Cyclacel Pharmaceuticals (NasdaqGM: CYCC)

CYCC is potentially a big winner for 2010.  Its line of oncology and hematology drugs have been much in the news lately and are expected to have even bigger news (Clinical trial-type news) before year-end.

The stock is off over 50% from its 2010 high as investor fervor has subsided from several promising announcments earlier in the year.

However, CYCC might be a good penny stock/small cap company to invest in a mid-to-longterm trade.

Cyclacel’s strategy is to build a diversified biopharmaceutical business focused in hematology and oncology based on a portfolio of commercial products and a development pipeline of novel drug candidates.  source: YahooFinance.com

The news has been mostly good:

1. CYCC just received orphan drug designation for Sapacitabine in both AML and MDS.
2. The company has been added to the Russell Microcap(R) Index.  That is important to remember because almost $4 TRILLION in funds are benchmarked to this index.  It is an annual index and CYCC will have to qualify next year, but given what I see that won’t be a problem.
3. CYCC’s ongoing Phase Two clinical studies for its cancer drug candidate, Seliciclib (boy, what a name…that really rolls off the tongue!) have electrified traders and investors.

From a fundamental standpoint, CYCC is strong.  They have a decent balance sheet with no debt and they have shown an ability to raise capital whenever they need or want to.  Which is all the time! CYCC is burning through a tremendous amount of cash every quarter and needs to “feed from the public trough” constantly.  They have no meaningful revenues and must fund operations solely off of their balance sheet.  If they receive any negative news, that ability to raise cash could be compromised.

From a technical standpoint, it appears that CYCC has stabilized at between $1.50 and $2.00.  The stock is in a small uptrend, but the indicators are not confirming that trend in any significant fashion.

Having said that….the 7 month chart shows a great deal of volatility that can be played if you watch the stock closely.

CYCC has a stable of drugs that have garnered mostly positive reviews.  Their ability to raise capital whenever they want to speaks to the confidence that institutional investors have in the company (despite being dilutive to current shareholders, it is “all good”).  In fact, over 20% of the company is held by institutions.  Insider ownership is only 5%, but I would expect a low number given how many rounds of financing CYCC goes through annually.

Bottom Line:  CYCC is a worthy candidate imo.  CYCC is on traders and investors radar screen and they are just looking for that next piece of good news to start a buying frenzy again.  CYCC will try and give them that good news before year end.

Here is what I am looking at for entry/exit points

Last Close:              $1.65

Buy Opinion:          $1.50 to 1.75 (if the price drops below $1.50, wait and see if it recovers)

Short Term Sell:    around $2.50

Long Term Sell:     $4.00+

Good Luck and Great Trading,

Jeffrey Dean

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