gains decreased by $59,000, from a gain of $69,000 for the three months ended March 31, 2020, to a gain of $10,000 for the three months ended March 31, 2021.

Other income (expense), net for the year ended December 31, 2021, will continue to be impacted by changes in foreign exchange rates and the receipt of income under the APA.

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Credit is taken for research and development tax credits, which are claimed from the United Kingdom’s revenue and customs authority, or HMRC, in respect of qualifying research and development costs incurred.

The following table summarizes total income tax benefit for the three months ended September 30, 2019 and 2020 (in $000s except percentages):

The following table summarizes total income tax benefit for the three months ended March 31, 2020 and 2021 (in $000s except percentages):

Three Months Ended

September 30,

Total income tax benefit

The total income tax benefit, which comprised of research and development tax credits recoverable, remained flat at $0.3 million for each of the three months ended September 30, 2019 and 2020.

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.

We expect to continue to be eligible to receive United Kingdom research and development tax credits for the foreseeable future and will elect to do so.

The amount of tax credits we will receive is entirely dependent on the amount of eligible expenses we incur and having sufficient trading losses.

We expect our qualifying research and development expenditure for the year ended December 31, 2020 to remain relatively flat, in comparison to the year ended December 31, 2019, in line with our planned research and development expenditure.

Nine months Ended September 30, 2019 and 2020

Results of Continuing Operations

Revenues for the nine months ended September 30, 2019 and 2020 were $0 and $0.

There are no active collaboration, licensing, or clinical supply agreements and there will be no revenues for the foreseeable future.

Research and development expenses

The following table provides information with respect to our research and development expenditures for the nine months ended September 30, 2019 and 2020 (in $000s except percentages):

Nine Months Ended

September 30,

Transcriptional Regulation (fadraciclib)

Anti-mitotic (CYC140)

DNA Damage Response (sapacitabine)

Other research and development programs and expenses

Total research and development expenses

Total research and development expenses represented 47% and 45% of our operating expenses for the nine months ended September 30, 2019 and 2020, respectively.

Research and development expenses increased by $0.1 million from $3.2 million for the nine months ended September 30, 2019 to $3.3 million for the nine months ended September 30, 2020.

Research and development expenses relating to transcriptional regulation increased by $0.6 million from $2.0 million for the nine months ended September 30, 2019 to $2.6 million for the nine months ended September 30, 2020, as the clinical evaluation of fadraciclib progressed.

Research and development expenses relating to CYC140 decreased by $0.1 million from $0.5 million for the nine months ended September 30, 2019 to $0.4 million for the nine months ended September 30, 2020, primarily as a result of a reduction in expenditures associated with drug supply manufacturing which were not required in 2020.

Research and development expenses relating to DNA Damage Response decreased by $0.2 million from $0.3 million for the nine months ended September 30, 2019 to $0.1 million for the nine months ended September 30, 2020, primarily as a result of a reduction in expenditures associated with drug supply manufacturing which were not required in 2020.

Research and development expenses relating to other research and development decreased by $0.1 million for the nine months ended September 30, 2020, due to a reduction in consultancy costs.

General and administrative expenses

The following table summarizes the general and administrative expenses for the nine months ended September 30, 2019 and 2020 (in $000s except percentages):

Nine Months Ended

September 30,

Total general and administrative expenses

Total general and administration expenses represented 53% and 55% of our operating expenses for the nine months ended September 30, 2019 and 2020, respectively.

General and administrative expenses increased by $0.4 million from $3.7 million for the nine months ended September 30, 2019 to $4.1 million for the nine months ended September 30, 2020 due to an increase in legal, professional and recruitment costs.

Other income (expense), net

The following table summarizes other income, net for the nine months ended September 30, 2019 and 2020 (in $000 except percentages):

Nine Months Ended

September 30,

Foreign exchange gains (losses)

Interest income

Other income, net

Total other income

Total other income increased by approximately $0.5 million, from $0.5 million for the nine months ended September 30, 2019 to $1.0 million for the nine months ended September 30, 2020.

The increase in other income is primarily related to royalty payments receivable under a December 2005 APA, whereby Xcyte sold certain assets and intellectual property to TSC through an APA and other related agreements.

Accordingly, the company recognized $223,000 and $891,000 of other income arising from sales related to this transaction during the nine months ended September 30, 2019 and 2020 respectively.

Foreign exchange losses

Foreign exchange gains decreased by approximately $73,000, from a gain of $115,000 for the nine months ended September 30, 2019, to a gain of $42,000 for the nine months ended September 30, 2020.

Other income (expense), net for the year ended December 31, 2020 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 in nature, unrealized foreign exchange gains and losses on such funding will be recognized in other comprehensive income until repayment of the intercompany loan becomes foreseeable.

Income tax benefit

The following table summarizes total income tax benefit for the nine months ended September 30, 2019 and 2020 (in $000s except percentages):

Nine Months Ended

September 30,

Total income tax benefit

The total income tax benefit, which comprised of research and development tax credits recoverable, remained flat at approximately $0.9 million for each of the nine months ended September 30, 2019 and 2020.

The total income tax benefit, which comprised of research and development tax credits recoverable, increased by $400,000 from $290,000 for the three months ended March 31, 2020 to $687,000 for the three months ended March 31, 2021.

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.

We expect to continue to be eligible to receive United Kingdom research and development tax credits for the foreseeable future and will elect to do so.

The amount of tax credits we will receive is entirely dependent on the amount of eligible expenses we incur and having sufficient trading losses.

We expect our qualifying research and development expenditure for the year ended December 31, 2020 to remain relatively flat, in comparison to the year ended December 31, 2019 in line with our planned research and development expenditure.

We expect to continue to be eligible to receive United 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 ended December 31, 2021, the level of tax credits recoverable is anticipated to be higher in 2021 compared to the fiscal year ended December 31, 2020.

Liquidity and Capital Resources

The following is a summary of our key liquidity measures as of September 30, 2019 and 2020 (in $000s):

Nine Months Ended

September 30,

The following is a summary of our key liquidity measures as of March 31, 2020 and 2021 (in $000s):

Cash and cash equivalents

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We have incurred significant losses since our inception.

As of September 30, 2020, we had an accumulated deficit of $ 363.3 million.

Cash used in operating, investing and financing activities for the nine months ended September 30, 2019 and 2020 is summarized as follows (in $000s):

Nine Months Ended September 30,

As of March 31, 2021, we had an accumulated deficit of $ 369.6 million.

Cash used in operating, investing and financing activities for the three months ended March 31, 2020 and 2021 is summarized as follows (in $000s):

Three Months Ended March 31,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Operating activities

Net cash used in operating activities decreased by $1.5 million, from $8.3 million for the nine months ended September 30, 2019 to $6.8 million for the nine months ended September 30, 2020.

The decrease in cash used by operating activities was primarily the result of a change in working capital of $1.6 million and an increase in net loss of $0.1 million.

The change in working capital was due to settlement of large trade payables during the nine months ended September 30, 2019.

Net cash used in operating activities increased by $0.8 million, from $2.8 million for the three months ended March 31, 2020 to $3.6 million for the three months ended March 31, 2021.

The increase in cash used by operating activities was primarily the result of an increase in net loss of $2.2 million, offset by a change in working capital of $1.4 million.

Investing activities

Net cash used by investing activities increased by approximately $76,000 for the nine months ended September 30, 2020 due to proceeds from sale of property and equipment for the nine months ended September 30, 2019 not repeated in 2020 and increased capital expenditure in 2020 of $47,000.

Net cash used by investing activities increased by $74,000 for the three months ended March 31, 2021 predominantly due to increased capital expenditures on scientific software.

Financing activities

Net cash provided by financing activities increased by $14.3 million, for the nine months ended September 30, 2020 as a direct result of receiving approximately $18.3 million in net proceeds from the issuance of common stock and accompanying common stock warrants under a co-placement agency agreement with Roth Capital Partners, LLC, Ladenburg Thalmann & Co.

Inc., and Brookline Capital Markets, a division of Arcadia Securities, LLC, offset by payments of preferred dividends.

Net cash provided by financing activities for the nine months ended September 30, 2019 was a direct result of receiving approximately $4.1 million in net proceeds from the issuance of common stock under the Sales Agreement with H C Wainwright, offset by payments of preferred dividends.

Net cash provided by financing activities increased by approximately $18.0 million for the three months ended March 31, 2021 as a direct result of receiving approximately $13.5 million in net proceeds from the issuance of common stock under an underwriting agreement with Oppenheimer & Co.

Inc., and approximately $4.5 million from warrant exercises associated with a co-placement agency agreement with Roth Capital Partners, LLC, Ladenburg Thalmann & Co.

Inc., and Brookline Capital Markets, a division of Arcadia Securities, LLC.

The increase was partially offset by payment of preferred dividends.

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 the Food and Drug Administration (“FDA”) or European 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 through to the end of 2022.

However, we do not currently have sufficient funds to complete development and commercialization of any of our drug candidates.

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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.

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.

At this time, the Company is unable to estimate the impact of the COVID-19 pandemic on its financial condition or operations, but it could materially affect the ability of the Company to raise future capital or to conduct clinical studies on a timely basis.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis