Seeking Alpha: Cyclacel Now An Exercise In Futility

If there's any lesson worth learning about biotech - other than that, somehow, Hemispherx (NYSEMKT:HEB) will manage to convince a new crop of investors that its experimental compound Ampligen actually has some use - it's that trying to play long odds with micro-cap oncology biotechs rarely works out. Cyclacel (NASDAQ:CYCC) shares had already been pricing in a much lower than normal expectation of success for a Phase III cancer drug, but even those expectations have proven too optimistic.

With Tuesday's announcement that sapacitabine is unlikely to meet its primary endpoint in the Phase III SEAMLESS study of the drug as treatment for newly-diagnosed acute myelogenous leukemia (or AML) in elderly patients, there is little reason for investors to hold on to hope. While it may technically be possible (as in the odds are not 0%) for the final results to look a little better, that seems exceptionally unlikely and investors should resist the temptation to believe that other applications like MDS will save the day. Cancer biotechs rarely ever go away entirely and these shares could be a speculative playtoy for traders, but investors looking for biotechs with a real future in oncology should move along.

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Cyclacel Now An Exercise In Futility

Seeking Alpha: With Cyclacel, The Waiting Is The Hardest Part

This has been a tough year to hold riskier biotechs, and Cyclacel (NASDAQ:CYCC) has been no exception as the shares have fallen by about a third since my last write-up on the company and more than 20% year-to-date. Some investors were definitely angered by the company's decision to launch another Phase II study in MDS instead of the expected pivotal Phase III study, but the shares were weak before that announcement. More likely, Cyclacel has found itself caught up in a "risk-off" move out of biotech and perhaps an increasing obsession with all things immuno-oncology.

Some readers will scoff at what I'm about to say, but I've always pursued Cyclacel from the value/expectation angle. I'm not all that positive on the company's odds of success (not many sub-$100 million market cap biotechs with Phase III oncology drugs see success), but the implied odds of success are indeed quite low and there are data to suggest that lead drug sapacitabine just may show a sufficient survival benefit in elderly AML and MDS patients to merit approval and use. Truing up my fair value estimate pushes my target down to $5 (from $6.50), but that still leaves considerable upside if the company's late-stage trials go well.

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With Cyclacel, The Waiting Is The Hardest Part

Seeking Alpha: Cyclacel Still Steeped In Doubt

Around five months ago, I thought Cyclacel Pharmaceuticals (CYCC) looked like an interesting speculative biotech play, as the market seemed to be hugely pessimistic on a drug (sapacitabine) that had shown encouraging evidence of efficacy in a seriously under-treated patient population. Since that report (and two by Seeking Alpha contributor Scrying Biotech), the shares are up about 50% and I would argue that these shares are still an interesting speculation for the risk-seeking biotech investor.

To be very clear, I'm still not unreservedly bullish on these shares. I think bears will remain fixated on the risks represented by running a Phase III trial with an unapproved drug as a control, not to mention the more typical risk that the drug doesn't work. Likewise, there are risks of competitive products from other oncology companies including Celgene (CELG) and Sunesis (SNSS). But even with what I consider to be conservative assumptions, it would seem that the shares are undervalued and worth a look for very aggressive biotech investors.

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Cyclacel Still Steeped In Doubt

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