Cyclacel, Xcyte merge to form biopharmaceutical company with two clinical-stage cancer therapies

By E. Janene Geiss

Philadelphia, Dec. 15 - Cyclacel Group plc and Xcyte Therapies, Inc. announced Thursday that they have entered into a definitive agreement to combine the two companies.

The transaction will create a publicly traded international biopharmaceutical company with two clinical stage, mechanism-targeted, small-molecule drug candidates in cancer, a third candidate expected to enter clinical trials in the second half of 2006 and a strong development pipeline, according to a news release.

The transaction is structured as an acquisition by Xcyte of all of the capital stock of Cyclacel Ltd., a wholly-owned subsidiary of Cyclacel Group plc. It is expected to close at the end of the first quarter of 2006 subject to shareholder approval.

The new company, to be called Cyclacel Pharmaceuticals, Inc., intends to build upon Cyclacel's position in the area of cell cycle biology, with a portfolio of three orally-available, mechanism-targeted drugs that modulate the cancer cell cycle, officials said.

Terms of the agreement provide for Xcyte to issue stock to Cyclacel shareholders. Following closing, Cyclacel shareholders will own about 80% of the combined company and Xcyte shareholders 20%, based on issued and outstanding common stock at the date of completion.

The stock purchase agreement has been approved by both boards of directors and needs approval of the companies' shareholders, officials said.

"The transaction will create an international public company with approximately $30 million in cash, a franchise in one of the most exciting fields of biology and a development-stage portfolio of targeted oncology drug candidates affecting the cancer cell cycle. We believe that cell cycle targeted drugs will become increasingly important in the modern treatment of cancer as a chronic disease," John Banham, Cyclacel chairman, said in the release.

The company will be headquartered in Short Hills, N.J., and will maintain its research laboratories in Dundee, Scotland and Cambridge, England. It will be led by Spiro Rombotis, Cyclacel's current chief executive officer. Paul McBarron, Cyclacel's current chief financial officer, will become the combined company's chief operating officer.

The company's board of directors will consist of five Cyclacel directors and one Xcyte director with a seventh director to be appointed after closing.

The new company will not retain any operations at Xcyte's facilities in Seattle.

Xcyte also announced Thursday that it sold its "Xcellerate Process," including intellectual property, clinical data generated by Xcyte in the course of six clinical trials of its lead product, Xcellerated T Cells, raw materials and equipment to Invitrogen Corp. for $5 million.

Seliciclib leads pipeline

Cyclacel's drug pipeline includes seliciclib (CYC202), a cyclin-dependent kinase (CDK) inhibitor in phase 2 clinical trials for the treatment of non-small cell lung cancer, sapacitabine (CYC682), a nucleoside analog in phase 1 trials, CYC116, an Aurora kinase inhibitor in IND-directed preclinical development and early stage programs targeting important cell cycle mechanisms for the treatment of cancer, type 2 diabetes, inflammatory kidney diseases and viral infections, officials said.

Officials said potential milestones for 2006 include initiation of a multicenter phase 2b randomized clinical trial of seliciclib (CYC202) in the United States for the treatment of patients with advanced non-small cell lung cancer, expected in the first half of 2006, initiation of a phase 1b clinical trial of sapacitabine (CYC682) at a major U.S. cancer center in patients with advanced leukemias and myelodysplastic syndrome, expected in the first half of 2006 and the filing of an Investigational New Drug application with FDA to begin phase 1 clinical trials with CYC116, an Aurora kinase inhibitor, expected in the second half of 2006.

Upon closing of the transaction, the company's common stock is expected to trade on the Nasdaq market, on which the company has reserved the symbol "CYCC."

Xcyte's current ticker symbol "XCYT" will become inactive after closing.

SG Cowen & Co., LLC served as financial adviser and Wilson Sonsini Goodrich & Rosati, Professional Corp. served as legal adviser to Xcyte. Allen & Overy LLP served as legal adviser to Cyclacel.

In conjunction with that transaction, Xcyte plans to file a registration statement containing a proxy statement/prospectus with the Securities and Exchange Commission.

Xcyte said it also will include in its proxy statement/prospectus a resolution for stockholder approval of the sale of its T cell expansion technology to Invitrogen.

Xcyte is a Seattle pharmaceutical company focused on research and development of therapies that harness the power of the immune system to treat cancer and other serious illnesses.

Cyclacel is a Dundee, Scotland biopharmaceutical company dedicated to the discovery, development and commercialization of novel, mechanism-targeted drugs to treat human cancers and other serious disorders.

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