BioWorld International Correspondent

LONDON - Cyclacel Group plc secured a Nasdaq listing in a reverse merger with Xcyte Therapies Inc., a T-cell immunotherapy specialist based in Seattle.

Xcyte put up a "for sale" sign in July after reaching an impasse with the FDA over the design of a Phase III trial of its Xcellerated T Cells in treating chronic lymphocytic lymphoma. The company dropped trials in multiple myeloma and non-Hodgkin's lymphoma, cut its work force from 100 to five and closed its manufacturing facility.

"The board [of Xcyte] said they wanted a small-molecule oncology platform to put their cash into, and we are pleased to have been chosen," Spiro Rombotis, CEO of Cyclacel, told BioWorld International.

The deal is structured as an acquisition by Xcyte of all Cyclacel's shares, giving Xcyte shareholders 20 percent of the combined entity. All operations in Seattle will close and the new company, Cyclacel Pharmaceuticals Inc., will be based at Cyclacel's existing facility in Short Hills, N.J. The rest of the company's operation will remain at sites in Dundee, Scotland, and Cambridge, UK.

Christopher Henney, chairman of Xcyte, said, "When we announced earlier this year our intention to pursue strategic alternatives, this was the type of transaction we hoped to be able to offer our shareholders." The merged company will be headed by Rombotis with the current Cyclacel board and Henney.

The move solves a problem for Cyclacel, which tried and failed to go public on the London Stock Exchange and Nasdaq in July 2004. It then raised an emergency injection of £5 million (US$8.8 million), with a promise of another £2.5 million, from the development agency Scottish Enterprise, an unprecedented investment of public money in a privately held company.

At the time, Scottish Enterprise CEO Jack Perry said the agency would hold its investment for the long term "to ensure that as the company continues its growth into a global business it can keep its roots in Scotland." That sentiment was echoed by the Deputy First Minister of Scotland, Nicol Stephen, who said, "There could not be a more important company for Scotland's future."

Rombotis said Scottish Enterprise supported the merger with Xcyte, even though the headquarters will move to New Jersey.

At the end of September, Xcyte had $26.7 million in cash. At the same time as announcing the merger, the company said it sold the T-cell technology to Invitrogen Corp., of Carlsbad, Calif., for $5 million.

Rombotis said the combined entity will have $30 million in cash, but would not say how much was contributed by each company. He also declined to comment on future fund raisings. On the current plan, there is enough money for the next two years.

Cyclacel in the first half of 2006 plans to start a Phase IIb U.S. trial of seliciclib in advanced non-small-cell lung cancer and a Phase Ib U.S. trial of sapacitabine in advanced leukemias and myelodysplastic syndrome. It also plans to file an investigational new drug application for CYC116, an aurora kinase inhibitor, in the second half of the year.