S-1/A: Cyclacel Pharmaceuticals Announces Best Efforts Public Offering Amid Nasdaq Non-Compliance

Cyclacel Pharmaceuticals, Inc. is conducting a best efforts public offering to raise up to $10 million, while facing non-compliance with Nasdaq's stockholders' equity requirement.

Summary

• Cyclacel Pharmaceuticals, a clinical-stage biopharmaceutical company, is undertaking a best efforts public offering of up to 5,952,380 shares of common stock and up to 11,904,760 common stock warrants.
• The offering also includes pre-funded warrants and shares of common stock issuable upon exercise of the warrants.
• The assumed public offering price is $1.68 per share and accompanying common stock warrants.
• The company is currently not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a minimum of $2,500,000 in stockholders' equity.
• As of December 31, 2023, Cyclacel's stockholders' equity was $607,000.
• The company must submit a plan to Nasdaq by May 10, 2024, to regain compliance.
• Cyclacel's cash and cash equivalents as of December 31, 2023, were $3.4 million, which is estimated to meet liquidity requirements into April 2024.
• As of April 12, 2024, the cash balance was approximately $2.7 million.
• The company is developing cancer medicines, including fadraciclib and plogosertib, in Phase 1/2 trials.
• The net proceeds from the offering will be used for working capital and general corporate purposes.
• Assuming net proceeds of approximately $8.9 million, the company believes it can satisfy capital needs through Q1 2025.
• Assuming net proceeds of approximately $6.5 million, the company believes it can satisfy capital needs to the end of Q4 2024.
• Assuming net proceeds of approximately $4.2 million, the company believes it can satisfy capital needs to the end of Q3 2024.
• Assuming net proceeds of approximately $1.9 million, the company believes it can satisfy capital needs through Q2 2024.

Sentiment

Score: 3

Explanation: The low sentiment score is due to the company's precarious financial position, non-compliance with Nasdaq listing requirements, and the uncertainty surrounding its ability to raise sufficient capital and continue as a going concern. The 'best efforts' nature of the offering further adds to the negative sentiment.

Positives

• Cyclacel is a pioneer in cancer cell cycle biology with a vision to improve patient healthcare.
• The company has retained rights to commercialize its clinical development candidates.
• Fadraciclib has shown encouraging preliminary data in a Phase 1/2 study, with single-agent activity observed in certain cancers.
• Fadraciclib tablets can be given orally with repeat dosing, leading to transient suppression of anti-apoptosis proteins with generally good tolerability.
• Plogosertib is in a Phase 1/2 trial with a streamlined design aimed at accelerating clinical development.
• The company has a diversified pipeline of drug candidates addressing oncology and hematology indications.

Negatives

• Cyclacel is not in compliance with Nasdaq Listing Rule 5550(b)(1), requiring a minimum of $2,500,000 in stockholders' equity.
• The company's stockholders' equity was only $607,000 as of December 31, 2023.
• There is no guarantee that the company will be able to raise additional funds to extend operations past May 2024.
• The company does not currently have sufficient funds to complete development and commercialization of any of its drug candidates.
• The offering is 'best efforts' with no minimum offering amount, meaning the actual proceeds may be substantially less than anticipated.
• If the company fails to regain compliance with Nasdaq Listing Rule 5550(b)(1), its common stock will be subject to delisting.
• The common stock warrants are not exercisable until stockholder approval and may not have any value.

Risks

• Cyclacel may not be able to continue its listing on the Nasdaq Capital Market, which could limit liquidity, increase volatility, and hinder capital raising.
• The company has broad discretion in the use of net proceeds from the offering and may not use them effectively.
• Investors will experience immediate and substantial dilution in the net tangible book value of shares purchased.
• There is no public market for the common stock warrants or pre-funded warrants, and liquidity will be limited.
• The common stock warrants are speculative in nature and may not be profitable to exercise.
• The company may not raise the amount of capital it believes is required for its business plans.
• Current business and capital market risks could have a detrimental effect on the availability of sources of funding.
• The company may need to raise additional funds, which may not be available on acceptable terms or at all.

Future Outlook

The company anticipates that its existing cash and cash equivalents, along with the potential net proceeds from the offering, will satisfy its capital needs through various timeframes depending on the amount raised, ranging from the second quarter of 2024 to the first quarter of 2025 under its current business plan.

Industry Context

Cyclacel is a clinical-stage biopharmaceutical company focused on developing cancer treatments. The company's approach, focusing on cell cycle, transcriptional regulation, epigenetics, and mitosis biology, places it within the broader oncology drug development industry. This industry is characterized by high research and development costs, lengthy clinical trial timelines, and significant regulatory hurdles. The success of companies in this space often hinges on the efficacy and safety of their drug candidates, as well as their ability to secure funding to advance these candidates through clinical trials and commercialization.

Comparison to Industry Standards

• Cyclacel's focus on CDK2/9 and PLK1 inhibitors aligns with industry trends targeting cell cycle regulation in cancer. For example, Pfizer's Ibrance (palbociclib), a CDK4/6 inhibitor, has demonstrated significant success in treating hormone receptor-positive, HER2-negative breast cancer, achieving blockbuster status with multi-billion dollar annual sales. While Cyclacel's fadraciclib targets CDK2/9, which are earlier in the cell cycle pathway than CDK4/6, the comparison highlights the potential market for effective CDK inhibitors.
• Novartis' Kisqali (ribociclib) and Eli Lilly's Verzenio (abemaciclib) are also CDK4/6 inhibitors approved for similar breast cancer indications as Ibrance. These drugs have shown improved progression-free survival in clinical trials, similar to the goals of Cyclacel's fadraciclib trials. However, Cyclacel's broader targeting of CDK2/9 may offer differentiation and potential in other cancer types beyond breast cancer.
• Regarding PLK1 inhibitors, Onvansertib, developed by Cardiff Oncology, is another PLK1 inhibitor in clinical development. Cardiff Oncology is evaluating Onvansertib in combination with other therapies for KRAS-mutated metastatic colorectal cancer. While Cyclacel's plogosertib is being tested as a single agent, the progress of Onvansertib provides a benchmark for the development of PLK1 inhibitors in the industry.
• Cyclacel's financial position, with a stockholders' equity of $607,000 as of December 31, 2023, is significantly weaker compared to many established biopharmaceutical companies. For instance, larger players like Amgen, Gilead Sciences, and Regeneron Pharmaceuticals have stockholders' equity in the billions of dollars, providing them with substantial resources for research and development. Even among smaller, clinical-stage companies, Cyclacel's financial position is relatively weak, highlighting the importance of this capital raise for its continued operations.

Management Changes

Related Party Transactions

• On December 21, 2023, Cyclacel entered into an Insider Securities Purchase Agreement to sell shares and warrants to CEO Spiro Rombotis and CFO Paul McBarron in a private placement concurrent with a registered direct offering to institutional investors.

Stakeholder Impact

• Shareholders: Potential for significant dilution from the offering and exercise of warrants. Risk of delisting from Nasdaq if compliance is not regained. Uncertainty about the company's future and potential for loss of investment.
• Employees: Uncertainty about job security due to the company's financial position and need to raise capital. Potential impact on morale and productivity.
• Customers: Not directly applicable as the company is in the clinical stage and does not have commercially available products.
• Suppliers: Potential impact on payment terms and future business relationships depending on the company's financial stability.
• Creditors: Increased risk of default if the company is unable to raise sufficient capital or improve its financial position.

Next Steps

• Submit a plan to Nasdaq by May 10, 2024, to regain compliance with the stockholders' equity requirement.
• Hold a stockholders meeting to seek approval for the exercise of the common stock warrants.
• Complete the best efforts public offering by May 31, 2024, or earlier.
• Continue clinical trials for fadraciclib and plogosertib.
• Develop a new oral formulation of plogosertib.

Key Dates

Keywords

Cyclacel Pharmaceuticals, biopharmaceutical, cancer medicines, cell cycle, transcriptional regulation, epigenetics, mitosis biology, oncology, hematology, fadraciclib, CDK2/9 inhibitor, plogosertib, PLK1 inhibitor, clinical trials, public offering, stock warrants, pre-funded warrants, Nasdaq non-compliance, stockholders' equity, capital raise