Seeking Alpha: Should Traders Try To Play The Odds With Cyclacel?

To be very clear from the get-go, I'm not bullish on the long-term prospects for Cyclacel (CYCC), nor those of its lead drug sapacitabine. I think the odds favor a negative outcome for the company's Phase III trial (SEAMLESS), and I think the remainder of the pipeline is unlikely to generate much investor enthusiasm in the absence of a licensing agreement.

That said, I'm surprised that Cyclacel trades where it does. By my math, Cycalcel trades with implied odds of sapacitabine success of less than 12%. While that may ultimately prove prescient, it seems out of line with the implied odds that other controversial oncology companies like Aeterna Zentaris (AEZS), Northwest Biotherapeutics (NWBO), ImmunoCellular (IMUC), Dendreon (DNDN) and Vical (VICL) have enjoyed at various points in their developmental histories.

This leads me to wonder if Cyclacel will run up into the interim analysis (estimated to occur in 2014) of the Phase III study. This is not a stock that I'd buy with the intention of holding for any extended period of time, but even just 15% to 20% assumed odds of success would suggest a target of around $4 to $5.40.

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Should Traders Try To Play The Odds With Cyclacel?

Seeking Alpha: Cyclacel An Intriguing Long Shot

By and large, I don't waste my time on sub-$1 biotechs. Sure, every once in a while you can find a gem by dumpster-diving, but more often than not sub-$1 stocks are just a fast ticket to capital losses. All of that said, I have to admit I'm interested in Cyclacel (CYCC). While there's a lot to dislike about the company's capital/governance structure and plenty that could still go wrong, I'm intrigued by the tiny valuation of this stock.

A New Approach To A Very Tricky Disease
Whatever value Cyclacel has, it's tied to sapacitabine - the company's novel oral nucleoside analog that it has licensed from Daiichi-Sankyo. Sapacitabine is vaguely similar to Lilly's (LLY) Gemzar, and basically works by interfering with the DNA synthesis within a cancer cell.

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Cyclacel: An Intriguing Long Shot