Shares of biotech micro-cap Cyclacel Pharmaceuticals (CYCC) have doubled in price in the past 10 days. Call it the Lloyd Christmas effect.
Dumb & Dumber.
You can sort of understand why momentum traders would be attracted to a penny biotech stock like Cyclacel. It recently underwent a 1-for-12 reverse split, taking the share count down to 3 million. It's a low floater.
Cyclacel had $15 million in cash on hand at the end of the second quarter, or about $5 per share. But on Aug. 10, the company's stock price closed at $4.48. Since then, the stock's been on a rocket, running as high as $9.45 in Monday trading.
Even with the stock price doubling, Cyclacel's market cap is under $30 million. That's still micro-cap territory, except now you have to believe the company's drug pipeline has value. This is where the problems begin. Cyclacel's drug pipeline is weak and pretty much worthless.
You think Cyclacel shares traded at 36 cents before the reverse stock split because its pipeline was underappreciated?
No, it wasn't. Momentum traders might be having their fun with Cyclacel but they can't change the company's woeful fundamentals. (And yes, I know hedge funder Kevin Tang just reported buying a 9.6% stake in Cyclacel. It doesn't matter. Have you looked at his sorry track record lately?)
About that Cyclacel drug pipeline: The company's lead product, sapacitabine, is heading for almost certain failure in a phase III study of elderly acute myeloid leukemia (AML) patients. In December 2014, independent data monitors performed an interim analysis of the phase III study, after which they informed Cyclacel that sapacitabine was unlikely to demonstrate a survival benefit large enough to hit the primary endpoint with success.