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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<B>As filed with the Securities and Exchange Commission on June 11, 2010</B></DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Registration
No.&nbsp;333-<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></B></DIV>

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 10pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 0pt; margin-top: 0pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 10pt"><B>FORM S-1</B></DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 10pt"><B>REGISTRATION STATEMENT<BR>
UNDER THE SECURITIES ACT OF 1933</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 6pt; margin-top: 10pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><B>CYCLACEL PHARMACEUTICALS, INC.</B></DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>91-1707622</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification Number)</TD>
</TR>
<!-- End Table Body --></TABLE></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>200 Connell Drive, Suite&nbsp;1500<BR>
Berkeley Heights, NJ 07922<BR>
(908)&nbsp;517-7330</B><BR>
(Address, including zip code, and telephone number, including area code, of<BR>
registrant&#146;s principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Spiro Rombotis<BR>
Chief Executive Officer<BR>
Cyclacel Pharmaceuticals, Inc.<BR>
200 Connell Drive, Suite&nbsp;1500<BR>
Berkeley Heights, NJ 07922<BR>
(908)&nbsp;517-7330</B><BR>
(Name, address, including zip code, and telephone number, including area code,<BR>
of agent for service)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">With a copy to:<BR>
<B>Joel I. Papernik, Esq.<BR>
Todd E. Mason, Esq.<BR>
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.<BR>
666 Third Avenue<BR>
New York, New York 10017<BR>
(212)&nbsp;935-3000</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Approximate date of commencement of proposed sale to public: </B>From time to time after the effective
date of this registration statement.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the following box:
<FONT face="Wingdings">&#254;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
<font style="white-space: nowrap">offering: <FONT face="Wingdings">&#111;</FONT></FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same <font style="white-space: nowrap">offering: <FONT face="Wingdings">&#111;</FONT></FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
 pursuant to Rule 462(d) under the Securities Act, check the following <font style="white-space: nowrap">box: <FONT face="Wingdings">&#111;</FONT></FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large
accelerated filer,&#148; &#147;accelerated filer,&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the
Exchange Act. (Check one):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="22%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="left" valign="top">Large accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap  align="center" valign="top">Smaller reporting company <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD  nowrap align="center" valign="top">(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE></DIV>

<DIV align="CENTER" style="font-size: 10pt; margin-top: 6pt"><B>CALCULATION OF REGISTRATION FEE</B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 1px" valign="bottom">
    <TD nowrap colspan="17" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>
    <TD nowrap align="center"><B>Title of Each Class of</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Amount Being</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Offering Price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Aggregate</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount of</B></TD>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>
    <TD nowrap align="center"><B>Security Being Registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Registered<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Per Security </B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Offering Price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Registration Fee</B></TD>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Shares of common stock, $.001 par value per share</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" valign="bottom" style="border-top: 2px solid #000000">1,266,358</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">$1.545<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" valign="bottom" style="border-top: 2px solid #000000">$1,956,523.11</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD colspan="2" align="center" valign="bottom" style="border-top: 2px solid #000000">$35.43</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
 <TD nowrap valign="bottom" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Shares
of common stock, $.001 par value per share, issuable upon exercise of
warrants<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" valign="bottom" style="border-top: 2px solid #000000">100,000</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">$1.40<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" valign="bottom" style="border-top: 2px solid #000000">$140,000</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD colspan="2" align="center" valign="bottom" style="border-top: 2px solid #000000">$2.37</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
 <TD nowrap valign="bottom" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">1,366,358</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">$2,096,523.11</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>

<TD colspan="2" align="center" valign="bottom" style="border-top: 2px solid #000000">$149.48*</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
   <TD nowrap valign="bottom" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap colspan="17" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 3pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Previously Paid in connection with Registration Statement on Form S-3
(Registration No. 333-147997</TD>
</TR>

<TR valign="bottom" style="font-size: 3pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD>&nbsp;</TD>
    <TD>This Registration Statement shall also cover any additional
shares of common stock which become issuable by reason of any stock
dividend, stock split or other similar transaction effected without
the receipt of consideration that results in an increase in the number of the outstanding shares of common stock of the registrant.</TD>
</TR>
<TR valign="bottom" style="font-size: 3pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>In accordance with Rule 457(c), the aggregate offering price of our stock is estimated
solely for the calculating of the registration fees due for this filing. This estimate is based
on the average of the high and low sales price of our stock reported by the NASDAQ Global Market
on December 5, 2007, which was $5.40.</TD>
</TR>

<TR valign="bottom" style="font-size: 3pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The proposed maximum offering price per share was determined
in accordance with Rule 457(g) under the Securities Act of 1933,
under which rule the per share price is estimated by reference to the
exercise price of the securities.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The
Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the registration statement shall become effective on such date
as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.</B></DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio --></DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXPLANATORY NOTE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">This
Registration Statement on Form S-1 relates solely to the shares of common stock
that we may issue to Kingsbridge Capital Limited, or Kingsbridge, pursuant to a common stock
purchase agreement between Kingsbridge and ourselves dated December&nbsp;10, 2007, as amended on
November&nbsp;24, 2009, and shares of our common stock that we may issue upon exercise of an amended and
restated warrant we issued to Kingsbridge on November&nbsp;24, 2009, initially registered by the
registrant on the Registration Statement on Form S-3 (File No.&nbsp;333-147997) declared effective by
the Securities and Exchange Commission on or about December&nbsp;20,
2007, but which was withdrawn by us on June 11, 2010. This
Registration Statement on Form S-1 is being filed in lieu of such
post-effective amendment on Form S-1 to Registration Statement on Form S-3.
 All filing fees payable in connection with the registration of
these securities were previously paid in connection with the filing of the original registration
statement.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><font color="red"><B>The information in this prospectus is not complete and may be changed. The selling securityholder
may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.</B></Font>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Subject
to Completion, dated June 11, 2010</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PROSPECTUS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>1,366,358 Shares</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>CYCLACEL PHARMACEUTICALS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Common Stock, $0.001 Par Value</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 6pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
This prospectus relates to the disposition from time to time of up to
1,366,358 shares of the
common stock of Cyclacel Pharmaceuticals, Inc. (&#147;we,&#148; &#147;us,&#148; &#147;our company,&#148; or &#147;the Company&#148;), by
the selling securityholder listed beginning on page 44 of this prospectus. All of the shares being
offered, when sold, will be sold by the selling securityholder. The shares of common stock
registered for resale under this prospectus are up to (i)&nbsp;1,266,358 shares of our common stock that
we may issue to Kingsbridge Capital Limited, or Kingsbridge, pursuant to a common stock purchase
agreement between Kingsbridge and ourselves dated December&nbsp;10, 2007, as amended on November&nbsp;24,
2009, and (ii)&nbsp;100,000 shares of our common stock that we may issue upon exercise of an amended and
restated warrant we issued to Kingsbridge on November&nbsp;24, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The selling securityholder may offer and sell any of the shares of common stock from time to
time at fixed prices, at market prices or at negotiated prices, and may engage a broker, dealer or
underwriter to sell the shares. For additional information on the possible methods of sale that may
be used by the selling securityholder, see the section entitled &#147;Plan of Distribution&#148; on page 46
of this prospectus. We are not selling any securities under this prospectus and we will not receive
any proceeds from the sale of the shares of common stock by the selling securityholder, although we
may receive proceeds upon the issuance of shares to Kingsbridge or in connection with the exercise
of the warrants by Kingsbridge.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
Our common stock is listed on the NASDAQ Global Market under the
symbol &#147;CYCC.&#148; On June&nbsp;9,
2010, the last reported sale price for our common stock was $1.42 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Investing in our securities involves significant risks. We strongly recommend that you read
carefully the risks we describe in this prospectus and the risk factors that are incorporated by
reference in this prospectus from our filings made with the Securities and Exchange Commission. See
&#147;Risk Factors&#148; beginning on page 14 before deciding whether to invest in our common stock.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 6pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><DIV align="center"><DIV style="font-size: 6pt; margin-top: 20pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt">The date of this prospectus is <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2010.
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>PROSPECTUS SUMMARY</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>RISK FACTORS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104"><B>USE OF PROCEEDS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105"><B>SELLING SECURITYHOLDER</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106"><B>PLAN OF DISTRIBUTION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107"><B>DESCRIPTION OF SECURITIES</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108"><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109"><B>LEGAL MATTERS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110"><B>EXPERTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111"><B>INCORPORATION OF DOCUMENTS BY REFERENCE</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112"><B>WHERE YOU CAN FIND MORE INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113"><B>PART II &#151; INFORMATION NOT REQUIRED IN PROSPECTUS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114"><B>SIGNATURES</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="w78776exv23w1.htm">EXHIBIT 23.1</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">You should read this prospectus and the documents incorporated by reference carefully before
you invest. Such documents contain important information you should consider when making your
investment decision. See &#147;Incorporation of Documents by Reference&#148; on page 64. You should rely only
on the information provided in this prospectus or documents incorporated by reference in this
prospectus. We have not, and the selling securityholder has not, authorized anyone to provide you
with different information. The information contained in this prospectus is accurate only as of the
date of this prospectus and any information we have incorporated by reference is accurate only as
of the date of the document incorporated by reference, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Our business, financial condition, results of
operations and prospects may have changed since that date.
</DIV>




<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->i<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PROSPECTUS SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Because this is only a summary, it does not contain all of the information that may be
important to you. You should carefully read the more detailed information contained in this
prospectus and the information incorporated by reference carefully before you invest. Our business
involves significant risks. You should carefully consider the information under the heading &#147;Risk
Factors&#148; beginning on page 14.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As used in this prospectus, unless otherwise indicated, the terms &#147;we,&#148; &#147;us,&#148; &#147;our company,&#148;
&#147;the Company&#148; and &#147;Cyclacel&#148; refer to Cyclacel Pharmaceuticals, Inc., a Delaware corporation.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Our Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are a biopharmaceutical business dedicated to the discovery, development and commercialization
of novel, mechanism-targeted drugs to treat cancer and other serious disorders. We are focused on
delivering leading edge therapeutic management of cancer patients based on a clinical development
pipeline, led by sapacitabine, of novel drug candidates. Our core area of expertise, and a
foundation of the Company since our inception, is in cell cycle biology; the processes by which
cells divide and multiply. We focus primarily on the development of orally available anticancer
agents that target the cell cycle with the aim of slowing the progression or shrinking the size of
tumors, and enhancing the quality of life and improving survival rates of cancer patients.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">We are focusing our clinical development priorities on:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sapacitabine in acute myeloid leukemia, or AML, in elderly patients;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sapacitabine in myelodysplastic syndromes, or MDS, in older patients; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sapacitabine in non-small cell lung cancer, or NSCLC.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has additional ongoing programs in clinical development which are currently
pending the availability of clinical data. Once these data become available and are reviewed, we
will determine the feasibility of pursuing further development and/or partnering of these assets
including sapacitabine in combination with seliciclib, seliciclib in nasopharyngeal cancer, or NPC,
and NSCLC and CYC116.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We were founded by Professor Sir David Lane, a recognized leader in the field of tumor
suppressor biology who discovered the p53 protein, which operates as one of the body&#146;s own
anticancer agents by regulating cell cycle targets. Our Chief Scientist, Professor David Glover, is
a recognized leader in the biology of mitosis or cell division. Professor Glover discovered, among
other cell cycle targets, the mitotic kinases, Polo and Aurora, enzymes that act in the mitosis
phase of the cell cycle.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Although our resources are primarily directed towards advancing our anticancer drug candidate
sapacitabine through in-house development activities we are also progressing, but with lower levels
of investment than in previous years, our other novel drug series which are at earlier stages.
Taken together, our pipeline covers all four phases of the cell cycle, which we believe will
improve the chances of successfully developing and commercializing novel drugs that work on their
own or in combination with approved conventional chemotherapies or with other targeted drugs to
treat human cancers.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Sapacitabine</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our lead candidate, sapacitabine, is an orally available prodrug of CNDAC, which is a novel
nucleoside analog, or a compound with a structure similar to a nucleoside. A prodrug is a compound
that has a therapeutic effect after it is metabolized within the body. CNDAC has a significantly
longer residence time in the blood when it is produced in the body through metabolism of
sapacitabine than when it is given directly. Sapacitabine acts through a dual mechanism whereby the
compound interferes with DNA synthesis and repair by causing single-strand DNA breaks and induces
arrest of the cell division cycle at G2/M checkpoint. A number of nucleoside drugs, such as
gemcitabine, or Gemzar<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, from Eli Lilly, and cytarabine, also known as Ara-C, a generic drug, are
in wide use as conventional chemotherapies. Both sapacitabine and its major metabolite, CNDAC, have
demonstrated potent anti-tumor activity in both blood and solid tumors in preclinical studies. In a
liver metastatic mouse model, sapacitabine was shown to be superior to gemcitabine and 5-FU, two
widely used nucleoside analogs, in delaying the onset and growth of liver metastasis. We have
retained worldwide rights to commercialize sapacitabine, except for Japan, for which Daiichi-Sankyo
Co., Ltd, or Daiichi-Sankyo, has a right of first negotiation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are currently exploring sapacitabine in both hematological cancers and solid tumors. To
date, sapacitabine has been evaluated in approximately 400 patients in several Phase 1 and 2
studies and has shown signs of anti-cancer activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Hematological Cancers</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 1 clinical trial in patients with advanced leukemias and myelodysplastic syndromes</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2007, at the ASH annual meeting, we reported interim results from a Phase 1
clinical trial of oral sapacitabine in patients with advanced leukemias and MDS. The data
demonstrated that sapacitabine had a favorable safety profile and promising anti-leukemic activity
in patients with relapsed and refractory AML and MDS when administered by two different dosing
schedules. The primary objective of the study is to determine the maximum tolerated dose, or MTD,
of sapacitabine administered twice daily for seven consecutive days every 21&nbsp;days or three
consecutive days per week for two weeks every 21&nbsp;days. The MTD was reached at 375 mg on the
seven-day schedule and 475 mg on the three-day schedule. Dose-limiting toxicity was
gastrointestinal which included abdominal pain, diarrhea, small bowel obstruction and neutropenic
colitis. One patient treated at the MTD of 375 mg on the seven-day schedule died of complications
from neutropenic colitis. Among 46 patients, 42 with AML and 4 with MDS, in this dose escalating
study, the best responses were complete remission, or CR, or complete remission without platelet
recovery, or CRp, in six patients for an Overall Response Rate of 13%. In addition, 15 patients had
a significant decrease in bone marrow blasts including seven with blast reduction to 5% or less.
The study was conducted at The University of Texas M. D. Anderson Cancer Center and is led by Hagop
Kantarjian, M.D., Professor of Medicine and Chairman of the Leukemia Department and Dr.&nbsp;William
Plunkett, Professor and Chief, Section of Molecular and Cellular Oncology, Department of
Experimental Therapeutics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 2 randomized clinical trial in elderly patients with AML previously untreated or in first
relapse</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2007, we initiated an open-label, multicenter, randomized Phase 2 clinical trial
of oral sapacitabine in 60 elderly patients with AML aged 70 or older who are previously untreated
or in first relapse. The Phase 2 study, led by Dr.&nbsp;Kantarjian, has a primary endpoint of 1-year
survival rate of three dosing schedules of sapacitabine in elderly patients with previously
untreated or first relapsed AML. Secondary objectives are to assess CR or CRp, partial remission,
or PR, duration of CR or CRp, or major hematological improvement and their corresponding durations,
transfusion requirements, number of hospitalized days and safety. The study uses a selection design
with the objective of identifying a dosing schedule among three different arms, A. 200 mg twice
daily for seven days every 3-4&nbsp;weeks, B. 300 mg
twice daily for seven days every 3-4&nbsp;weeks, and C. 400 mg twice daily for three days per week for
two weeks every 3-4&nbsp;weeks, which produces a better 1-year survival rate in the event that all three
dosing schedules are active. Each arm enrolled and treated 20 patients. Approximately 55% of
patients had AML de novo and the rest had AML preceded by antecedent hematological disorder, or
AHD, such as MDS, or myeloproliferative disease. Eighty percent of the patients were untreated and
20% in first relapse. We completed enrollment of 60 AML patients in this study in October&nbsp;2008. In
December&nbsp;2009, at the 51st Annual Meeting of ASH we reported 1-year survival data.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The primary endpoint of 1-year survival was 35% on Arm A, 30% on Arm C and 10% on Arm B. The
median overall survival was 212&nbsp;days on Arm C (range of 13 to over 654&nbsp;days), 197&nbsp;days on Arm A
(range of 26 to over 610&nbsp;days) and 100&nbsp;days on Arm B (range of 6 to over 646&nbsp;days). Overall
response rate, or ORR, a secondary endpoint, was 45% on Arm A, 35% on Arm C and 25% on Arm B with
CR rate of 25% on Arm C and 10% on Arms A and B. Thirty-day mortality was 10% on Arm C and Arm A
and 20% on Arm B. Approximately 30% of all patients received sapacitabine for at least 6 cycles.
Fifteen patients who survived one year or more received an average of 12 treatment cycles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Exploratory subgroup analysis suggests that (i)&nbsp;Arm C may be more effective for de novo AML
and (ii)&nbsp;Arm A may be more effective for AML preceded by AHD, such as MDS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The 3-day dosing schedule in Arm C was selected for further clinical development in elderly
patients with de novo AML based on a 1-year survival rate of 30%, ORR of 35% with durable CRs. The
7-day dosing schedule in Arm A was selected for further clinical development in elderly patients
with AML preceded by AHD based on a 1-year survival rate of 35%, ORR of 45% with durable
hematological improvement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Randomized Phase 2 clinical trial in older patients with MDS as a second-line treatment</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In September&nbsp;2008, we advanced sapacitabine into Phase 2 development as a second-line
treatment in patients aged 60 or older with MDS who are previously treated with hypomethylating
agents. The MDS stratum of the study is designed as a protocol amendment expanding the ongoing
Phase 2 trial of sapacitabine in AML described above, to include a cohort of patients with MDS.
Patients with MDS often progress to AML. The primary objective of the MDS stratum is to evaluate
the 1-year survival rate of three dosing schedules of sapacitabine. Secondary objectives are to
assess the number of patients who have achieved CR or CRp, PR, hematological improvement and their
corresponding durations, transfusion requirements, number of hospitalization days and safety. The
study uses a selection design with the objective of identifying a dosing schedule which produces a
better 1-year survival rate for each stratum in the event that all three dosing schedules are
active.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June
2010, at the American Society of Clinical Oncology, or ASCO, meeting we reported interim response
data for the ongoing Phase 2 clinical trial of sapacitabine in older patients with MDS. The study
has recently completed enrollment of 61 patients aged 60 or older
with MDS who were previously
treated with azacitidine or decitabine or both. In this three-arm study, Arms B &#38; C enrolled
20 patients each while Arm C enrolled 21 patients across the same three randomized dosing schedules
of sapacitabine tested in the AML stratum of the study. All patients
have received at least one
hypomethylating agent and 15 patients (25%) have received two hypomethylating agents, i.e.,
azacitidine and decitabine. Approximately 51% of the 61 patients had baseline bone marrow blast
counts above 10%. Based on interim data, the overall response rate is 24% on Arm A, the 7-day
low dose schedule, 35% on Arm B, the 7-day high dose schedule, and 10% on Arm C, the 3-day high
dose schedule. Two patients achieved complete remission and both were treated on Arm A.
Thirty-day mortality from all-causes is 4.8% on Arm A, 0% on Arm B and 15% on Arm C.
Approximately 34% of the patients received 4 or more cycles of sapacitabine.</DIV>




<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Pivotal trial plan for sapacitabine for the treatment of hematological malignancies</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December&nbsp;2009, we announced that we held a Type A meeting with the FDA to discuss a
randomized Phase 3 study design for our oral sapacitabine capsules in AML and separately in MDS.
Based on the FDA&#146;s confirmation that the proposed study design would be acceptable for a SPA, we
submitted a SPA request during the first quarter of 2010. Should the SPA be granted we would plan
to start such a study during 2010. The SPA process allows for official FDA evaluation of clinical
protocols of a Phase 3 clinical trial intended to form the primary basis for an efficacy claim. A
SPA provides trial sponsors with an FDA agreement that the design and analysis of the trial
adequately address objectives in support of a submission for a marketing application if the trial
is performed according to the SPA. The SPA may only be changed through a written agreement between
the sponsor and the FDA, or if the FDA becomes aware of a substantial scientific issue essential to
product efficacy or safety. However, a SPA does not provide any assurance that a marketing
application would be approved by the FDA. Furthermore, Phase 3 clinical trials are time-consuming
and expensive, and because we have limited resources, we may be required to collaborate with a
third party or raise additional funds. However, there is no assurance that we will be able to do
so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Solid Tumors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 1 clinical trials in patients with refractory solid tumors or lymphomas</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Two Phase 1 studies of sapacitabine were completed by Daiichi-Sankyo, from which we
in-licensed sapacitabine, evaluating 87 patients in refractory solid tumors. In addition, we
conducted a Phase 1b dose escalation clinical trial in patients with refractory solid tumors or
lymphomas. Preliminary results of the Phase 1b study were reported at the EORTC-NCI-AACR Molecular
Targets and Cancer Therapeutics meeting in November&nbsp;2006. The primary objective of the study was to
evaluate the safety profile of sapacitabine administered twice daily for 14 consecutive days or 7
consecutive days every 21&nbsp;days. Of the 37 treated patients, 28 received the drug twice daily for 14
days and 9 received the drug twice daily for 7&nbsp;days. The dose-limiting toxicity was reversible
myelosuppression. One patient treated at the maximum tolerated dose died of candida sepsis in the
setting of grade 4 neutropenia and thrombocytopenia. Non-hematological toxicities were mostly mild
to moderate. The best response by investigator assessment was stable disease in 13 patients, five
with non-small cell lung cancer, two with breast cancer, two with ovarian cancer and one each with
colorectal cancer, adenocarcinoma of unknown primary, gastrointestinal stromal tumor, and parotid
acinar carcinoma.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 2 clinical trial in patients with non-small cell lung cancer</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In January&nbsp;2009, we began treating patients in a Phase 2, open label, single arm, multicenter
clinical trial in patients with NSCLC who have had one prior chemotherapy. This study builds on the
observation of prolonged stable disease of four months or longer experienced by heavily pretreated
NSCLC patients involved in two Phase 1 studies of sapacitabine. The multicenter Phase 2 trial is
led by Philip D. Bonomi, M.D., at Rush University Medical Center, Chicago. The primary objective of
the study is to evaluate the rate of response and stable disease in patients with previously
treated NSCLC. Secondary objectives are to assess progression-free survival, duration of response,
duration of stable disease, 1-year survival, overall survival and safety. The study will enroll
approximately 40 patients and has a lead-in phase for dose escalation with the objective of
defining a recommended dose followed by a second stage in which patients will be treated at the
recommended dose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 2 clinical trial in patients with cutaneous T-cell lymphoma, or CTCL</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In April&nbsp;2007, we initiated a Phase 2 clinical trial in patients with advanced CTCL, a cancer
of T-lymphocytes, or white blood cells, which causes disfiguring skin lesions and severe itching.
The primary objective of the study is to evaluate tolerability and response rate of 50 mg and 100
mg regimens of
sapacitabine both twice a day for three days per week for two weeks in a three week cycle in
patients with progressive, recurrent, or persistent CTCL on or following two systemic therapies.
The study uses a selection design to choose an optimal dose if both are active. Secondary
objectives are to assess response duration, time to response, time to progression and relief of
pruritus or itching. Non-hematological toxicities were mostly mild to moderate. The best response
by investigator assessment was partial response in 3 patients out of 16 enrolled. We stopped the
trial in order to re-direct our resources to sapacitabine clinical trials with a higher priority.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>EU Orphan Designation</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During May&nbsp;2008, we received designation from the European Medicines Evaluation Agency, or
EMEA, for sapacitabine as an orphan medicine in two separate indications: AML and MDS. The EMEA&#146;s
Committee for Orphan Medicinal Products, or COMP, adopted a positive opinion on the Company&#146;s
application to designate sapacitabine as an orphan medicinal product for the indications of AML and
MDS. The objective of European orphan medicines legislation is to stimulate research and
development of medicinal products for rare diseases by providing incentives to industry. An orphan
designation in the European Union confers a range of benefits to sponsor companies including market
exclusivity for a period of 10&nbsp;years, EMEA scientific advice on protocol development, direct access
to the centralized procedure for review of marketing authorizations, EMEA fee reductions and
eligibility for grant support from European agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Seliciclib</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our second drug candidate, seliciclib, is a novel, first-in-class, orally available, CDK
inhibitor. The compound selectively inhibits a spectrum of enzyme targets -CDK2/E, CDK2/A, CDK7 and
CDK9- that are central to the process of cell division and cell cycle control. The target profile
of seliciclib is differentiated from the published target profile of other CDK inhibitors. Its
selectivity is differentiated by recent publications by independent investigators which showed that
seliciclib (i) <U>is more</U> active against NSCLC cells with K-Ras or N-Ras mutations than those
with wild type Ras and (ii)&nbsp;overcomes resistance to letrozole (Femara<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>) in breast cancer cells
caused by a particular form of cyclin E in complex with CDK2. Preclinical studies have shown that
the drug works by inducing cell apoptosis, or cell suicide, in multiple phases of the cell cycle.
To date, seliciclib has been evaluated in approximately 450 patients in several Phase 1 and 2
studies and has shown signs of anti-cancer activity. We have retained worldwide rights to
commercialize seliciclib.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 1 clinical trials in patients with refractory solid tumors</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have completed two Phase 1 trials that enrolled 24 healthy volunteers and three Phase 1
trials that enrolled a total of 84 cancer patients testing different doses and schedules. The
primary toxicities observed were of a non-hematological nature, including asthenia or weakness,
elevation of liver enzymes, hypokalemia or decreased potassium levels, nausea and vomiting and
elevation in creatinine. Although these trials were designed to test safety rather than efficacy of
seliciclib given alone as monotherapy in patients with solid tumors who failed multiple previous
treatments, several of these patients appeared to have benefited from seliciclib treatment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Seliciclib was shown in a further Phase 1 study sponsored and conducted by independent
investigators to have clinical antitumor activity in patients with nasopharyngeal cancer, measured
as a decrease in the size of primary tumor and involved lymph nodes, as well as an increase in
tumor cell deaths by biomarker analyses.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 2 clinical trials in patients with NSCLC or breast cancer</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Four Phase 2 trials have been conducted in cancer patients to evaluate the tolerability and
antitumor activities of seliciclib alone or in combination with standard chemotherapies used in the
treatment of advanced NSCLC or breast cancer. Interim data from two Phase 2 open-label studies of a
total of 52 patients with NSCLC, suggest that seliciclib treatment did not aggravate the known
toxicities of standard first and second-line chemotherapies nor appear to cause unexpected
toxicities, although these trials were not designed to provide statistically significant
comparisons. The combination of seliciclib with a standard dose of Capecitabine (Xeloda<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>) was not
well tolerated in patients with advanced breast cancer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Seliciclib is currently being investigated in the Phase 2b APPRAISE study as a treatment for
patients with advanced NSCLC. APPRAISE is a double-blinded, randomized study of single agent
seliciclib versus best supportive care in patients with NSCLC treated with at least two prior
systemic therapies. APPRAISE is led by Chandra P. Belani, M.D. at Milton S. Hershey Medical Center,
Penn State University. The study&#146;s main objective is to learn the anti-tumor activity of seliciclib
as a single agent in refractory NSCLC and help determine further development strategies. The study
design is randomized discontinuation. All patients receive seliciclib at a dose of 1200 mg twice a
day for three days for at least three cycles of two weeks each. Patients who achieve stable disease
after three cycles will be randomized to continue on seliciclib or receive placebo with best
supportive care. Patients in the placebo arm who progress will be given the option to cross-over
and again receive seliciclib. The primary efficacy endpoint of APPRAISE is doubling progression
free survival, or PFS, measured in the randomized portion of the study.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In August&nbsp;2008, we announced that an independent data review committee, or IDRC, completed a
review of the first interim analysis data from the study. The IDRC assessed the safety profile of
seliciclib and recommended that the study continue after reviewing data from 173 patients with
previously-treated NSCLC, of whom 45 proceeded into the blinded portion of the study and were
randomized to receive either seliciclib or best supportive care. Based on the interim data, the
IDRC reached the following main conclusions: there were no safety concerns that would warrant
stopping the study; there was no trend favoring the seliciclib treatment arm; and as a definitive
conclusion could not be reached because of the low number of events, it was recommended that the
study be continued. Based on our cost versus benefit analysis, we decided not to enroll additional
patients. The APPRAISE trial continues with the 191 patients already enrolled until the last
enrolled patient has completed follow-up. In accordance with the protocol, we remain blinded to the
study data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><I>Phase 2 clinical trials in patients with NPC</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In November&nbsp;2007, we commenced a Phase 2 multicenter, international, blinded randomized study
of oral seliciclib as a single agent in patients with NPC. The primary objective is to evaluate
6-month progression free survival, or PFS, of two dosing schedules of seliciclib in approximately
75 patients with previously treated NPC. Secondary objectives are overall survival, response rate,
response duration, safety and tolerability. The first part of the study is designed to confirm
safety and tolerability of 400 mg twice a day for four days per week or 800 mg once a day for four
days per week of seliciclib. It is open to approximately 12 to 24 patients with advanced solid
tumors as well as patients with NPC. The second part of the study is designed to detect major
differences between the two dosing schedules of seliciclib and a placebo group in terms of 6-month
PFS in approximately 51 patients. The start of the second part of the study is dependent on
clinical data from the lead-in phase and available resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In May&nbsp;2009, at the ASCO annual meeting, we reported interim data from the lead-in portion of
the Phase 2 study which demonstrated that oral seliciclib could be safely administered in two
dosing schedules which were well tolerated and met the criteria for proceeding to the randomized
stage of the
study. Seliciclib treatment resulted in prolonged stable disease in 70% of previously-treated NPC
patients, including 3 with stable disease lasting longer than 8&nbsp;months, suggesting seliciclib
inhibits tumor growth in NPC. The data support further clinical development of oral seliciclib in
NPC.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>CYC116</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In June&nbsp;2007, we initiated a multicenter Phase 1 pharmacologic clinical trial of CYC116, an
orally-available inhibitor of Aurora kinase A and B and VEGFR2, in patients with advanced solid
tumors. The multicenter Phase 1 trial, now completed, is designed to examine the safety and
tolerability of CYC116 in patients with advanced solid tumors. The primary objective of the study
is to determine the maximum tolerated dose. Secondary objectives are to evaluate pharmacokinetic
and pharmacodynamic effects of the drug and document anti-tumor activity. Aurora kinases, or AK,
are a family of serine/threonine protein kinases discovered by Professor David Glover, our Chief
Scientist, that are only expressed in actively dividing cells and are crucial for the process of
cell division or mitosis. These proteins, which have been found to be over-expressed in many types
of cancer, have generated significant scientific and commercial interest as cancer drug targets.
VEGFR2 is a receptor protein that plays a key regulatory role in the angiogenesis pathway, or blood
vessel formation. VEGFR is targeted by recently approved drugs such as bevacizumab and sorafenib
indicated for the treatment of several solid cancers, such as breast, colorectal, kidney, liver and
lung. We have retained worldwide rights to commercialize CYC116. Further work on CYC116 will be
undertaken when appropriate levels of resource are available to direct to the program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Other programs</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have allocated limited resources to other programs allowing us to maintain and build on our
core competency in cell cycle biology and related drug discovery. In our second generation CDK
inhibitor program, we have discovered several series of CDK inhibitors that we believe may prove to
be more potent anticancer agents than seliciclib based on preclinical observations. Our polo-like
kinase or Plk inhibitor program targets the mitotic phase of the cell cycle with the objective of
identifying potent and selective small molecule inhibitors of Plk1, a kinase active during mitosis.
Plk was discovered by Professor David Glover, our Chief Scientist. The Company has a number of
earlier stage programs for which limited or no resources will be allocated. For example, extensive
preclinical data published by independent investigators evidence activity by our CDK inhibitors,
including seliciclib, in various autoimmune and inflammatory diseases of aberrant cell
proliferation including glaucoma, lupus nephritis, idiopathic pulmonary fibrosis, polycystic kidney
disease, and rheumatoid arthritis. In our GSK-3 inhibitor program we have demonstrated evidence of
activity in preclinical models of Type 2 Diabetes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Where appropriate we intend to progress such programs through collaboration with groups that
specialize in the particular mechanism of action or disease area until such times that these
programs can be partnered and/or progressed should funding become available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Commercial products</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have exclusive rights to sell and distribute three products in the United States and Canada
used primarily to manage the effects of radiation or chemotherapy in cancer patients: Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges. All three products are approved in the United
States under FDA 510 (k)&nbsp;or medical device registrations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Cream</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is an aqueous cream containing sodium hyaluronate, or hyaluronic acid, and
glycyrrhetinic acid that is formulated to relieve symptoms associated with radiation dermatitis.
Sodium
hyaluronate is the key water-regulating substance in human skin. Sodium hyaluronate has high
viscoelasticity and lubricity. When sodium hyaluronate solution is applied on the surface of skin,
it forms an air permeable layer that keeps skin moist and smooth. Small molecular weight sodium
hyaluronate can penetrate into the dermis where it combines with water to promote microcirculation,
nutrient absorption, and metabolism. Glycyrrhetinic acid reduces inflammation and is believed to
have immunomodulatory properties.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid is an oral solution used to replace natural saliva when salivary glands are
damaged. The viscosity of Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid is similar to that of natural saliva. Linseed extract in
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid contains mucins that provide superior viscosity and reduced friction compared to
water or carboxymethylcellulose or CMC solutions. Linseed extract significantly reduces the
symptoms of dry mouth with increasing effect over time while Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid is used.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges dissolve slowly while moved around in the mouth. They contain sorbitol and
malic acid to stimulate normal salivation and provide temporary relief of dry mouth in patients who
have some residual secretory function and taste perception. Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges support saliva&#146;s
natural protection of teeth so that teeth are not damaged with repeated and use of the lozenges.
They are sugar free and buffered with calcium to protect teeth. Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges have been
demonstrated to be safe and effective for long-term use and are well tolerated by patients. Use of
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges improves subjective symptoms of dry mouth and does not cause bacteria or plaque
formation or loss of tooth enamel hardness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Equity Financing Facility With Kingsbridge Capital</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On December&nbsp;10, 2007, we entered into a Committed Equity Financing Facility, or CEFF, with
Kingsbridge, as amended on November&nbsp;24, 2009, pursuant to which Kingsbridge committed to purchase,
subject to certain conditions, up to $60&nbsp;million of our common stock. As part of the CEFF, we
entered into a common stock purchase agreement, dated December&nbsp;10, 2007, as amended on November&nbsp;24,
2009, and a registration rights agreement, dated December&nbsp;10, 2007, with Kingsbridge. On December
10, 2007 we also issued a warrant to Kingsbridge, which warrant was amended and restated on
November&nbsp;24, 2009. Pursuant to the amended and restated warrant, Kingsbridge is entitled to
purchase up to 175,000 shares of our common stock at an exercise price of $1.40 per share, which
represented 175% of the closing bid price of our common stock on
November&nbsp;23, 2009. The warrant is exercisable, subject to certain exceptions and conditions, until June 10, 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The common stock purchase agreement entitles us to sell and obligates Kingsbridge to purchase,
from time to time over a period of three years from December&nbsp;10, 2007, shares of our common stock
for cash consideration up to an aggregate of $60&nbsp;million, subject to certain conditions and
restrictions. The shares of common stock that may be issued to Kingsbridge under the common stock
purchase agreement and the warrant will be issued pursuant to an exemption from registration under
the Securities Act of 1933, as amended, or the Securities Act. Pursuant to the registration rights
agreement, we have filed a registration statement of which this prospectus is a part, covering the
possible resale by Kingsbridge of any shares that we may issue to Kingsbridge under the common
stock purchase agreement or upon exercise of the warrant. Through this prospectus, the selling
securityholder may offer to the public for resale shares of our common stock that we may issue to
Kingsbridge pursuant to the common stock purchase agreement or that Kingsbridge may acquire upon
exercise of the warrant.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For a period from the first trading day following the effective date of this prospectus to
December&nbsp;10, 2010, we may, from time to time, at our discretion, and subject to certain conditions
that we must satisfy, draw down funds under the CEFF by selling shares of our common stock to
Kingsbridge. The purchase price of these shares will be at a price that is between 80% and 94% of
the volume weighted average price for each trading day during an eight-day pricing period. The
discount on each of these eight trading days will be determined as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Applicable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>VWAP*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>VWAP</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Discount)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Greater than $11.00 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>94%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(6)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or equal to $11.00 per share but greater than $6.50 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>92%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(8)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or equal to $6.50 per share but greater than $2.00 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>90%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(10)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or equal to $2.00 per share but greater than $1.00 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>88%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(12)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or equal to $1.00 per share but greater than $0.90 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>85%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(15)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or equal to $0.90 per share but greater than $0.65 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>83%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(17)%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less than or
equal to $0.65 per share but greater than or equal to $0.40 per share</DIV></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>80%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
<TD align="center" colspan=2>(20)%</TD>
    <TD nowrap></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>As set forth in the common stock purchase agreement, &#147;VWAP&#148; means the
volume weighted average price (the aggregate sales price of all trades
of our common stock during each trading day divided by the total
number of shares of common stock traded during that trading day) of
our common stock during any trading day as reported by Bloomberg, L.P.
using the AQR function. The VWAP and corresponding discount will be
determined for each of the eight trading days during a draw down
pricing period.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the eight trading day pricing period for a draw down, if the VWAP for any one trading
day is less than the greater of (i) $0.40, or (ii)&nbsp;85% of the closing price of our common stock for
the trading day immediately preceding the beginning of the draw down period, the VWAP from that
trading day will not be used in calculating the number of shares to be issued in connection with
that draw down, and the draw down amount for that pricing period will be reduced by one-eighth of
the draw down amount we had initially specified. In addition, if trading in our common stock is
suspended for any reason for more than three consecutive or non-consecutive hours during any
trading day during a draw down pricing period, that trading day will not be used in calculating the
number of shares to be issued in connection with that draw down, and the draw down amount for that
pricing period will be reduced by one-eighth of the draw down amount we had initially specified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The maximum number of shares of common stock that we can now issue pursuant to the CEFF is the
lesser of 1,266,358 shares and $55.9&nbsp;million of our common stock. An additional 100,000 shares of
common stock are issuable if Kingsbridge exercises the amended and restated warrant that we issued
to Kingsbridge. We intend to exercise our right to draw down amounts under the CEFF, if and to the
extent available, at such times as we have a need for additional capital and when we believe that
sales of stock under the CEFF provide an appropriate means of raising capital. We may exercise our
right to draw down shortly after the effective date of the registration statement of which this
prospectus is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our ability to require Kingsbridge to purchase our common stock is subject to various
limitations.
We may access capital under the CEFF in maximum draw downs of (i)&nbsp;3.0% of our market capitalization
at the time of the draw down with respect to one draw down per calendar quarter beginning on
February&nbsp;1, 2010, and (ii)&nbsp;2.0% of our market capitalization at the time of the draw down with
respect to all other draw downs.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the term of the CEFF, without Kingsbridge&#146;s prior written consent, we may not issue
securities that are, or may become, convertible or exchangeable into shares of common stock where
the purchase, conversion or exchange price for our common stock is determined using a floating
discount or other post-issuance adjustable discount to the market price of the common stock,
including pursuant to an equity line or other financing that is substantially similar to the
arrangement provided for in the CEFF, with certain exceptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The issuance of our common stock under the CEFF or upon exercise of the Kingsbridge warrant
will have no effect on the rights or privileges of existing holders of common stock except that the
economic and voting interests of each stockholder will be diluted as a result of any such issuance.
Although the number of shares of common stock that stockholders presently own will not decrease,
these shares will represent a smaller percentage of our total shares that will be outstanding after
any issuances of shares of common stock to Kingsbridge. If we draw down amounts under the CEFF when
our share price is decreasing, we will need to issue more shares to raise the same amount than if
our stock price was higher. Such issuances will have a dilutive effect and may further decrease our
stock price.
Kingsbridge agreed in the common stock purchase agreement that during the term of the CEFF, neither
Kingsbridge nor any of its affiliates, nor any entity managed or controlled by it, will enter into
any short sale of any shares of our common stock as defined in Regulation&nbsp;SHO promulgated under the
Securities Exchange Act of 1934, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Before Kingsbridge is obligated to buy any shares of our common stock pursuant to a draw down,
the following conditions, none of which is in Kingsbridge&#146;s control, must be met:
</DIV>



<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Each of our representations and warranties in the common stock purchase agreement shall be
true and correct in all material respects as of the date when made and as of the draw down exercise
date as though made at that time, except for representations and warranties that are expressly made
as of a particular date.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the common stock purchase agreement, the registration rights
agreement and the warrant to be performed, satisfied or complied with by us.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We shall have complied in all material respects with all applicable federal, state and local
governmental laws, rules, regulations and ordinances in connection with the execution, delivery and
performance of the common stock purchase agreement and the consummation of the transactions it
contemplates.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registration statement, which includes this prospectus, shall have previously become
effective and shall remain effective.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We shall not have knowledge of any event that could reasonably be expected to have the
effect of causing the registration statement applicable to Kingsbridge&#146;s resale of shares of our
common stock to be suspended or otherwise ineffective.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trading in our common stock shall not have been suspended by the Securities and Exchange
Commission, or SEC, The NASDAQ Global Market or the Financial Industry Regulatory Authority and
trading in securities generally on The NASDAQ Global Market shall not have been suspended or
limited.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No statute, rule, regulation, executive order, decree, writ, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental authority which
prohibits the consummation of or would materially modify or delay any of the transactions contemplated by the
common stock purchase agreement.</TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">



<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No action, suit or proceeding before any arbitrator or any governmental authority shall have
been commenced, and to our knowledge no investigation by any governmental authority shall have been
threatened, against us or any of our officers, directors or affiliates seeking to enjoin, prevent
or change the transactions contemplated by the common stock purchase agreement.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We shall have sufficient shares of common stock, calculated using the closing trade price of
the common stock as of the trading day immediately preceding a draw down, registered under the
registration statement to issue and sell such shares in accordance with such draw down.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>




<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The warrant to purchase up to 100,000 shares of our common stock shall have been duly
executed, delivered and issued to Kingsbridge, and we shall not be in default in any material
respect under the warrant.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>



<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Kingsbridge shall have received an opinion in the form previously agreed to.</TD>
</TR>
</TABLE>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There is no guarantee that we will be able to meet the foregoing conditions or any other
conditions under the common stock purchase agreement or that we will be able to draw down any
portion of the amounts available under the CEFF.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We also entered into a registration rights agreement with Kingsbridge. Pursuant to the
registration rights agreement, we have filed a registration statement, which includes this
prospectus, with the SEC relating to Kingsbridge&#146;s resale of any shares of common stock purchased
by Kingsbridge under the common stock purchase agreement or issued to Kingsbridge as a result of
the exercise of the Kingsbridge warrant. The effectiveness of this registration statement is a
condition precedent to our ability to sell common stock to Kingsbridge under the common stock
purchase agreement. In the event that we fail to maintain the effectiveness of the registration
statement of which this prospectus is a part (other than during a blackout period as discussed
below), and such failure was within our reasonable control, we must pay to Kingsbridge certain
amounts based on the change in market price of our common stock during the period of
ineffectiveness of the registration statement or offer to repurchase our shares from Kingsbridge at
a price based on the market price of our common stock on the trading day prior to the first day of
ineffectiveness of the registration statement. We are entitled in certain circumstances, including
the existence of certain kinds of nonpublic information, to deliver a blackout notice to
Kingsbridge to suspend the use of this prospectus and prohibit Kingsbridge from selling shares
under this prospectus. If we deliver a blackout notice in the 15 trading days following the
settlement of a draw down, then we must pay amounts to Kingsbridge, or issue Kingsbridge additional
shares in lieu of payment, calculated by means of a varying percentage of an amount based on the
number of shares held by Kingsbridge that were purchased pursuant to the draw down and the change
in the market price of our common stock between the date the blackout notice is delivered and the
date the prospectus again becomes available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The foregoing summary of the CEFF does not purport to be complete and is qualified by
reference to the common stock purchase agreement, the registration rights agreement and the
warrant, copies of which have been filed as exhibits to the registration statement of which this
prospectus is a part.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On April&nbsp;27, 2010, we were served with a complaint filed by Celgene Corporation in the United
States District Court for the District of Delaware seeking a Declaratory Judgment that four of our
owned patents, claiming the use of romidepsin injection in T-cell lymphomas, are not infringed by
Celgene&#146;s products and are invalid. The four patents cited in the complaint do not involve our
clinical development candidates nor our commercial products. We are presently required to answer or
otherwise move in response to the complaint by June&nbsp;17, 2010. We intend to vigorously defend the
validity of these patents and enforce our patent rights.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Corporate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our corporate headquarters are located at 200 Connell Drive, Suite&nbsp;1500, Berkeley Heights, New
Jersey, 07922, and our telephone number is (908)&nbsp;517-7330. This is also where our marketing,
medical and regulatory functions are located. Our research facility is located in Dundee, Scotland,
which is also the center of our translational work and development programs.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>THE OFFERING</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Common stock offered by selling
securityholder</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Up to 1,366,358 shares, of which
(i)&nbsp;1,266,358 represent unissued
shares of our common stock to be
offered for resale by the selling
securityholder, and (ii)&nbsp;100,000
represent unissued shares of our
common stock to be offered for
resale by selling stockholders
following issuance upon exercise
of the amended and restated
warrant.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Offering price</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Determined at the time of sale by
the selling securityholder.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Common stock outstanding
as of June&nbsp;9, 2010</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">36,873,986 shares.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Use of proceeds</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We will not receive any of the
proceeds from the sale of the
shares offered by the selling
securityholder. We may receive
proceeds from the sales of our
common stock by us to Kingsbridge
under the common stock purchase
agreement or in connection with
the exercise of the amended and
restated warrant, if and when
exercised by Kingsbridge. Such
proceeds will be used by us for
general corporate purposes,
including capital expenditures,
the advancement of our drug
candidates in clinical trials, and
to meet working capital needs. The
amounts and timing of the
expenditures will depend on
numerous factors, such as the
timing and progress of our
clinical trials and research and
development efforts, technological
advances and the competitive
environment for our drug
candidates. We expect from time to
time to evaluate the acquisition
of businesses, products and
technologies for which a portion
of the net proceeds may be used,
although we currently are not
planning or negotiating any such
transactions. As of the date of
this prospectus, we cannot specify
with certainty all of the
particular uses for the net
proceeds to us from the sale of
shares to Kingsbridge or the
exercise of warrants by the
Kingsbridge. Accordingly, we will
retain broad discretion over the
use of these proceeds, if any.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Risk factors</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The shares of common stock offered
hereby involve a high degree of
risk. See &#147;Risk Factors&#148; beginning
on page 14.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Dividend policy</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We currently intend to retain any
future earnings to fund the
development and growth of our
business. Therefore, we do not
currently anticipate paying cash
dividends on our common stock.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Trading Symbol</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Our shares of common stock currently trade
on the NASDAQ Global Market under
the symbol &#147;CYCC.&#148;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Any investment in our common stock involves a high degree of risk. Investors should carefully
consider the risks described below, together with all of the other information included in this
prospectus, before deciding whether to purchase shares of our common stock. Each of the following
risk factors, either alone or taken together, could adversely affect our business, operating
results and financial condition, as well as adversely affect the value of an investment in our
company. This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our operating results could differ materially from those anticipated in these
forward-looking statements as a result of certain risk factors, including the risks we face as
described below and elsewhere in this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We believe regulatory agencies will not accept registration pathways based on Phase 2 data and,
therefore, we will need to conduct randomized Phase 3 studies, which are time-consuming and
expensive.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Regulatory agencies, including, but not limited to, the FDA, have in certain instances
accepted Phase 2 data from uncontrolled studies as sufficient for approval in indications where an
unmet medical need exists or in exceptional circumstances.  However,
in September 2009, the Oncologic Drugs
Advisory Committee (ODAC), which is the cancer drug advisory panel of the FDA, voted in favor of
completion of a randomized trial prior to regulatory approval with respect to drugs submitted for
approval as treatments for patients with AML and likely in respect of drugs submitted for approval
as treatments for patients with other forms of cancer. Therefore, we believe that to gain
regulatory approval from the FDA, we will need to conduct a randomized Phase 3 trial. Randomized
Phase 3 studies are time-consuming and expensive, and because we have limited resources any such
requirements may adversely impact our operating results and financial condition and delay or block
our ability to commercialize our lead drug candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Even if we believe that the data collected from clinical trials of our drug candidates are
promising with respect to safety and efficacy, such data may not be deemed sufficient by regulatory
authorities to warrant product approval. Clinical data can be interpreted in different ways.
Regulatory officials could interpret such data in different ways than we do which could delay,
limit or prevent regulatory approval. The FDA, other regulatory authorities or we may suspend or
terminate clinical trials at any time. Any failure or significant delay in completing clinical
trials for our lead drug candidates, or in receiving regulatory approval for the commercialization
of our lead drug candidates, may adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The current economic conditions and financial market turmoil could adversely affect our business
and results of operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Economic conditions remain difficult with the continuing uncertainty in the global credit
markets, the financial services industry and the United States capital markets and with the United
States economy as a whole experiencing a period of substantial turmoil and uncertainty
characterized by unprecedented intervention by the United States federal government and the
failure, bankruptcy, or sale of various financial and other institutions. We believe the current
economic conditions and financial market turmoil could adversely affect our operations, business
and prospects, as well as our ability to obtain funds and manage our liquidity. If these
circumstances persist or continue to worsen, our future operating results could be adversely
affected, particularly relative to our current expectations.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We are at an early stage of development as a company and we do not have, and may never have, any
products that generate significant revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are at an early stage of development as a company and have a limited operating history on
which to evaluate our business and prospects. While we have earned modest product revenues from the
ALIGN business acquired in October&nbsp;2007, since beginning operations in 1996, we have not generated
any product revenues from our product candidates currently in development. We cannot guarantee that
any of our product candidates currently in development will ever become marketable products and we
do not anticipate material revenues from the ALIGN products in the foreseeable future. We must
demonstrate that our drug candidates satisfy rigorous standards of safety and efficacy for their
intended uses before the FDA, and other regulatory authorities in the United States, the European
Union and elsewhere. Significant additional research, preclinical testing and clinical testing is
required before we can file applications with the FDA or other regulatory authorities for premarket
approval of our drug candidates. In addition, to compete effectively, our drugs must be easy to
administer, cost-effective and economical to manufacture on a commercial scale. We may not achieve
any of these objectives. Sapacitabine and seliciclib, our most advanced drug candidates for the
treatment of cancer, are currently our only drug candidates in Phase 2 clinical trials. A
combination trial of sapacitabine and seliciclib and CYC116 are currently in a Phase 1 clinical
trial. We cannot be certain that the clinical development of these or any other drug candidates in
preclinical testing or clinical development will be successful, that we will receive the regulatory
approvals required to commercialize them or that any of our other research and drug discovery
programs will yield a drug candidate suitable for investigation through clinical trials. Our
commercial revenues from our product candidates currently in development, if any, will be derived
from sales of drugs that will not become marketable for several years, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We have a history of operating losses and we may never become profitable. Our stock is a highly
speculative investment.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have incurred operating losses in each year since beginning operations in 1996 due to costs
incurred in connection with our research and development activities and selling, general and
administrative costs associated with our operations, and we may never achieve profitability. As of
March 31, 2010, our accumulated deficit was $227.8&nbsp;million. Our net loss for each of the three months ended
March 31, 2009 and 2010  was $5.1&nbsp;million. Our net loss
applicable to common stockholders from inception through March 31, 2010 was $268.8&nbsp;million.
Our drug candidates are in the mid-stages of clinical testing and we must conduct significant
additional clinical trials before we can seek the regulatory approvals necessary to begin
commercial sales of our drugs. We expect to incur continued losses for several years, as we
continue our research and development of our drug candidates, seek regulatory approvals,
commercialize any approved drugs and market and promote the ALIGN products: Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges. If our drug candidates are
unsuccessful in clinical trials or we are unable to obtain regulatory approvals, or if our drugs
are unsuccessful in the market, we will not be profitable. If we fail to become and remain
profitable, or if we are unable to fund our continuing losses, particularly in light of the current
economic conditions, you could lose all or part of your investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Capital markets are currently experiencing a period of disruption and instability, which has had
and could continue to have a negative impact on the availability and cost of capital.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The general disruption in the United States capital markets has impacted the broader worldwide
financial and credit markets and reduced the availability of debt and equity capital for the market
as a whole. These global conditions could persist for a prolonged period of time or worsen in the
future. Our ability to access the capital markets may be restricted at a time when we would like,
or need, to access those markets, which could have an impact on our flexibility to react to
changing economic and business
conditions. The resulting lack of available credit, lack of confidence in the financial
sector, increased volatility in the financial markets could materially and adversely affect the
cost of debt financing and the proceeds of equity financing may be materially adversely impacted by
these market conditions.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we fail to comply with the continued listing requirements of the NASDAQ Global Market our common
stock price may be delisted and the price of our common stock and our ability to access the capital
markets could be negatively impacted.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our common stock is currently listed for trading on the NASDAQ Global Market. We must satisfy
NASDAQ&#146;s continued listing requirements, including among other things, a minimum stockholders&#146;
equity of $10.0&nbsp;million and a minimum bid price for our common stock of $1.00 per share, or risk
delisting, which would have a material adverse affect on our business. A delisting of our common
stock from the NASDAQ Global Market could materially reduce the liquidity of our common stock and
result in a corresponding material reduction in the price of our common stock. In addition,
delisting could harm our ability to raise capital through alternative financing sources on terms
acceptable to us, or at all, and may result in the potential loss of confidence by investors,
suppliers, customers and employees and fewer business development opportunities. During 2009,
Cyclacel received notification from the NASDAQ Stock Market that the Company was not in compliance
with the minimum $10&nbsp;million stockholders&#146; equity requirement for continued listing set forth in
NASDAQ Marketplace Rule&nbsp;5450(b)(1)(A). On January&nbsp;27, 2010, NASDAQ notified the Company that it
regained compliance with the minimum $50&nbsp;million market value of listed securities requirement and
that it currently complies with all other applicable standards for continued listing on The NASDAQ
Global Market. Accordingly, the Company&#146;s shares of common and preferred stock will continue to
trade on The NASDAQ Global Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Raising additional capital in the future may not be available to us on reasonable terms, if at all,
when or as we require additional funding. If we issue additional shares of our common stock or
other securities that may be convertible into, or exercisable or exchangeable for, our common
stock, our existing stockholders would experience further dilution. If we fail to obtain additional
funding, we may be unable to complete the development and commercialization of our lead drug
candidate, sapacitabine, or continue to fund our research and development programs.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have funded all of our operations and capital expenditures with proceeds from the issuance
of public equity securities, private placements of our securities, interest on investments,
licensing revenue, government grants, research and development tax credits and product revenue. In
order to conduct the lengthy and expensive research, preclinical testing and clinical trials
necessary to complete the development and marketing of our drug candidates, we will require
substantial additional funds. Based on our current operating plans of focusing on the advancement
of sapacitabine, we expect our existing resources to be sufficient to fund our planned operations
for at least the next twelve months. To meet our long-term financing requirements, we may raise
funds through public or private equity offerings, debt financings or strategic alliances. Raising
additional funds by issuing equity or convertible debt securities may cause our stockholders to
experience substantial dilution in their ownership interests and new investors may have rights
superior to the rights of our other stockholders. Raising additional funds through debt financing,
if available, may involve covenants that restrict our business activities and options. To the
extent that we raise additional funds through collaborations and licensing arrangements, we may
have to relinquish valuable rights to our drug discovery and other technologies, research programs
or drug candidates, or grant licenses on terms that may not be favorable to us. Additional funding
may not be available to us on favorable terms, or at all, particularly in light of the current
economic conditions. If we are unable to obtain additional funds, we may be forced to delay or
terminate our current clinical trials and the development and marketing of our drug candidates
including sapacitabine.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our committed equity financing facility with Kingsbridge may not be available to us if we elect to
make a draw down or may require us to make additional &#147;blackout&#148; or other payments to Kingsbridge,
which may result in dilution to our stockholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On December&nbsp;10, 2007 and as amended on November&nbsp;24, 2009, we entered into the committed equity
financing facility, or CEFF, with Kingsbridge Capital Limited, or Kingsbridge. The CEFF entitles us
to sell and obligates Kingsbridge to purchase from us the lesser of 4,084,590 shares of our common
stock or $60&nbsp;million of our common stock, during the three years term of the CEFF, subject to
certain conditions and restrictions. Kingsbridge will not be obligated to purchase shares under the
CEFF unless certain conditions are met, which include, among other things, a minimum price for our
common stock of $0.40 per share, effectiveness of the registration statement covering the shares
subject to the CEFF and the continued listing of our stock on The NASDAQ Global Market. However,
because we have not declared dividends on our preferred stock for several quarters during fiscal
year 2009 and the first quarter of 2010, we are not able to use our Registration Statement on Form
S-3, which covers the shares subject to the CEFF and therefore, we cannot access the CEFF until
such time as an effective registration statement covering such shares be in place. This may limit
our ability to access capital markets on short notice or make the cost of capital more expensive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As
of June&nbsp;9, 2010, following the sale of an aggregate of 2,818,232 shares of our common stock
during the period from December&nbsp;2009 through March&nbsp;2010, the CEFF entitles us to sell and obligates
Kingsbridge to purchase from us the lesser of 1,266,358 or $55.9&nbsp;million of our shares of common
stock during the remaining term of the CEFF which ends on December&nbsp;10, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Kingsbridge is permitted to terminate the CEFF if it determines that a material and adverse
event has occurred affecting our business, operations, properties or financial condition and if
such condition continues for a period of 10&nbsp;days from the date Kingsbridge provides us notice of
such material and adverse event. In such a case, we would be unable to access any capital through
the CEFF.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are entitled, in certain circumstances, to deliver a blackout notice to Kingsbridge to
suspend the use of the registration statement which became effective in December&nbsp;2007, and prohibit
Kingsbridge from selling shares. If we deliver a blackout notice in the 15 trading days following
the settlement of a draw down, or if the registration statement is not effective in circumstances
not permitted by the CEFF, then we must make a payment to Kingsbridge, or issue Kingsbridge
additional shares in lieu of this payment, calculated on the basis of the number of shares held by
Kingsbridge exclusive of shares that Kingsbridge may hold pursuant to exercise of the Kingsbridge
warrant and the change in the market price of our common stock during the period in which the use
of the registration statement is suspended. If the trading price of our common stock declines
during a suspension of the registration statement, the blackout or other payment to be made by us
could be significant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Should we sell shares to Kingsbridge under the CEFF, or issue shares in lieu of a blackout
payment, it will have a dilutive effective on the holdings of our current stockholders, and may
result in downward pressure on the price of our common stock. If we draw down under the CEFF, we
will issue shares to Kingsbridge at a discount of up to 20% from the volume weighted average price
of our common stock. If we draw down amounts under the CEFF when our share price is decreasing, we
will need to issue more shares to raise the same amount than if our stock price was higher.
Issuances in the face of a declining share price will have an even greater dilutive effect than if
our share price were stable or increasing, and may further decrease our share price.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>To the extent we elect to fund the development of a drug candidate or the commercialization of a
drug at our expense, we will need substantial additional funding.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We plan to market drugs on our own, with or without a partner, that can be effectively
commercialized and sold in concentrated markets that do not require a large sales force to be
competitive. To achieve this goal, we will need to establish our own specialized sales force,
marketing organization and supporting distribution capabilities. The development and
commercialization of our drug candidates is very expensive, including our anticipated Phase 3
clinical trials for sapacitabine. To the extent we elect to fund the full development of a drug
candidate or the commercialization of a drug at our expense, we will need to raise substantial
additional funding to:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fund research and development and clinical trials connected with our research;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fund clinical trials and seek regulatory approvals;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>build or access manufacturing and commercialization capabilities;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>implement additional internal control systems and infrastructure;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>commercialize and secure coverage, payment and reimbursement of our drug candidates,
if any such candidates receive regulatory approval;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintain, defend and expand the scope of our intellectual property; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>hire additional management, sales and scientific personnel.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Our future funding requirements will depend on many factors, including:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the scope, rate of progress and cost of our clinical trials and other research and
development activities;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs and timing of seeking and obtaining regulatory approvals;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs associated with establishing sales and marketing capabilities;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effect of competing technological and market developments; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the payment, other terms and timing of any strategic alliance, licensing or other
arrangements that we may establish.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we are not able to secure additional funding when needed, especially in light of the
current economic conditions and financial market turmoil, we may have to delay, reduce the scope of
or eliminate one or more of our clinical trials or research and development programs or future
commercialization efforts.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we do not realize the expected benefits from the restructuring plans we announced in September
2008 and June&nbsp;2009, our operating results and financial conditions could be negatively impacted.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In September&nbsp;2008 and June&nbsp;2009, we announced a strategic restructuring designed to focus our
resources on our lead drug, sapacitabine, while maintaining the Company&#146;s core competency in drug
discovery and cell cycle biology. We cannot guarantee that we will not have to undertake additional
restructuring activities, that any of our restructuring efforts will be successful, or that we will
be able to realize the cost savings and other anticipated benefits from our restructuring. If we
are unable to realize the expected operational efficiencies from our restructuring activities, our
operating results and financial condition could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Any future workforce and expense reductions may have an adverse impact on our internal programs,
strategic plans, and our ability to hire and retain key personnel, and may also be distracting to
our management.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Further workforce and expense reductions in addition to those carried out in September&nbsp;2008
and June&nbsp;2009 could result in significant delays in implementing our strategic plans. In addition,
employees, whether or not directly affected by such reduction, may seek future employment with our
business partners or competitors. Although our employees are required to sign a confidentiality
agreement at the time of hire, the confidential nature of certain proprietary information may not
be maintained in the course of any such future employment. In addition, any additional workforce
reductions or restructurings would be expected to involve significant expense as a result of
contractual terms in certain of our existing agreements, including potential severance obligations
as well as any payments that may, under certain circumstances, be required under our agreement with
the Scottish Enterprise. Further, we believe that our future success will depend in large part upon
our ability to attract and retain highly skilled personnel. We may have difficulty retaining and
attracting such personnel as a result of a perceived risk of future workforce and expense
reductions. Finally, the implementation of expense reduction programs may result in the diversion
of the time and attention of our executive management team and other key employees, which could
adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Budget constraints resulting from our restructuring plan may negatively impact our research and
development, forcing us to delay our efforts to develop certain product candidates in favor of
developing others, which may prevent us from commercializing our product candidates as quickly as
possible.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Research and development is an expensive process. As part of our restructuring plan, we have
decided to focus our clinical development priorities on sapacitabine, while still possibly
continuing to progress additional programs pending the availability of clinical data and the
availability of funds, at which time we will determine the feasibility of pursuing, if at all,
further advanced development of seliciclib, CYC116 or additional programs. Because we have had to
prioritize our development candidates as a result of budget constraints, we may not be able to
fully realize the value of our product candidates in a timely manner, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we fail to enter into and maintain successful strategic alliances for our drug candidates, we
may have to reduce or delay our drug candidate development or increase our expenditures.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">An important element of our strategy for developing, manufacturing and commercializing our
drug candidates is entering into strategic alliances with pharmaceutical companies or other
industry participants to advance our programs and enable us to maintain our financial and
operational capacity.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We face significant competition in seeking appropriate alliances. We may not be able to
negotiate alliances on acceptable terms, if at all. In addition, these alliances may be
unsuccessful. If we fail to create and maintain suitable alliances, we may have to limit the size
or scope of, or delay, one or more of our drug development or research programs. If we elect to
fund drug development or research programs on our own, we will have to increase our expenditures
and will need to obtain additional funding, which may be unavailable or available only on
unfavorable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We are exposed to risks related to foreign currency exchange rates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Some of our costs and expenses are denominated in foreign currencies. Most of our foreign
expenses are associated with our research and development operations of our United Kingdom-based
wholly-owned subsidiary. When the United States dollar weakens against the British pound, the
United States dollar value of the foreign currency denominated expense increases, and when the
United States dollar strengthens against the British pound, the United States dollar value of the
foreign currency denominated expense decreases. Consequently, changes in exchange rates, and in
particular a weakening of the United States dollar, may adversely affect our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We are exposed to risk related to the marketable securities we may purchase.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may invest cash not required to meet short term obligations in short term marketable
securities. We may purchase securities in United States government, government-sponsored agencies
and highly rated corporate and asset-backed securities subject to an approved investment policy.
Historically, investment in these securities has been highly liquid and has experienced only very
limited defaults. However, recent volatility in the financial markets has created additional
uncertainty regarding the liquidity and safety of these investments. Although we believe our
marketable securities investments are safe and highly liquid, we cannot guarantee that our
investment portfolio will not be negatively impacted by recent or future market volatility or
credit restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Clinical trials are expensive, time consuming, subject to delay and may be required to continue
beyond our available funding.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Clinical trials are expensive, complex can take many years to conduct and may have uncertain
outcomes. We estimate that clinical trials of our most advanced drug candidates may be required to
continue beyond our available funding and may take several years more to complete. The designs used
in some of our trials have not been used widely by other pharmaceutical companies. Failure can
occur at any stage of the testing and we may experience numerous unforeseen events during, or as a
result of, the clinical trial process that could delay or prevent commercialization of our current
or future drug candidates, including but not limited to:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in securing clinical investigators or trial sites for our clinical trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in obtaining institutional review board, or IRB, and other regulatory
approvals to commence a clinical trial; slower than anticipated rates of patient recruitment and enrollment, or reaching the
targeted number of patients because of competition for patients from other trials or
other reasons;</TD>
</TR>

</TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>negative or inconclusive results from clinical trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unforeseen safety issues;</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>uncertain dosing issues may or may not be related to suboptimal pharmacokinetic and
pharmacodynamic behaviors;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approval and introduction of new therapies or changes in standards of practice or
regulatory guidance that render our clinical trial endpoints or the targeting of our
proposed indications obsolete;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability to monitor patients adequately during or after treatment or problems with
investigator or patient compliance with the trial protocols;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability to replicate in large controlled studies safety and efficacy data obtained
from a limited number of patients in uncontrolled trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability or unwillingness of medical investigators to follow our clinical
protocols; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unavailability of clinical trial supplies.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we suffer any significant delays, setbacks or negative results in, or termination of, our
clinical trials, we may be unable to continue development of our drug candidates or generate
revenue and our development costs could increase significantly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Adverse events have been observed in our clinical trials and may force us to stop development of
our product candidates or prevent regulatory approval of our product candidates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Adverse or inconclusive results from our clinical trials may substantially delay, or halt
entirely, any further development of our drug candidates. Many companies have failed to demonstrate
the safety or effectiveness of drug candidates in later stage clinical trials notwithstanding
favorable results in early stage clinical trials. Previously unforeseen and unacceptable side
effects could interrupt, delay or halt clinical trials of our drug candidates and could result in
the FDA or other regulatory authorities denying approval of our drug candidates. We will need to
demonstrate safety and efficacy for specific indications of use, and monitor safety and compliance
with clinical trial protocols throughout the development process. To date, long-term safety and
efficacy has not been demonstrated in clinical trials for any of our drug candidates. Toxicity and
&#147;serious adverse events&#148; as defined in trial protocols have been noted in preclinical and clinical
trials involving certain of our drug candidates. For example, neutropenia and gastro-intestinal
toxicity were observed in patients receiving sapacitabine and elevations of liver enzymes and
decrease in potassium levels have been observed in patients receiving seliciclib.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, we may pursue clinical trials for sapacitabine and seliciclib in more than one
indication. There is a risk that severe toxicity observed in a trial for one indication could
result in the delay or suspension of all trials involving the same drug candidate. Even if we
believe the data collected from clinical trials of our drug candidates are promising with respect
to safety and efficacy, such data may not be deemed sufficient by regulatory authorities to warrant
product approval. Clinical data can be interpreted in different ways. Regulatory officials could
interpret such data in different ways than we do which could delay, limit or prevent regulatory
approval. The FDA, other regulatory authorities or we may suspend or terminate clinical trials at
any time. Any failure or significant delay in completing clinical trials for our drug candidates,
or in receiving regulatory approval for the commercialization of our drug candidates, may severely
harm our business and reputation.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If our understanding of the role played by CDKs or AKs in regulating the cell cycle is incorrect,
this may hinder pursuit of our clinical and regulatory strategy.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our development of small molecule inhibitors of CDK and AK is based on our understanding of
the mechanisms of action of CDK and AK inhibitors and their interaction with other cellular
mechanisms. One of our drug candidates, seliciclib, is a CDK inhibitor, and CYC116 is an AK and
VEGFR2 inhibitor. Although a number of pharmaceutical and biotechnology companies are attempting to
develop CDK or AK inhibitor drugs for the treatment of cancer, no CDK or AK inhibitor has yet
reached the market. If our understanding of the role played by CDK or AK inhibitors in regulating
the cell cycle is incorrect, seliciclib and/or CYC116 may fail to produce therapeutically relevant
results hindering our ability to pursue our clinical and regulatory strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We are making use of biomarkers, which are not scientifically validated, and our reliance on
biomarker data may thus lead us to direct our resources inefficiently.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are making use of biomarkers in an effort to facilitate our drug development and to
optimize our clinical trials. Biomarkers are proteins or other substances whose presence in the
blood can serve as an indicator of specific cell processes. We believe that these biological
markers serve a useful purpose in helping us to evaluate whether our drug candidates are having
their intended effects through their assumed mechanisms, and thus enable us to identify more
promising drug candidates at an early stage and to direct our resources efficiently. We also
believe that biomarkers may eventually allow us to improve patient selection in connection with
clinical trials and monitor patient compliance with trial protocols.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For most purposes, however, biomarkers have not been scientifically validated. If our
understanding and use of biomarkers is inaccurate or flawed, or if our reliance on them is
otherwise misplaced, then we will not only fail to realize any benefits from using biomarkers, but
may also be led to invest time and financial resources inefficiently in attempting to develop
inappropriate drug candidates. Moreover, although the FDA has issued for comment a draft guidance
document on the potential use of biomarker data in clinical development, such data are not
currently accepted by the FDA or other regulatory agencies in the United States, the European Union
or elsewhere in applications for regulatory approval of drug candidates and there is no guarantee
that such data will ever be accepted by the relevant authorities in this connection. Our biomarker
data should not be interpreted as evidence of efficacy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Due to our reliance on contract research organizations or other third parties to conduct clinical
trials, we may be unable to directly control the timing, conduct and expense of our clinical
trials.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We do not have the ability to independently conduct clinical trials required to obtain
regulatory approvals for our drug candidates. We must rely on third parties, such as contract
research organizations, data management companies, contract clinical research associates, medical
institutions, clinical investigators and contract laboratories to conduct our clinical trials. In
addition, we rely on third parties to assist with our preclinical development of drug candidates.
If these third parties do not successfully carry out their contractual duties or regulatory
obligations or meet expected deadlines, if the third parties need to be replaced or if the quality
or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our preclinical development activities
or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to
obtain regulatory approval for or successfully commercialize our drug candidates.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>To the extent we are able to enter into collaborative arrangements or strategic alliances, we will
be exposed to risks related to those collaborations and alliances.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Although we are not currently party to any collaboration arrangement or strategic alliance
that is material to our business, in the future we expect to be dependent upon collaborative
arrangements or strategic alliances to complete the development and commercialization of some of
our drug candidates particularly after the Phase 2 stage of clinical testing. These arrangements
may place the development of our drug candidates outside our control, may require us to relinquish
important rights or may otherwise be on terms unfavorable to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may be unable to locate and enter into favorable agreements with third parties, which could
delay or impair our ability to develop and commercialize our drug candidates and could increase our
costs of development and commercialization. Dependence on collaborative arrangements or strategic
alliances will subject us to a number of risks, including the risk that:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not be able to control the amount and timing of resources that our
collaborators may devote to the drug candidates;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our collaborators may experience financial difficulties;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may be required to relinquish important rights such as marketing and distribution
rights; business combinations or significant changes in a collaborator&#146;s business
strategy may also adversely affect a collaborator&#146;s willingness or ability to complete
our obligations under any arrangement;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a collaborator could independently move forward with a competing drug candidate
developed either independently or in collaboration with others, including our
competitors; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>collaborative arrangements are often terminated or allowed to expire, which would
delay the development and may increase the cost of developing our drug candidates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We have no manufacturing capacity and will rely on third party manufacturers for the late stage
development and commercialization of any drugs or devices we may develop or sell.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We do not currently operate manufacturing facilities for clinical or commercial production of
our drug candidates under development or our currently marketed ALIGN products. We currently lack
the resources or the capacity to manufacture any of our products on a clinical or commercial scale.
We depend upon a third party, Sinclair, to manufacture the commercial products sold by our ALIGN
subsidiary and we can not rely upon Sinclair to continue to supply the products. We anticipate
future reliance on a limited number of third party manufacturers until we are able, or decide to,
expand our operations to include manufacturing capacities. Any performance failure on the part of
manufacturers could delay late stage clinical development or regulatory approval of our drug, the
commercialization of our drugs or our ability to sell our commercial products, producing additional
losses and depriving us of potential product revenues.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If the FDA or other regulatory agencies approve any of our drug candidates for commercial
sale, or if we significantly expand our clinical trials, we will need to manufacture them in larger
quantities and will be required to secure alternative third-party suppliers to our current
suppliers. To date, our drug candidates have been manufactured in small quantities for preclinical
testing and clinical trials and we may not be able to successfully increase the manufacturing
capacity, whether in collaboration with our current or future third-party manufacturers or on our
own, for any of our drug candidates in a timely or
economic manner, or at all. Significant scale-up of manufacturing may require additional
validation studies, which the FDA and other regulatory bodies must review and approve. If we are
unable to successfully increase the manufacturing capacity for a drug candidate whether for late
stage clinical trials or for commercial sale or are unable to secure alternative third-party
suppliers to our current suppliers, the drug development, regulatory approval or commercial launch
of any related drugs may be delayed or blocked or there may be a shortage in supply. Even if any
third party manufacturer makes improvements in the manufacturing process for our drug candidates,
we may not own, or may have to share, the intellectual property rights to such innovation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>As we evolve from a company primarily involved in discovery and development to one also involved in
the commercialization of drugs and devices, we may encounter difficulties in managing our growth
and expanding our operations successfully.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In order to execute our business strategy, we will need to expand our development, control and
regulatory capabilities and develop financial, manufacturing, marketing and sales capabilities or
contract with third parties to provide these capabilities for us. If our operations expand, we
expect that we will need to manage additional relationships with various collaborative partners,
suppliers and other third parties. Our ability to manage our operations and any growth will require
us to make appropriate changes and upgrades, as necessary, to our operational, financial and
management controls, reporting systems and procedures wherever we may operate. Any inability to
manage growth could delay the execution of our business plan or disrupt our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The failure to attract and retain skilled personnel and key relationships could impair our drug
development and commercialization efforts.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are highly dependent on our senior management and key scientific, technical and sales and
marketing personnel. Competition for these types of personnel is intense. The loss of the services
of any member of our senior management, scientific, technical or sales or marketing staff may
significantly delay or prevent the achievement of drug development and other business objectives
and could have a material adverse effect on our business, operating results and financial
condition. We also rely on consultants and advisors to assist us in formulating our strategy. All
of our consultants and advisors are either self-employed or employed by other organizations, and
they may have conflicts of interest or other commitments, such as consulting or advisory contracts
with other organizations, that may affect their ability to contribute to us. The success of the
commercialization of the ALIGN products depends, in large part, on our continued ability to develop
and maintain important relationships with distributors and research and medical institutions.
Failure to do that could have a material adverse effect on our ability to commercialize the ALIGN
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We intend to expand and develop new drug candidates. We will need to hire additional employees
in order to continue our clinical trials and market our drug candidates and medical devices. This
strategy will require us to recruit additional executive management and scientific and technical
personnel. There is currently intense competition for skilled executives and employees with
relevant scientific and technical expertise, and this competition is likely to continue. The
inability to attract and retain sufficient scientific, technical and managerial personnel could
limit or delay our product development efforts, which would adversely affect the development of our
drug candidates and commercialization of our potential drugs and growth of our business.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our drug candidates are subject to extensive regulation, which can be costly and time-consuming,
and we may not obtain approvals for the commercialization of any of our drug candidates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The clinical development, manufacturing, selling and marketing of our drug candidates are
subject to extensive regulation by the FDA and other regulatory authorities in the United States,
the European Union and elsewhere. These regulations also vary in important, meaningful ways from
country to country. We are not permitted to market a potential drug in the United States until we
receive approval of an NDA from the FDA. We have not received an NDA approval from the FDA for any
of our drug candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Obtaining an NDA approval is expensive and is a complex, lengthy and uncertain process. The
FDA approval process for a new drug involves completion of preclinical studies and the submission
of the results of these studies to the FDA, together with proposed clinical protocols,
manufacturing information, analytical data and other information in an Investigational New Drug, or
IND, which must become effective before human clinical trials may begin. Clinical development
typically involves three phases of study: Phase 1, 2 and 3. The most significant costs associated
with clinical development are the pivotal or suitable for registration late Phase 2 or Phase 3
clinical trials as they tend to be the longest and largest studies conducted during the drug
development process. After completion of clinical trials, an NDA may be submitted to the FDA. In
responding to an NDA, the FDA may refuse to file the application, or if accepted for filing, the
FDA may grant marketing approval, request additional information or deny the application if it
determines that the application does not provide an adequate basis for approval. In addition,
failure to comply with the FDA and other applicable foreign and U.S. regulatory requirements may
subject us to administrative or judicially imposed sanctions. These include warning letters, civil
and criminal penalties, injunctions, product seizure or detention, product recalls, total or
partial suspension of production and refusal to approve either pending NDAs, or supplements to
approved NDAs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Despite the substantial time and expense invested in preparation and submission of an NDA or
equivalents in other jurisdictions, regulatory approval is never guaranteed. The FDA and other
regulatory authorities in the United States, the European Union and elsewhere exercise substantial
discretion in the drug approval process. The number, size and design of preclinical studies and
clinical trials that will be required for FDA or other regulatory approval will vary depending on
the drug candidate, the disease or condition for which the drug candidate is intended to be used
and the regulations and guidance documents applicable to any particular drug candidate. The FDA or
other regulators can delay, limit or deny approval of a drug candidate for many reasons, including,
but not limited to:
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>those discussed in the risk factor which immediately follows;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the fact that the FDA or other regulatory officials may not approve our or our third
party manufacturer&#146;s processes or facilities; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the fact that new regulations may be enacted by the FDA or other regulators may
change their approval policies or adoption of new regulations requiring new or
different evidence of safety and efficacy for the intended use of a drug candidate.
</TD>
</TR>
</TABLE>
</DIV>
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</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>With regard to the ALIGN products, and following regulatory approval of any of our drug candidates,
we are subject to ongoing regulatory obligations and restrictions, which may result in significant
expense and limit our ability to commercialize our potential products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">With regard to our ALIGN products and our drug candidates, if any, approved by the FDA or by
another regulatory authority, we are held to extensive regulatory requirements over product
manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion
and record keeping. Regulatory approvals may also be subject to significant limitations on the
indicated uses or marketing of the drug candidates. Potentially costly follow-up or post-marketing
clinical studies may be required as a condition of approval to further substantiate safety or
efficacy, or to investigate specific issues of interest to the regulatory authority. Previously
unknown problems with the product or drug candidate, including adverse events of unanticipated
severity or frequency, may result in restrictions on the marketing of the drug or device, and could
include withdrawal of the drug or device from the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, the law or regulatory policies governing pharmaceuticals may change. New
statutory requirements may be enacted or additional regulations may be enacted that could prevent
or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or
extent of adverse government regulation that may arise from future legislation or administrative
action, either in the United States or elsewhere. If we are not able to maintain regulatory
compliance, we might not be permitted to market our drugs and our business could suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our applications for regulatory approval could be delayed or denied due to problems with studies
conducted before we in-licensed the rights to some of our product candidates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We currently license some of the compounds and drug candidates used in our research programs
from third parties. These include sapacitabine which was licensed from Daiichi-Sankyo. Our present
research involving these compounds relies upon previous research conducted by third parties over
whom we had no control and before we in-licensed the drug candidates. In order to receive
regulatory approval of a drug candidate, we must present all relevant data and information obtained
during our research and development, including research conducted prior to our licensure of the
drug candidate. Although we are not currently aware of any such problems, any problems that emerge
with preclinical research and testing conducted prior to our in-licensing may affect future results
or our ability to document prior research and to conduct clinical trials, which could delay, limit
or prevent regulatory approval for our drug candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We face intense competition and our competitors may develop drugs that are less expensive, safer,
or more effective than our drug candidates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
A large number of drug candidates are in development for the treatment of leukemia, lung
cancer, lymphomas and nasopharyngeal cancer. Several pharmaceutical and biotechnology companies
have nucleoside analogs or other products on the market or in clinical trials which may be
competitive to sapacitabine in both hematological and oncology indications. These include Celgene,
Cephalon, Eisai, Johnson &#038; Johnson, Eli Lilly, Genzyme, GlaxoSmithKline, Hospira, Pfizer, Seattle
Genetics, Sunesis and Vion. We believe that we are currently the only company that has an orally
available CDK-specific agent in Phase 2 clinical trials but that there are a number of companies,
including AstraZeneca, Eisai, Pfizer, Piramal Life Sciences, Roche Merck and Bayer-Schering that
are developing CDK inhibitors in early stage clinical trials in cancer patients. Although Aventis,
a predecessor of Sanofi-Aventis, had previously announced that it has ceased Phase 2 development of
alvocidib or flavopiridol, a CDK inhibitor, we believe that the National Cancer Institute&#146;s Cancer
Therapy Evaluation Program, or CTEP, is continuing to enroll patients in a CTEP sponsored trial in
patients with chronic leukemia. A number of companies are pursuing discovery and research
activities in each of the other areas that are the subject of our research and drug development
programs. We believe that AstraZeneca, Entremed, Merck, jointly with Vertex, Nerviano Medical
Sciences, Pfizer, Rigel, Sunesis and Takeda-Millennium have commenced Phase 1 or Phase 2 clinical
trials of Aurora kinase inhibitors in patients with advanced cancers. Several companies have
reported selection of Aurora kinase inhibitor candidates for development and may have started or
are expected to start clinical trials within the next twelve months. We believe that Boehringer
Ingelheim, GlaxoSmithKline, Onconova and Nerviano Medical Sciences have commenced Phase 1 or Phase
2 clinical trials with Plk inhibitor candidates for oncology indications. For our ALIGN products,
we believe that Beiersdorf, Daiichi-Sankyo, Eisai, Johnson &#038; Johnson, MPM Medical and other
companies market products for radiation dermatitis and xerostomia.

</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our competitors, either alone or together with collaborators, may have substantially greater
financial resources and research and development staff. Our competitors may also have more
experience:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developing drug candidates;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>conducting preclinical and clinical trials;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining regulatory approvals; and</TD>
</TR>

</TABLE>
</DIV>

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    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>commercializing product candidates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our competitors may succeed in obtaining patent protection and regulatory approval and may
market drugs before we do. If our competitors market drugs that are less expensive, safer, more
effective or more convenient to administer than our potential drugs, or that reach the market
sooner than our potential drugs, we may not achieve commercial success. Scientific, clinical or
technical developments by our competitors may render our drug candidates obsolete or
noncompetitive. We anticipate that we will face increased competition in the future as new
companies enter the markets and as scientific developments progress. If our drug candidates obtain
regulatory approvals, but do not compete effectively in the marketplace, our business will suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The commercial success of the ALIGN products and our drug candidates depends upon their market
acceptance among physicians, patients, healthcare providers and payors and the medical community.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">It is necessary that our and our distribution partners&#146; products, including Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges achieve and maintain market
acceptance. If our drug candidates are approved by the FDA or by another regulatory authority, the
resulting drugs, if any, may not gain market acceptance among physicians, healthcare providers and
payors, patients and the medical community. The degree of market acceptance of any of our approved
drugs or devices will depend on a variety of factors, including:
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
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    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing of market introduction, number and clinical profile of competitive drugs;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to provide acceptable evidence of safety and efficacy;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>relative convenience and ease of administration;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cost-effectiveness;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of coverage, reimbursement and adequate payment from health maintenance
organizations and other third party payors;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prevalence and severity of adverse side effects; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other potential advantages over alternative treatment methods.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If our drugs fail to achieve market acceptance, we may not be able to generate significant
revenue and our business would suffer.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we are unable to compete successfully in our market place, it will harm our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There are existing products in the marketplace that compete with our products. Companies may
develop new products that compete with our products. Certain of these competitors and potential
competitors have longer operating histories, substantially greater product development capabilities
and financial, scientific, marketing and sales resources. Competitors and potential competitors may
also develop products that are safer, more effective or have other potential advantages compared to
our products. In addition, research, development and commercialization efforts by others could
render our products obsolete or non-competitive. Certain of our competitors and potential
competitors have broader product offerings and extensive customer bases allowing them to adopt
aggressive pricing policies that would enable them to gain market share. Competitive pressures
could result in price reductions, reduced margins and loss of market share. We could encounter
potential customers that, due to existing relationships with our competitors, are committed to
products offered by those competitors. As a result, those potential customers may not consider
purchasing our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>There is uncertainty related to coverage, reimbursement and payment by healthcare providers and
payors for the ALIGN products and newly approved drugs, if any. The inability or failure to obtain
or maintain coverage could affect our ability to market the ALIGN products and our future drugs and
decrease our ability to generate revenue.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The availability and levels of coverage and reimbursement of newly approved drugs by
healthcare providers and payors is subject to significant uncertainty. The commercial success of
the ALIGN products and our drug candidates in both the United States and international markets is
substantially dependent on whether third party coverage and reimbursement is available. The United
States Centers for Medicare and Medicaid Services, health maintenance organizations and other third
party payors in the United States, the European Union and other jurisdictions are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of
new drugs and, as a result, they may not cover or provide adequate payment for our potential drugs.
The ALIGN products and our drug candidates may not be considered cost-effective and reimbursement
may not be available to consumers or may not be sufficient to allow the ALIGN products or our drug
candidates to be marketed on a competitive basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In some countries, pricing of prescription drugs is subject to government control. In such
countries, pricing negotiations with governmental authorities can take three to 12&nbsp;months or longer
following application to the competent authorities. To obtain reimbursement or pricing approval in
such countries may require conducting an additional clinical trial comparing the cost-effectiveness
of the drug to other alternatives. In the United States, the Medicare Part&nbsp;D drug benefit
implemented in 2006 will limit drug coverage through formularies and other cost and utilization
management programs, while Medicare Part&nbsp;B limits drug payments to a certain percentage of average
price or through restrictive payment policies of &#147;least costly alternatives&#148; and &#147;inherent
reasonableness&#148; Our business could be materially harmed if coverage, reimbursement or pricing is
unavailable or set at unsatisfactory levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be exposed to product liability claims that may damage our reputation and we may not be able
to obtain adequate insurance.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Because we conduct clinical trials in humans, we face the risk that the use of our drug
candidates will result in adverse effects. We believe that we have obtained reasonably adequate
product liability insurance coverage for our trials. We cannot predict, however, the possible harm
or side effects that may result from our clinical trials. Such claims may damage our reputation and
we may not have sufficient resources to pay for any liabilities resulting from a claim excluded
from, or beyond the limit of, our insurance coverage.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As we market commercialized products through our ALIGN subsidiary we are exposed to additional
risks of product liability claims. These risks exist even with respect to drugs and devices that
are approved for commercial sale by the FDA or other regulatory authorities in the United States,
the European Union or elsewhere and manufactured in facilities licensed and regulated by the FDA or
other such regulatory authorities. We have secured limited product liability insurance coverage,
but may not be able to maintain such insurance on acceptable terms with adequate coverage, or at a
reasonable cost. There is also a risk that third parties that we have agreed to indemnify could
incur liability. Even if we were ultimately successful in product liability litigation, the
litigation would consume substantial amounts of our financial and managerial resources and may
exceed insurance coverage creating adverse publicity, all of which would impair our ability to
generate sales of the litigated product as well as our other potential drugs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be subject to damages resulting from claims that our employees or we have wrongfully used or
disclosed alleged trade secrets of their former employers.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Many of our employees were previously employed at universities or other biotechnology or
pharmaceutical companies, including our competitors or potential competitors. Although no claims
against us are currently pending, we may be subject to claims that these employees or we have
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend against these claims. If we fail in
defending such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. A loss of key research personnel or their work product could hamper
or prevent our ability to commercialize certain potential drugs, which could severely harm our
business. Even if we are successful in defending against these claims, litigation could result in
substantial costs and be a distraction to management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Defending against claims relating to improper handling, storage or disposal of hazardous chemical,
radioactive or biological materials could be time consuming and expensive.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our research and development involves the controlled use of hazardous materials, including
chemicals, radioactive and biological materials such as chemical solvents, phosphorus and bacteria.
Our operations produce hazardous waste products. We cannot eliminate the risk of accidental
contamination or discharge and any resultant injury from those materials. Various laws and
regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. We
may be sued for any injury or contamination that results from our use or the use by third parties
of these materials. Compliance with environmental laws and regulations may be expensive, and
current or future environmental regulations may impair our research, development and production
efforts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be required to defend lawsuits or pay damages in connection with the alleged or actual
violation of healthcare statutes such as fraud and abuse laws, and our corporate compliance
programs can never guarantee that we are in compliance with all relevant laws and regulations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our commercialization efforts in the United States are subject to various federal and state
laws pertaining to promotion and healthcare fraud and abuse, including federal and state
anti-kickback, fraud and false claims laws. Anti-kickback laws make it illegal for a manufacturer
to offer or pay any remuneration in exchange for, or to induce, the referral of business, including
the purchase of a product. The federal government has published many regulations relating to the
anti-kickback statutes, including numerous safe harbors or exemptions for certain arrangements.
False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be
presented for payment to third-party payers including Medicare and Medicaid, claims for reimbursed
products or services that are false or fraudulent,
claims for items or services not provided as claimed, or claims for medically unnecessary
items or services.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our activities relating to the sale and marketing of our products will be subject to scrutiny
under these laws and regulations. It may be difficult to determine whether or not our activities,
comply with these complex legal requirements. Violations are punishable by significant criminal
and/or civil fines and other penalties, as well as the possibility of exclusion of the product from
coverage under governmental healthcare programs, including Medicare and Medicaid. If the government
were to investigate or make allegations against us or any of our employees, or sanction or convict
us or any of our employees, for violations of any of these legal requirements, this could have a
material adverse effect on our business, including our stock price. Our activities could be subject
to challenge for many reasons, including the broad scope and complexity of these laws and
regulations, the difficulties in interpreting and applying these legal requirements, and the high
degree of prosecutorial resources and attention being devoted to the biopharmaceutical industry and
health care fraud by law enforcement authorities. During the last few years, numerous
biopharmaceutical companies have paid multi-million dollar fines and entered into burdensome
settlement agreements for alleged violation of these requirements, and other companies are under
active investigation. Although we have developed and implemented corporate and field compliance
programs as part of our commercialization efforts, we cannot assure you that we or our employees,
directors or agents were, are or will be in compliance with all laws and regulations or that we
will not come under investigation, allegation or sanction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, we may be required to prepare and report product pricing-related information to
federal and state governmental authorities, such as the Department of Veterans Affairs and under
the Medicaid program. The calculations used to generate the pricing-related information are complex
and require the exercise of judgment. If we fail to accurately and timely report product
pricing-related information or to comply with any of these or any other laws or regulations,
various negative consequences could result, including criminal and/or civil prosecution,
substantial criminal and/or civil penalties, exclusion of the approved product from coverage under
governmental healthcare programs including Medicare and Medicaid, costly litigation and restatement
of our financial statements. In addition, our efforts to comply with this wide range of laws and
regulations are, and will continue to be, time-consuming and expensive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we fail to enforce adequately or defend our intellectual property rights our business may be
harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our commercial success depends in large part on obtaining and maintaining patent and trade
secret protection for our drug candidates, the methods used to manufacture those drug candidates
and the methods for treating patients using those drug candidates. Specifically, sapacitabine is
covered in granted, composition of matter patents that expire in 2014 in the U.S. and 2012 outside
the U.S. Sapacitabine is further protected by additional granted, composition of matter patents
claiming certain, stable crystalline forms of sapacitabine and their pharmaceutical compositions
and therapeutic uses that expire in 2022. In early development, amorphous sapacitabine was used. We
have used one of the stable, crystalline forms of sapacitabine in nearly all our Phase 1 and in all
of our Phase 2 clinical studies. We have also chosen this form for commercialization. Additional
patents claim certain medical uses and formulations of
sapacitabine which have emerged in our clinical trials. Seliciclib is protected by granted,
composition of matter patents that expire in 2016. Additional patents claim certain medical uses
which have emerged from our research programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Failure to obtain, maintain or extend the patents could adversely affect our business. We will
only be able to protect our drug candidates and our technologies from unauthorized use by third
parties to the extent that valid and enforceable patents or trade secrets cover them.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our ability to obtain patents is uncertain because legal means afford only limited protections
and may not adequately protect our rights or permit it to gain or keep any competitive advantage.
Some legal principles remain unresolved and the breadth or interpretation of claims allowed in
patents in the United States, the European Union or elsewhere can still be difficult to ascertain
or predict. In addition, the specific content of patents and patent applications that are necessary
to support and interpret patent claims is highly uncertain due to the complex nature of the
relevant legal, scientific and factual issues. Changes in either patent laws or in interpretations
of patent laws in the United States, the European Union or elsewhere may diminish the value of our
intellectual property or narrow the scope of our patent protection. Our existing patents and any
future patents we obtain may not be sufficiently broad to prevent others from practicing our
technologies or from developing competing products and technologies. In addition, we generally do
not control the patent prosecution of subject matter that we license from others and have not
controlled the earlier stages of the patent prosecution. Accordingly, we are unable to exercise the
same degree of control over this intellectual property as we would over our own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Even if patents are issued regarding our drug candidates or methods of using them, those
patents can be challenged by our competitors who may argue such patents are invalid and/or
unenforceable. On April&nbsp;27, 2010, we were served with a complaint filed by Celgene Corporation in the United
States District Court for the District of Delaware seeking a Declaratory Judgment that four of our
owned patents, claiming the use of romidepsin injection in T-cell lymphomas, are not infringed by
Celgene&#146;s products and are invalid. The four patents cited in the complaint do not involve our
clinical development candidates nor commercial products. We are presently required to answer or
otherwise move in response to the complaint by June&nbsp;17, 2010. We intend to vigorously defend the
validity of these patents and enforce our patent rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
 Patents also will not protect our drug candidates if competitors devise ways of
making or using these product candidates without legally infringing our patents. The U.S. Federal
Food, Drug and Cosmetic, or FD&#038;C, Act and FDA regulations and policies and equivalents in other
jurisdictions provide incentives to manufacturers to challenge patent validity or create modified,
noninfringing versions of a drug in order to facilitate the approval of abbreviated new drug
applications for generic substitutes. These same types of incentives encourage manufacturers to
submit new drug applications that rely on literature and clinical data not prepared for or by the
drug sponsor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Proprietary trade secrets and unpatented know-how are also very important to our business. We
rely on trade secrets to protect our technology, especially where we do not believe that patent
protection is appropriate or obtainable. However, trade secrets are difficult to protect. Our
employees, consultants, contractors, outside scientific collaborators and other advisors may
unintentionally or willfully disclose our confidential information to competitors, and
confidentiality agreements may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. Enforcing a claim that a third party obtained illegally and
is using trade secrets is expensive and time consuming, and the outcome is unpredictable. Moreover,
our competitors may independently develop equivalent knowledge, methods and know-how. Failure to
obtain or maintain trade secret protection could adversely affect our competitive business
position.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Intellectual property rights of third parties may increase our costs or delay or prevent us from
being able to commercialize our drug candidates and/or the ALIGN products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There is a risk that we are infringing or will infringe the proprietary rights of third
parties because patents and pending applications belonging to third parties exist in the United
States, the European Union and elsewhere in the world in the areas of our research and/or the ALIGN
products. Others might have been the first to make the inventions covered by each of our or our
licensors&#146; pending patent applications and issued patents and might have been the first to file
patent applications for these inventions. We are aware of several published patent applications,
and understand that others may exist, that could support claims that, if granted, could cover
various aspects of our developmental programs, including in some cases particular uses of our lead
drug candidate sapacitabine, seliciclib or other therapeutic candidates, or gene sequences and
techniques that we use in the course of our research and development. In addition, we understand
that other applications and patents exist relating to potential uses of sapacitabine and seliciclib
that are not part of our current clinical programs for these compounds. Numerous third-party United
States and foreign issued patents and pending applications exist in the area of kinases, including
CDK, AK and Plk for which we have research programs. For example, some pending patent applications
contain broad claims that could represent freedom to operate limitations for some of our kinase
programs should they be issued unchanged. Although we intend to continue to monitor these
applications, we cannot predict what claims will ultimately be allowed and if allowed what their
scope would be. In addition, because the patent application process can take several years to
complete, there may be currently pending applications, unknown to us, which may later result in
issued patents that cover the production, manufacture, commercialization or use of our drug
candidates. If we wish to use the technology or compound claimed in issued and unexpired patents
owned by others, we will need to obtain a license from the owner, enter into litigation to
challenge the validity of the patents or incur the risk of litigation in the event that the owner
asserts that we infringe its patents. In one case we have opposed a European patent relating to
human aurora kinase and the patent has been finally revoked (no appeal was filed). We are also
aware of a corresponding U.S. patent containing method of treatment claims for specific cancers
using aurora kinase modulators which, if held valid, could potentially restrict the use of our
aurora kinase inhibitors once clinical trials are completed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There has been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industries. Defending against
third party claims, including litigation in particular, would be costly and time consuming and
would divert management&#146;s attention from our business, which could lead to delays in our
development or commercialization efforts. If third parties are successful in their claims, we might
have to pay substantial damages or take other actions that are adverse to our business. As a result
of intellectual property infringement claims, or to avoid potential claims, we might:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be prohibited from selling or licensing any product that we may develop unless the
patent holder licenses the patent to us, which it is not required to do;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be required to pay substantial royalties or grant a cross license to our patents to
another patent holder;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>decide to move some of our screening work outside Europe;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be required to pay substantial damages for past infringement, which we may have to
pay if a court determines that our product candidates or technologies infringe a
competitor&#146;s patent or other proprietary rights; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be required to redesign the formulation of a drug candidate so it does not infringe,
which may not be possible or could require substantial funds and time.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The development programs for our two lead drug candidates are based in part on intellectual
property rights we license from others, and any termination of those licenses could seriously harm
our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have in-licensed certain patent rights in connection with the development programs for each
of our two lead drug candidates. Both of these license agreements impose payment and other material
obligations on us. Under the Daiichi-Sankyo license, we are obligated to pay license fees,
milestone payments and royalties. We are also obligated to use commercially reasonable efforts to
commercialize products based on the licensed rights and to use reasonable efforts to obtain
regulatory approval to sell the products in at least one country by September&nbsp;2011, unless we have
in-licensed certain patent rights in connection with the development programs for each of our two
lead drug candidates. Under both of the license agreements relating to these drug candidates we are
obligated to pay license fees, milestone payments and royalties. We are also obligated to use
reasonable efforts to develop and commercialize products based on the licensed patents.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Pursuant to the Daiichi-Sankyo license under which we license sapacitabine, we are obligated
to pay license fees, milestone payments and royalties, provide regular progress reports and use
commercially reasonable efforts to commercialize products based on the licensed rights and obtain
regulatory approval to sell the products in at least one country by September&nbsp;2011, unless we are
prevented from doing so by virtue of certain causes outside of our reasonable control, including
but not limited to difficulties in patient recruitment into trials or significant, unexpected
change in regulatory requirements affecting the development of our drug. Pursuant to the CNRS and
Institut Curie license under which we license seliciclib, we are obligated to pay license fees,
milestone payments and royalties and provide regular progress reports.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Although we are currently in compliance with all of our material obligations under these
licenses, if we were to breach any such obligations our counterparties may be entitled to terminate
the licenses. This would restrict or delay or eliminate our ability to develop and commercialize
these drug candidates, which could adversely affect our business. With respect to seliciclib we
hold a license from CNRS and Institut Curie under which we are obligated to pay license fees,
milestone payments and royalties. We are obligated to use reasonable efforts to develop and
commercialize products based on the licensed patents. Although we are currently in compliance with
all of our material obligations under these licenses, if we were to breach any such obligations our
counterparties could attempt to terminate the licenses and there can be no assurance as to what
would constitute exceptional cause. This would restrict or delay or eliminate our ability to
develop and commercialize these drug candidates, which could adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Failure to achieve and maintain internal controls in accordance with Sections&nbsp;302 and 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price</I></B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We just recently completed a restatement of our financial statements and filed an amendment to
our Annual Report on Form 10-K as and for the year ended December&nbsp;31, 2009, in which we reported a
material weakness in our internal control over financial reporting for the year then ended,
specifically related to the operational failure of the controls in place to ensure the correct
computation of net loss per share and presentation of preferred stock dividends in the consolidated
statement of cash flows. If we fail to maintain our internal controls or fail to implement required
new or improved controls, as such control standards are modified, supplemented or amended from time
to time, we may not be able to conclude on an ongoing basis that we have effective internal
controls over financial reporting. Effective internal controls are necessary for us to produce
reliable financial reports and are important in the prevention of financial fraud. If we cannot
produce reliable financial reports or prevent fraud, our business and operating results could be
harmed, investors may lose confidence in our reported financial information, and there could be a
material adverse effect on our stock price.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We incur increased costs and management resources as a result of being a public company, and we
still may fail to comply with public company obligations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">

As a public company, we face and will continue to face increased legal, accounting,
administrative and other costs and expenses as a public company that we would not incur as a
private company. Compliance with the Sarbanes Oxley Act of 2002, as well as other rules of the SEC,
the Public Company Accounting Oversight Board and the NASDAQ Global Market resulted in a
significant initial cost to us as well as an ongoing compliance costs. As a public company, we are
subject to Section&nbsp;404 of the Sarbanes Oxley Act relating to internal control over financial
reporting. We completed, and later revisited, our formal process to evaluate our internal controls
for purposes of Section&nbsp;404. In performing this assessment, our management identified a deficiency
in our internal control over financial reporting. As our business grows and changes, there can be
no assurances that we can maintain the effectiveness of our internal controls over financial
reporting that constitutes a material weakness under standards established by the Public Company
Accounting Oversight Board, or PCAOB, as of December&nbsp;31, 2009. Specifically related to the
operational failure of the controls in place to ensure the correct
computation of net loss per share and presentation of preferred stock dividends in the statement of
cash flows. Due to this deficiency, we concluded that the material weakness in internal control
over financial reporting existed as of December&nbsp;31, 2009 and continued as of March&nbsp;31, 2010. Solely
as a result of this material weakness, management concluded that we did not maintain effective
internal control over financial reporting as of March&nbsp;31, 2010, based on the criteria established
in &#147;Internal Control &#151; Integrated Framework,&#148; issued by the COSO. As our business grows and
changes, there can be no assurances that we can maintain the effectiveness of our internal controls
over financial reporting. Effective internal controls over financial reporting are necessary for us
to provide reliable financial reports and, together with adequate disclosure controls and
procedures, are designed to prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. We have completed a formal process to
evaluate our internal control over financial reporting. However, guidance from regulatory
authorities in the area of internal controls continues to evolve and substantial uncertainty exists
regarding our on-going ability to comply by applicable deadlines. Any failure to implement required
new or improved controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations. Ineffective internal
controls could also cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Effective internal controls over financial reporting are necessary for us to provide reliable
financial reports and, together with adequate disclosure controls and procedures, are designed to
prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating
results could be harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have completed a formal process to evaluate our internal control over financial reporting.
However, guidance from regulatory authorities in the area of internal controls continues to evolve
and substantial uncertainty exists regarding our on-going ability to comply by applicable
deadlines. Any failure to implement required new or improved controls, or difficulties encountered
in their implementation, could harm our operating results or cause us to fail to meet our reporting
obligations. Ineffective internal controls could also cause investors to lose confidence in our
reported financial information, which could have a negative effect on the trading price of our
common stock.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our common stock may have a volatile public trading price.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">An active public market for our common stock has not developed. Our stock can trade in small
volumes which may make the price of our stock highly volatile. The last reported price of our stock
may not represent the price at which you would be able to buy or sell the stock. The market prices
for securities of companies comparable to us have been highly volatile. Often, these stocks have
experienced significant price and volume fluctuations for reasons that are both related and
unrelated to the operating performance of the individual companies. In addition, the stock market
as a whole and biotechnology and other life science stocks in particular have experienced
significant recent volatility. Like our common stock, these stocks have experienced significant
price and volume fluctuations for reasons unrelated to the operating performance of the individual
companies. In addition, due to our existing stock price, we may not continue to qualify for
continued listing on the NASDAQ Global Market. To maintain listing, we are required to maintain a
minimum closing bid price of $1.00 per share and, among other requirements, to maintain a minimum
stockholders equity value of $10&nbsp;million. Factors giving rise to this volatility may include:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disclosure of actual or potential clinical results with respect to product
candidates we are developing;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory developments in both the United States and abroad;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments concerning proprietary rights, including patents and litigation
matters;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>public concern about the safety or efficacy of our product candidates or technology,
or related technology, or new technologies generally;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>public announcements by our competitors or others; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general market conditions and comments by securities analysts and investors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Fluctuations in our operating losses could adversely affect the price of our common stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our operating losses may fluctuate significantly on a quarterly basis. Some of the factors
that may cause our operating losses to fluctuate on a period-to-period basis include the status of
our preclinical and clinical development programs, level of expenses incurred in connection with
our preclinical and clinical development programs, implementation or termination of collaboration,
licensing, manufacturing or other material agreements with third parties, non-recurring revenue or
expenses under any such agreement, and compliance with regulatory requirements. Period-to-period
comparisons of our historical and future financial results may not be meaningful, and investors
should not rely on them as an indication of future performance. Our fluctuating losses may fail to
meet the expectations of securities analysts or investors. Our failure to meet these expectations
may cause the price of our common stock to decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If securities or industry analysts do not publish research or reports about us, if they change
their recommendations regarding our stock adversely or if our operating results do not meet their
expectations, our stock price and trading volume could decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The trading market for our common stock is influenced by the research and reports that
industry or securities analysts publish about us. If one or more of these analysts cease coverage
of us or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one
or more of the analysts who cover us
downgrade our stock or if our operating results do not meet their expectations, our stock
price could decline.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Anti-takeover provisions in our charter documents and provisions of Delaware law may make an
acquisition more difficult and could result in the entrenchment of management.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our amended and
restated certificate of incorporation and amended and restated bylaws may make a change in control
or efforts to remove management more difficult. Also, under Delaware law, our board of directors
may adopt additional anti-takeover measures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We have the authority to issue up to 5&nbsp;million shares of preferred stock and to determine the terms
of those shares of stock without any further action by our stockholders. If the board of directors
exercises this power to issue preferred stock, it could be more difficult for a third party to
acquire a majority of our outstanding voting stock and vote the stock they acquire to remove
management or directors.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our amended and restated certificate of incorporation and amended and restated bylaws also
provides staggered terms for the members of our board of directors. Under Section&nbsp;141 of the
Delaware General Corporation Law, our directors may be removed by stockholders only for cause and
only by vote of the holders of a majority of voting shares then outstanding. These provisions may
prevent stockholders from replacing the entire board in a single proxy contest, making it more
difficult for a third party to acquire control of us without the consent of our board of directors.
These provisions could also delay the removal of management by the board of directors with or
without cause. In addition, our directors may only be removed for cause and amended and restated
bylaws limit the ability our stockholders to call special meetings of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under Section&nbsp;203 of the Delaware General Corporation Law, a corporation may not engage in a
business combination with any holder of 15% or more of its capital stock until the holder has held
the stock for three years unless, among other possibilities, the board of directors approves the
transaction. Our board of directors could use this provision to prevent changes in management. The
existence of the foregoing provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Certain severance-related agreements in our executive employment agreements may make an acquisition
more difficult and could result in the entrenchment of management.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In March&nbsp;2008 (as amended in December&nbsp;2008 with respect to our President and Chief Executive
Officer), we entered into employment agreements with our President and Chief Executive Officer and
our Executive Vice President, Finance, Chief Financial Officer and Chief Operating Officer, which
contain severance arrangements in the event that such executive&#146;s employment is terminated without
&#147;cause&#148; or as a result of a &#147;change of control&#148; (as each such term is defined in each agreement).
The financial obligations triggered by these provisions may prevent a business combination or
acquisition that would be attractive to stockholders and could limit the price that investors would
be willing to pay in the future for our stock.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>In the event of an acquisition of our common stock, we cannot assure our common stockholders that
we will be able to negotiate terms that would provide for a price equivalent to, or more favorable
than, the price at which our shares of common stock may be trading at such time.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may not effect a consolidation or merger with another entity without the vote or consent of
the holders of at least a majority of the shares of our preferred stock (in addition to the
approval of our common stockholders), unless the preferred stock that remains outstanding and its
rights, privileges and preferences are unaffected or are converted into or exchanged for preferred
stock of the surviving entity having rights, preferences and limitations substantially similar, but
no less favorable, to our convertible preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, in the event a third party seeks to acquire our company or acquire control of our
company by way of a merger, but the terms of such offer do not provide for our preferred stock to
remain outstanding or be converted into or exchanged for preferred stock of the surviving entity
having rights, preferences and limitations substantially similar, but no less favorable, to our
preferred stock, the terms of the Certificate of Designations of our preferred stock provide for an
adjustment to the conversion ratio of our preferred stock such that, depending on the terms of any
such transaction, preferred stockholders may be entitled, by their terms, to receive up to $10.00
per share in common stock, causing our common stockholders not to receive as favorable a price as
the price at which such shares may be trading at the time of any such
transaction. As of June&nbsp;9,
2010, there were 1,213,142 shares of our preferred stock issued and outstanding. If the transaction
were one in which proceeds were received by the Company for distribution to stockholders, and the
terms of the Certificate of Designations governing the preferred stock were strictly complied with,
approximately $13&nbsp;million would be paid to the preferred holders before any distribution to the
common stockholders, although the form of transaction could affect how the holders of preferred
stock are treated. In such an event, although such a transaction would be subject to the approval
of our holders of common stock, we cannot assure our common stockholders that we will be able to
negotiate terms that would provide for a price equivalent to, or more favorable than, the price at
which our shares of common stock may be trading at such time. Thus, the terms of our preferred
stock might hamper a third party&#146;s acquisition of our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our certificate of incorporation and bylaws and certain provisions of Delaware law may delay or
prevent a change in our management and make it more difficult for a third party to acquire us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our amended and restated certificate of incorporation and bylaws contain provisions that could
delay or prevent a change in our board of directors and management teams. Some of these provisions:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorize the issuance of preferred stock that can be created and issued by the
board of directors without prior stockholder approval, commonly referred to as &#147;blank
check&#148; preferred stock, with rights senior to those of our common stock;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide for the board of directors to be divided into three classes; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>require that stockholder actions must be effected at a duly called stockholder
meeting and prohibit stockholder action by written consent.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, because we are incorporated in Delaware, we are governed by the provisions of
Section&nbsp;203 of the Delaware General Corporation Law, which limits the ability of large stockholders
to complete a business combination with, or acquisition of, us. These provisions may prevent a
business combination or acquisition that would be attractive to stockholders and could limit the
price that investors would be willing to pay in the future for our stock.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">These provisions also make it more difficult for our stockholders to replace members of our
board of directors. Because our board of directors is responsible for appointing the members of our
management team, these provisions could in turn affect any attempt to replace our current
management team. Additionally, these provisions may prevent an acquisition that would be attractive
to stockholders and could limit the price that investors would be willing to pay in the future for
our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may have limited ability to pay cash dividends on the convertible preferred stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Delaware law may limit our ability to pay cash dividends on the convertible preferred stock.
Under Delaware law, cash dividends on our convertible preferred stock may only be paid from surplus
or, if there is no surplus, from the corporation&#146;s net profits for the current or preceding fiscal
year. Delaware law defines &#147;surplus&#148; as the amount by which the total assets of a corporation,
after subtracting its total liabilities, exceed the corporation&#146;s capital, as determined by its
board of directors. Since we are not profitable, our ability to pay cash dividends will require the
availability of adequate surplus. Even if adequate surplus is available to pay cash dividends on
the convertible preferred stock, we may not have sufficient cash to pay dividends on the
convertible preferred stock or we may choose not to declare the dividends. If that was to happen,
holders of preferred stock would be granted certain additional rights until such dividends were
paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we continue not to declare the quarterly dividends on our 6% Convertible Exchangeable Preferred
Stock for a total of six quarterly dividend periods, we will have to grant additional rights to our
holders of preferred stock with respect to the management of the Company.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On April&nbsp;6, 2009, June&nbsp;22, 2009, October&nbsp;19, 2009, January&nbsp;7, 2010 and March&nbsp;29, 2010, our
board of directors resolved, pursuant to the Certificate of Designations, not to declare payment of
the quarterly cash dividend on the Company&#146;s 6% Convertible Exchangeable Preferred Stock, with
respect to the dividends that would otherwise been payable on May&nbsp;1, 2009, August&nbsp;1, 2009, November
1, 2009, February&nbsp;1, 2010 and May&nbsp;1, 2010, respectively. To the extent that any dividends payable
on the preferred stock are not paid, such unpaid dividends are accumulated. We have not declared
dividends with respects to five quarters and if dividends with respect to at least six quarters
(whether or not consecutive) are not paid, the size of our board of directors will be increased by
two and the holders of the preferred stock will have the right to vote to fill the two vacancies
created thereby until all accrued but unpaid dividends have been paid in full, at which time such
right is terminated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our common and convertible preferred stock may experience extreme price and volume fluctuations,
which could lead to costly litigation for the Company and make an investment in the Company less
appealing.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The market price of our common and convertible preferred stock may fluctuate substantially due
to a variety of factors, including:
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additions to or departures of our key personnel;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements of technological innovations or new products or services by us or our
competitors;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements concerning our competitors or the biotechnology industry in general;</TD>
</TR>

</TABLE>
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<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new regulatory pronouncements and changes in regulatory guidelines;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general and industry-specific economic conditions;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in financial estimates or recommendations by securities analysts;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>variations in our quarterly results;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements about our collaborators or licensors; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in accounting principles.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The market prices of the securities of biotechnology companies, particularly companies like us
without product revenues and earnings, have been highly volatile and are likely to remain highly
volatile in the future. This volatility has often been unrelated to the performance of particular
companies. In the past, companies that experience volatility in the market price of their
securities have often faced securities class action litigation. Moreover, market prices for stocks
of biotechnology-related and technology companies frequently reach levels that bear no relationship
to the performance of these companies. These market prices generally are not sustainable and are
highly volatile. Whether or not meritorious, litigation brought against us could result in
substantial costs, divert our management&#146;s attention and resources and harm our financial condition
and results of operations. In addition, due to our stock price from time to time, we may not
continue to qualify for continued listing on the NASDAQ Global Market. Please see Risk Factor: <I>Our
common stock may have a volatile public trading price.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The future sale of our common and preferred stock and future issuances of our common stock upon
conversion of our preferred stock, could negatively affect our stock price.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If our common or preferred stockholders sell substantial amounts of our stock in the public
market, or the market perceives that such sales may occur, the market price of our common and
preferred stock could fall. Thus if holders of preferred stock elect to convert their
shares to shares of common stock at renegotiated prices, and the holders of an aggregate of 833,671
preferred stock have elected to so convert into an aggregate of 1,655,599 common stock, such
conversion as well as the sale of substantial amounts of our common or preferred stock, could cause
dilution to existing holders of our common stock, thereby also negatively affecting the price of
our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we exchange the convertible preferred stock for debentures, the exchange will be taxable but we
will not provide any cash to pay any tax liability that any convertible preferred stockholder may
incur.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">An exchange of convertible preferred stock for debentures, as well as any dividend make-whole
or interest make-whole payments paid in our common stock, will be taxable events for United States
federal income tax purposes, which may result in tax liability for the holder of convertible
preferred stock without any corresponding receipt of cash by the holder. In addition, the
debentures may be treated as having original issue discount, a portion of which would generally be
required to be included in the holder&#146;s gross income even though the cash to which such income is
attributable would not be received until maturity or redemption of the debenture. We will not
distribute any cash to the holders of the securities to pay these potential tax liabilities.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we automatically convert the convertible preferred stock, there is a substantial risk of
fluctuation in the price of our common stock from the date we elect to automatically convert to the
conversion date.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may automatically convert the convertible preferred stock into common stock if the closing
price of our common stock has exceeded $35.30. There is a risk of fluctuation in the price of our
common stock between the time when we may first elect to automatically convert the preferred and
the automatic conversion date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We do not intend to pay cash dividends on our common stock in the foreseeable future.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any
payment of cash dividends will depend on our financial condition, results of operations, capital
requirements, the outcome of the review of our strategic alternatives and other factors and will be
at the discretion of our board of directors. Accordingly, investors will have to rely on capital
appreciation, if any, to earn a return on their investment in our common stock. Furthermore, we may
in the future become subject to contractual restrictions on, or prohibitions against, the payment
of dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The number of shares of common stock which are registered, including the shares to be issued upon
exercise of our outstanding warrants, is significant in relation to our currently outstanding
common stock and could cause downward pressure on the market price for our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The number of shares of common stock registered for resale, including those shares which are
to be issued upon exercise of our outstanding warrants, is significant in relation to the number of
shares of common stock currently outstanding. If the security holder determines to sell a
substantial number of shares into the market at any given time, there may not be sufficient demand
in the market to purchase the shares without a decline in the market price for our common stock.
Moreover, continuous sales into the market of a number of shares in excess of the typical trading
volume for our common stock, or even the availability of such a large number of shares, could
depress the trading market for our common stock over an extended period of time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If persons engage in short sales of our common stock, including sales of shares to be issued upon
exercise of our outstanding warrants, the price of our common stock may decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Selling short is a technique used by a stockholder to take advantage of an anticipated decline
in the price of a security. In addition, holders of options and warrants will sometimes sell short
knowing they can, in effect, cover through the exercise of an option or warrant, thus locking in a
profit. A significant number of short sales or a large volume of other sales within a relatively
short period of time can create downward pressure on the market price of a security. Further sales
of common stock issued upon exercise of our outstanding warrants could cause even greater declines
in the price of our common stock due to the number of additional shares available in the market
upon such exercise, which could encourage short sales that could further undermine the value of our
common stock. You could, therefore, experience a decline in the value of your investment as a
result of short sales of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our distribution rights to the ALIGN products are licensed from others, and any termination of that
license could harm our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have in-licensed from Sinclair the distribution rights to the ALIGN products. This license
agreement imposes obligations on us. Although we are currently in compliance with all of our
material obligations under this license, if we were to breach any such obligations, Sinclair would
be permitted to terminate the license. This would restrict us from distributing the ALIGN products.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If our supplier upon whom we rely fails to produce on a timely basis the finished goods in the
volumes that we require or fails to meet quality standards and maintain necessary licensure from
regulatory authorities, we may be unable to meet demand for our products, potentially resulting in
lost revenues.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our licensor and supplier Sinclair contracts with third party manufacturers to supply the
finished goods to us to meet our needs. If any of Sinclair&#146;s third party manufacturers service
providers do not meet our or our licensor&#146;s requirements for quality, quantity or timeliness, or do
not achieve and maintain compliance with all applicable regulations, demand for our products or our
ability to continue supplying such products could substantially decline. As the third party
manufacturers are the sole supplier of the products any delays may impact our sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In all the countries where we sell or may sell our products, governmental regulations exist to
define standards for manufacturing, packaging, labeling and storing. All of our suppliers of raw
materials and contract manufacturers must comply with these regulations. Failure to do so could
result in supply interruptions. In the United States, the FDA requires that all suppliers of
pharmaceutical bulk material and all manufacturers of pharmaceuticals for sale in or from the
United States achieve and maintain compliance with the FDA&#146;s Current Good Manufacturing Practice or
cGMP regulations and guidelines. Failure of our third-party manufacturers to comply with applicable
regulations could result in sanctions being imposed on them or us, including fines, injunctions,
civil penalties, disgorgement, suspension or withdrawal of approvals, license revocation, seizures
or recalls of products, operating restrictions and criminal prosecutions, any of which could
significantly and adversely affect supplies of our products. In addition, before any product batch
produced by our manufacturers can be shipped, it must conform to release specifications
pre-approved by regulators for the content of the pharmaceutical product. If the operations of one
or more of our manufacturers were to become unavailable for any reason, any required FDA review and
approval of the operations of an alternative supplier could cause a delay in the manufacture of our
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our customer base is highly concentrated.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our principal customers are a small number of wholesale drug distributors. These customers
comprise a significant part of the distribution network for pharmaceutical products in the United
States. Three large wholesale distributors, AmerisourceBergen Corporation, Cardinal Health, Inc.
and McKesson Corporation, control a significant share of the market in the United States. Our
ability to distribute any product, including Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid
and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges and to recognize revenues on a timely basis is substantially
dependent on our ability to maintain commercially reasonable agreements with each of these
wholesale distributors and the extent to which these distributors, over whom we have no control,
comply with such agreements. Our agreements with wholesaler distributors may contain terms that are
not favorable, given our relative lack of market leverage as a company with only three approved
products or other factors, which could adversely affect our commercialization of Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges. The loss of any of these
customers could materially and adversely affect our ability to distribute our products, resulting
in a negative impact on our operations and financial condition.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be unable to accurately estimate demand and monitor wholesaler inventory of
Xclair</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
</I></B></SUP><B><I> Cream, Numoisyn</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> Liquid or Numoisyn</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> Lozenges. Although we
attempt to monitor wholesaler inventory of Xclair</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> Cream, Numoisyn</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> Liquid or
Numoisyn</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I> Lozenges, we also rely on third party information, which is inherently
uncertain and may not be accurate, to assist us in monitoring estimated inventory levels and
prescription trends. Inaccurate estimates of the demand and inventory levels of the product may
cause our revenues to fluctuate significantly from quarter to quarter and may cause our operating
results for a particular quarter to be below expectations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Inventory levels of Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid or
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges held by wholesalers can also cause our operating results to fluctuate
unexpectedly. For the three months ended March&nbsp;31, 2009 and 2010, approximately 85% and 91%,
respectively, of our product sales in the United States were to three wholesalers, Cardinal Health,
Inc., McKesson Corporation and AmerisourceBergen. Inventory levels held by those wholesalers can
cause our operating results to fluctuate unexpectedly if our sales to wholesalers do not match end
user demand. We have entered into inventory management agreements with these U.S. wholesalers under
which they provide us with data regarding inventory levels at these wholesalers. However, these
wholesalers may not be completely effective in matching inventory levels to end user demand, as
they make estimates to determine end user demand. In addition, inventory is held at retail
pharmacies and other non-wholesaler locations, for which we have no inventory management agreements
and have no control in respect to their buying patterns. Also, the non-retail sector in the United
States, which includes government institutions and large health maintenance organizations, tends to
be less consistent in terms of buying patterns, and often causes quarter-over-quarter fluctuations
in inventory and ordering patterns. We attempt to monitor inventory of Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>,
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid or Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges in the United States through the use
of internal sales forecasts and the expiration dates of product shipped, among other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The commercialization of our products is substantially dependent on our ability to develop
effective sales and marketing capabilities.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our successful commercialization of Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Cream, Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges in the United States will depend on our ability to establish and
maintain an effective sales and marketing organization in the United States. We hired trained and
deployed additional marketing personnel and a small oncology specialty sales force. We may increase
or decrease the size of our sales force in the future, depending on many factors, including the
effectiveness of the sales force, the level of market acceptance of Xclair<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Cream,
Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Liquid and Numoisyn<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Lozenges and the results of our clinical
trials. Prior to our launches of these products, we had never sold or marketed any products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For our product candidates currently under development, our strategy is to develop compounds
through the Phase 2 stage of clinical testing and market or co-promote certain of our drugs on our
own. We have limited sales, marketing or distribution capabilities. We will depend primarily on
strategic alliances with third parties, which have established distribution systems and sales
forces, to commercialize our drugs. To the extent that we are unsuccessful in commercializing any
drugs or devices ourselves or through a strategic alliance, product revenues will suffer, we will
incur significant additional losses and our share price will be negatively affected.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Securities and Exchange Commission encourages companies to disclose forward-looking
information so that investors can better understand a company&#146;s future prospects and make informed
investment decisions. This prospectus contains such &#147;forward-looking statements&#148; within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in
this prospectus, and they may also be made a part of this prospectus by reference to other
documents filed with the Securities and Exchange Commission, which is known as &#147;incorporation by
reference.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Words such as &#147;may,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;expects,&#148; &#147;projects,&#148; &#147;intends,&#148; &#147;plans,&#148;
&#147;believes&#148; and words and terms of similar substance used in connection with any discussion of
future operating or financial performance identify forward-looking statements. All forward-looking
statements are management&#146;s present expectations of future events and are subject to a number of
risks and uncertainties that could cause actual results to differ materially from those described
in the forward-looking statements. Forward-looking statements might include one or more of the
following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>anticipated results of financing activities;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>anticipated agreements with marketing partners;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>anticipated clinical trial timelines or results;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>anticipated research and product development results;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>projected regulatory timelines;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>descriptions of plans or objectives of management for future operations, products or
services;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>forecasts of future economic performance; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>descriptions or assumptions underlying or relating to any of the above items.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Please also see the discussion of risks and uncertainties under the heading &#147;Risk Factors&#148;
beginning on page 14.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In light of these assumptions, risks and uncertainties, the results and events discussed in
the forward-looking statements contained in this prospectus or in any document incorporated by
reference might not occur. Investors are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this prospectus or the date of the
document incorporated by reference in this prospectus. We are not under any obligation, and we
expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise. All subsequent forward-looking statements
attributable to Cyclacel or to any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We will not receive any of the proceeds from the sale of shares of our common stock by the
selling securityholder. The selling securityholder will receive all of the net proceeds from the
sales of common stock offered by it under this prospectus. Any issuance of shares by us to the
selling securityholder under the common stock purchase agreement or in connection with the exercise
of the amended and restated warrant will be made pursuant to an exemption from the registration
requirements of the Securities Act. The proceeds from these sales and from the exercise of the
warrants, if and when exercised by the selling securityholder, will be used by us for general
corporate purposes, including capital expenditures, the advancement of our drug candidates in
clinical trials, and to meet working capital needs. The amounts and timing of the expenditures will
depend on numerous factors, such as the timing and progress of our clinical trials and research and
development efforts, technological advances and the competitive environment for our drug
candidates. We expect, from time to time, to evaluate the acquisition of businesses, products, and
technologies for which a portion of the net proceeds may be used, although we currently are not
planning or negotiating any such transactions. As of the date of this prospectus, we cannot specify
with certainty all of the particular uses for the net proceeds to us from the sale of shares to the
selling securityholder or the exercise of warrants by the selling securityholder. Accordingly, we
will retain broad discretion over the use of these proceeds, if any.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SELLING SECURITYHOLDER</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">This prospectus relates to the possible resale by the selling securityholder, Kingsbridge
Capital Limited (&#147;Kingsbridge&#148; or the &#147;selling securityholder&#148;), of shares of common stock that we
may issue pursuant to the common stock purchase agreement we entered into with Kingsbridge on
December&nbsp;10, 2007, as amended on November&nbsp;24, 2009, or upon exercise of the amended and restated
warrant we issued to Kingsbridge. Pursuant to common stock purchase agreement, Kingsbridge
committed to purchase, subject to certain conditions, up to the lesser of 4,084,590 shares of
common stock and $60&nbsp;million of common stock over a three-year period. Pursuant to the amended and
restated warrant, we issued a warrant to Kingsbridge to purchase 175,000 shares of our common stock
at an exercise price of $1.40 per share, such warrant expiring on
June&nbsp;10, 2012. As of June&nbsp;9, 2010,
there were 1,266,358 shares of common stock available for purchase by Kingsbridge under the CEFF
and 100,000 shares available for purchase under Kingsbridge&#146;s warrant. We are not obligated to
utilize any of the funds available under the CEFF, and there are no minimum commitments or minimum
use penalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The shares to be issued to the selling securityholder are &#147;restricted securities&#148; under
applicable federal and state securities laws and are being registered pursuant to the provisions of
the registration rights agreement we entered into with Kingsbridge on December&nbsp;10, 2007. The
registration of the shares does not necessarily mean, however, that any of these shares will be
offered or sold by the selling securityholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The selling securityholder may from time to time offer and sell pursuant to this prospectus
any or all of the shares that it acquires under the common stock purchase agreement or upon
exercise of the warrant. We do not know how long the selling securityholder will hold its shares
before selling them, and we currently have no agreements, arrangements or understandings with the
selling securityholder regarding the sale of any of the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We will receive no proceeds from the sale of the registered shares, and we have agreed to bear
the expenses of registration of the shares, other than commissions and discounts of agents or
broker-dealers and transfer taxes, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The following table presents information regarding Kingsbridge and the shares that it may
offer and sell from time to time under this prospectus. This table is prepared based on information
supplied to us by the selling securityholder, and reflects holdings
as of June&nbsp;9, 2010. As used in
this prospectus, the term &#147;selling securityholder&#148; includes Kingsbridge and any donees, pledgees,
transferees or other successors in interest selling shares received after the date of this
prospectus from the Selling Stockholder as a gift, pledge or other non-sale related transfer. The
number of shares in the column &#147;Number of Shares Being Offered&#148; represents all of the shares that
the selling securityholder may offer under this prospectus. The selling securityholder may sell
some, all or none of its shares. We do not know how long the selling securityholder will hold the
shares before selling them, and we currently have no agreements, arrangements or understandings
with the selling securityholder regarding the sale of any of the shares.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Beneficial ownership is determined in accordance with Rule&nbsp;13d-3(d) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The
percentage of shares beneficially owned prior to the offering is based both on 36,873,986 shares of
our common stock actually outstanding as of June&nbsp;9, 2010 and on the assumption that all shares of
common stock that remain issuable under the common stock purchase agreement we entered into with
Kingsbridge on December&nbsp;10, 2007, as amended on November&nbsp;24, 2009 and all shares of common stock
issuable upon exercise of the warrant held by Kingsbridge are outstanding as of that date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Shares of Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Shares of Common Stock</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Beneficially Owned Prior to</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Beneficially Owned After</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Offering</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Security Holders</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Being Offered</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Percent</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kingsbridge Capital Limited (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,366,358</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Represents beneficial ownership of less than 1% of the
outstanding shares of our common stock.<BR></TD>
</TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The address of Kingsbridge is Kingsbridge Capital Limited, Attention: Mr.&nbsp;Tony Hillman, P.O.
Box 1075, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE42QP, Channel Islands.<BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>



<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 100,000 shares of common stock issuable upon
exercise of a warrant, issued to Kingsbridge on December&nbsp;10,
2007, which warrant is exercisable beginning June&nbsp;10, 2008 and
until June&nbsp;10, 2013. <BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;1,266,358 shares of common stock issuable under the common stock purchase
agreement we entered into with Kingsbridge on December&nbsp;10, 2007, as amended, and (b)&nbsp;100,000 shares of common
stock issuable upon exercise of a warrant, issued to Kingsbridge on December&nbsp;10, 2007, as amended, which
warrant is exercisable beginning June&nbsp;10, 2008 and until June&nbsp;10, 2013. For the purposes hereof,
we assume the issuance of all 1,366,358 shares under (a)&nbsp;and (b). Adam Gurney and Maria O&#146;Donoghue
have voting and investment control of the securities held by Kingsbridge. Kingsbridge does not
accept third party investments.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

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<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We
are registering up to 1,366,358 shares of common stock under this prospectus on behalf of
the selling securityholder. Except as described below, to our knowledge, the selling securityholder
has not entered into any agreement, arrangement or understanding with any particular broker or
market maker with respect to the shares of common stock offered hereby, nor, except as described
below, do we know the identity of the brokers or market makers that will participate in the sale of
the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The selling securityholder may decide not to sell any shares. The selling securityholder may,
from time to time, offer some or all of the shares of common stock through brokers, dealers or
agents who may receive compensation in the form of discounts, concessions or commissions from the
selling securityholder and/or the purchasers of the shares of common stock for whom they may act as
agent. In effecting sales, broker-dealers that are engaged by the selling securityholder may
arrange for other broker-dealers to participate. Kingsbridge is an &#147;underwriter&#148; within the meaning
of the 1933 Securities Act, as amended, or the Securities Act. Any brokers, dealers or agents who
participate in the distribution of the shares of common stock may also be deemed to be
&#147;underwriters,&#148; and any profits on the sale of the shares of common stock by them and any
discounts, commissions or concessions received by any such brokers, dealers or agents may be deemed
to be underwriting discounts and commissions under the Securities Act. The selling securityholder
has advised us that it may effect resales of our common stock through any one or more registered
broker-dealers. To the extent the selling securityholder may be deemed to be an underwriter, the
selling securityholder will be subject to the prospectus delivery requirements of the Securities
Act and may be subject to certain statutory liabilities of, including but not limited to, Sections
11, 12 and 17 of the Securities Act and Rule&nbsp;10b-5 under the Securities Exchange Act of 1934, as
amended, or the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The selling securityholder will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made over The NASDAQ Global Market, on
the over-the-counter market, otherwise or in a combination of such methods of sale, at then
prevailing market prices, at prices related to prevailing market prices or at negotiated prices.
The shares of common stock may be sold according to one or more of the following methods:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ordinary brokerage transactions and transactions in which the broker dealer solicits
purchasers;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>block trades in which the broker dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchases by a broker dealer as principal and resale by the broker dealer for its
account;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>privately negotiated transactions;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>broker dealers may agree with the selling securityholder to sell a specified number
of such shares at a stipulated price per share;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a combination of any such methods of sale;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other method permitted pursuant to applicable law.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Any shares covered by this prospectus which qualify for sale pursuant to Rule&nbsp;144 of the
Securities Act may be sold under Rule&nbsp;144 rather than pursuant to this prospectus. In addition, the
selling securityholder may transfer the shares by other means not described in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Any broker-dealer participating in such transactions as agent may receive commissions from the
selling securityholder (and, if they act as agent for the purchaser of such shares, from such
purchaser). Broker-dealers may agree with the selling securityholder to sell a specified number of
shares at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for the selling securityholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the selling securityholder.
Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time
in transactions (which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described above) on The
NASDAQ Global Market, on the over-the-counter market, in privately-negotiated transactions or
otherwise at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such shares commissions
computed as described above. To the extent required under the Securities Act, an amendment to this
prospectus or a supplemental prospectus will be filed, disclosing:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the name of any such broker-dealers;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares involved;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the price at which such shares are to be sold;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the commission paid or discounts or concessions allowed to such broker-dealers,
where applicable;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that such broker-dealers did not conduct any investigation to verify the information
set out or incorporated by reference in this prospectus, as supplemented; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other facts material to the transaction.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Underwriters and purchasers that are deemed underwriters under the Securities Act may engage
in transactions that stabilize maintain or otherwise affect the price of the securities, including
the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty bids.
The selling securityholder and any other persons participating in the sale or distribution of the
shares will be subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Regulation&nbsp;M. These provisions may restrict
certain activities of, and limit the timing of, purchases by the selling securityholder or other
persons or entities. Furthermore, under Regulation&nbsp;M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior to the commencement
of such distributions, subject to special exceptions or exemptions. Regulation&nbsp;M may restrict the
ability of any person engaged in the distribution of the securities to engage in market-making
and certain other activities with respect to those securities. In addition, the
anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market.
All of these limitations may affect the marketability of the shares and the ability of any person
to engage in market-making activities with respect to the securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have agreed to pay the expenses of registering the shares of common stock under the
Securities Act, including registration and filing fees, printing expenses, administrative expenses
and certain legal and accounting fees, as well as certain fees of counsel for the selling
securityholder incurred in the preparation of the CEFF agreements and the registration statement of
which this prospectus forms a part. The selling securityholder will bear all discounts, commissions
or other amounts payable to underwriters, dealers or agents, as well as transfer taxes and certain
other expenses associated with the sale of securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under the terms of the common stock purchase agreement and the registration rights agreement
we entered into with the selling securityholder, we have agreed to indemnify the selling
securityholder and certain other persons against certain liabilities in connection with the
offering of the shares of common stock offered hereby, including liabilities arising under the
Securities Act or, if such indemnity is unavailable, to contribute toward amounts required to be
paid in respect of such liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">At any time a particular offer of the shares of common stock is made, a revised prospectus or
prospectus supplement, if required, will be distributed. Such prospectus supplement or
post-effective amendment will be filed with the SEC, to reflect the disclosure of required
additional information with respect to the distribution of the shares of common stock. We may
suspend the sale of shares by the selling securityholder pursuant to this prospectus for certain
periods of time for certain reasons, including if the prospectus is required to be supplemented or
amended to include additional material information.
</DIV>
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<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>DESCRIPTION OF SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Description of Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We are authorized to issue 100,000,000 shares of common stock, $0.001 par value per share. As
of June&nbsp;9, 2010, 36,873,986 shares of common stock were issued and outstanding. The following
descriptions of our common stock and provisions of our amended and restated certificate of
incorporation and amended and restated by-laws are only summaries, and we encourage you to review
complete copies of these documents, which have been filed as exhibits to our periodic reports with
the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Dividends, Voting Rights and Liquidation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Holders of common stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders, and do not have cumulative voting rights. Subject to
preferences that may be applicable to any outstanding shares of preferred stock, holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared from time to time
by our board of directors out of funds legally available for dividend payments. All outstanding
shares of common stock are fully paid and non-assessable, and the shares of common stock to be
issued upon completion of this offering will be fully paid and non-assessable. The holders of
common stock have no preferences or rights of conversion, exchange, pre-emption or other
subscription rights. There are no redemption or sinking fund provisions applicable to the common
stock. In the event of any liquidation, dissolution or winding-up of our affairs, holders of common
stock will be entitled to share ratably in our assets that are remaining after payment or provision
for payment of all of our debts and obligations and after liquidation payments to holders of
outstanding shares of preferred stock, if any.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Delaware Law and Certain Charter and By-law Provisions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The provisions of (1)&nbsp;Delaware law, (2)&nbsp;our amended and restated certificate of incorporation,
and (3)&nbsp;our amended and restated bylaws discussed below could discourage or make it more difficult
to accomplish a proxy contest or other change in our management or the acquisition of control by a
holder of a substantial amount of our voting stock. It is possible that these provisions could make
it more difficult to accomplish, or could deter, transactions that stockholders may otherwise
consider to be in their best interests or in our best interests. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of our board of directors and
in the policies formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of us. These provisions are
designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also
are intended to discourage certain tactics that may be used in proxy fights. Such provisions also
may have the effect of preventing changes in our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Delaware Statutory Business Combinations Provision. </I>We are subject to the anti-takeover
provisions of Section&nbsp;203 of the Delaware General Corporation Law. In general, Section&nbsp;203
prohibits a publicly-held Delaware corporation from engaging in a &#147;business combination&#148; with an
&#147;interested stockholder&#148; for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is, or the transaction in
which the person became an interested stockholder was, approved in a prescribed manner or another
prescribed exception applies. For purposes of Section&nbsp;203, a &#147;business combination&#148; is defined
broadly to include a merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder, and, subject to certain exceptions, an &#147;interested stockholder&#148; is a
person who, together with his or her affiliates and associates, owns (or within three years prior,
did own) 15% or more of the corporation&#146;s voting stock.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Classified Board of Directors; Removal of Directors for Cause. </I>Our amended and restated
certificate of incorporation and amended and restated bylaws provide that our board of directors is
divided into three classes, each serving staggered three-year terms ending at the annual meeting of
our stockholders. All directors elected to our classified board of directors will serve until the
election and qualification of their respective successors or their earlier resignation or removal.
The board of directors is authorized to create new directorships and to fill such positions so
created and is permitted to specify the class to which any such new position is assigned. The
person filling such position would serve for the term applicable to that class. The board of
directors (or its remaining members, even if less than a quorum) is also empowered to fill
vacancies on the board of directors occurring for any reason for the remainder of the term of the
class of directors in which the vacancy occurred. Members of the board of directors may only be
removed for cause and only by the affirmative vote of 80% of our outstanding voting stock. These
provisions are likely to increase the time required for stockholders to change the composition of
the board of directors. For example, in general, at least two annual meetings will be necessary for
stockholders to effect a change in a majority of the members of the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Advance Notice Provisions for Stockholder Proposals and Stockholder Nominations of Directors.</I>
Our amended and restated bylaws provide that, for nominations to the board of directors or for
other business to be properly brought by a stockholder before a meeting of stockholders, the
stockholder must first have given timely notice of the proposal in writing to our Secretary. For an
annual meeting, a stockholder&#146;s notice generally must be delivered not less than 45&nbsp;days nor more
than 75&nbsp;days prior to the anniversary of the mailing date of the proxy statement for the previous
year&#146;s annual meeting. For a special meeting, the notice must generally be delivered by the later
of 90&nbsp;days prior to the special meeting or ten days following the day on which public announcement
of the meeting is first made. Detailed requirements as to the form of the notice and information
required in the notice are specified in the amended and restated bylaws. If it is determined that
business was not properly brought before a meeting in accordance with our bylaw provisions, such
business will not be conducted at the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Special Meetings of Stockholders. </I>Special meetings of the stockholders may be called only by
our board of directors pursuant to a resolution adopted by a majority of the total number of
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>No Stockholder Action by Written Consent. </I>Our amended and restated certificate of
incorporation and amended and restated bylaws do not permit our stockholders to act by written
consent. As a result, any action to be effected by our stockholders must be effected at a duly
called annual or special meeting of the stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><I>Super-Majority Stockholder Vote Required for Certain Actions. </I>The Delaware General
Corporation Law provides generally that the affirmative vote of a majority of the shares entitled
to vote on any matter is required to amend a corporation&#146;s certificate of incorporation or bylaws,
unless the corporation&#146;s certificate of incorporation or bylaws, as the case may be, requires a
greater percentage. Our amended and restated certificate of incorporation requires the affirmative
vote of the holders of at least 80% of our outstanding voting stock to amend or repeal any of the
provisions discussed in this section of this prospectus entitled &#147;Anti-Takeover Provisions&#148; or to
reduce the number of authorized shares of common stock or preferred stock. This 80% stockholder
vote would be in addition to any separate class vote that might in the future be required pursuant
to the terms of any preferred stock that might then be outstanding. In addition, an 80% vote is
also required for any amendment to, or repeal of, our amended and restated bylaws by the
stockholders. Our amended and restated bylaws may be amended or repealed by a simple majority vote
of the board of directors.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We
have the authority to issue up to 5,000,000 shares of preferred
stock. As of June&nbsp;9, 2010,
1,213,142 shares of our preferred stock were outstanding (see &#147;6% Convertible Exchangeable
Preferred Stock&#148; below). The description of preferred stock provisions set forth below is not
complete and is subject to and qualified in its entirety by reference to our certificate of
incorporation and the certificate of designations relating to each series of preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The board of directors has the right, without the consent of holders of common stock, to
designate and issue one or more series of preferred stock, which may be convertible into common
stock at a ratio determined by the board of directors. A series of preferred stock may bear rights superior to
common stock as to voting, dividends, redemption, distributions in liquidation, dissolution, or
winding up, and other relative rights and preferences. The board may set the following terms of any
series preferred stock, and a prospectus supplement will specify these terms for each series
offered:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number of shares constituting the series and the distinctive designation of the
series;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dividend rates, whether dividends are cumulative, and, if so, from what date; and
the relative rights of priority of payment of dividends;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>voting rights and the terms of the voting rights;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>conversion privileges and the terms and conditions of conversion, including
provision for adjustment of the conversion rate;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>redemption rights and the terms and conditions of redemption, including the date or
dates upon or after which shares may be redeemable, and the amount per share payable in
case of redemption, which may vary under different conditions and at different
redemption dates;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sinking fund provisions for the redemption or purchase of shares;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rights in the event of voluntary or involuntary liquidation, dissolution or winding
up of the corporation, and the relative rights of priority of payment; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other relative powers, preferences, rights, privileges, qualifications,
limitations and restrictions of the series.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Dividends on outstanding shares of preferred stock will be paid or declared and set apart for
payment before any dividends may be paid or declared and set apart for payment on the common stock
with respect to the same dividend period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets available for distribution to holders of preferred stock are insufficient to pay the
full preferential amount to which the holders are entitled, then the available assets will be
distributed ratably among the shares of all series of preferred stock in accordance with the
respective preferential amounts (including unpaid cumulative dividends, if any) payable with
respect to each series.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Holders of preferred stock will not be entitled to preemptive rights to purchase or subscribe
for any shares of any class of capital stock of the corporation. The preferred stock will, when
issued, be fully
paid and non-assessable. The rights of the holders of preferred stock will be subordinate to
those of our general creditors.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have previously issued 2,990,000 shares of preferred stock in one series, designated as 6%
Convertible Exchangeable Preferred Stock, of which 1,213,142 are currently outstanding and are
quoted on the NASDAQ Global Market under the symbol &#147;CYCCP.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>6% Convertible Exchangeable Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our board of directors has designated 2,990,000 shares of the preferred stock that were issued
as convertible preferred stock on November&nbsp;3, 2004. The shares of convertible preferred stock are
duly and validly issued, fully paid and non-assessable. These shares will not have any preemptive
rights if we issue other series of preferred stock. The convertible preferred stock is not subject
to any sinking fund. We have no obligation to retire the convertible preferred stock. The
convertible preferred stock has a perpetual maturity and may remain outstanding indefinitely,
subject to the holder&#146;s right to convert the convertible preferred stock and our right to cause the
conversion of the convertible preferred stock and exchange or redeem the convertible preferred
stock at our option. Any convertible preferred stock converted, exchanged or redeemed or acquired
by us will, upon cancellation, have the status of authorized but unissued shares of convertible
preferred stock. We will be able to reissue these cancelled shares of convertible preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">When and if declared by our board of directors out of the legally available funds, holders of
the convertible preferred stock are entitled to receive cash dividends at an annual rate of 6% of
the liquidation preference of the convertible preferred stock. Dividends are payable, and have been
paid since February&nbsp;1, 2005, quarterly on the first day of February, May, August and November. If
any dividends are not declared, they will accrue and be paid at such later date, if any, as
determined by our board of directors. Dividends on the convertible preferred stock will be
cumulative from the issue date. Dividends will be payable to holders of record as they appear on
our stock books not more than 60&nbsp;days nor less than 10&nbsp;days preceding the payment dates, as fixed
by our board of directors. If the convertible preferred stock is called for redemption on a
redemption date between the dividend record date and the dividend payment date and the holder does
not convert the convertible preferred stock (as described below), the holder shall receive the
dividend payment together with all other accrued and unpaid dividends on the redemption date
instead of receiving the dividend on the dividend date. Dividends payable on the convertible
preferred stock for any period greater or less than a full dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Accrued but unpaid dividends will not
bear interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we do not pay or set aside cumulative dividends in full on the convertible preferred stock
and any other preferred stock ranking on the same basis as to dividends, all dividends declared
upon shares of the convertible preferred stock and any other preferred stock ranking on the same
basis as to dividends will be declared on a pro rata basis until all accrued dividends are paid in
full. For these purposes, &#147;pro rata&#148; means that the amount of dividends declared per share on the
convertible preferred stock and any other preferred stock ranking on the same basis as to dividends
bear to each other will be the same ratio that accrued and unpaid dividends per share on the shares
of the convertible preferred stock and such other preferred stock bear to each other. We will not
be able to redeem, purchase or otherwise acquire any of our stock ranking on the same basis as the
convertible preferred stock as to dividends or liquidation preferences unless we have paid or set
aside full cumulative dividends, if any, accrued on all outstanding shares of convertible preferred
stock.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->52<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Unless we have paid or set aside cumulative dividends in full on the convertible preferred
stock and any other of the convertible preferred stock ranking on the same basis as to dividends:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may not declare or pay or set aside dividends on common stock or any other stock
ranking junior to the convertible preferred stock as to dividends or liquidation
preferences, excluding dividends or distributions of shares, options, warrants or
rights to purchase common stock or other stock ranking junior to the convertible
preferred stock as to dividends; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we will not be able to redeem, purchase or otherwise acquire any of our other stock
ranking junior to the convertible preferred stock as to dividends or liquidation
preferences, except in very limited circumstances.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Under Delaware law, we may only make dividends or distributions to our stockholders from:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our surplus; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the net profits for the current fiscal year or the fiscal year before which the
dividend or distribution is declared under certain circumstances.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">   On April 6, 2009, June 22, 2009, October 19, 2009,
January 7, 2010, and March 29, 2010, our board of directors resolved, pursuant to the Certificate of Designations, not to declare the
quarterly cash dividend on the Company&#146;s 6% Convertible Exchangeable Preferred Stock with respect to the dividends that would otherwise
been payable on May 1, 2009, August 1, 2009, November 1, 2009, February 1, 2010 and May 1, 2010, respectively. To the extent that any
dividends payable on the preferred stock are not paid, such unpaid dividends are accrued. We have not declared dividends with respect
to five quarters and if dividends with respect to at least six quarters (whether or not consecutive) are not paid on the preferred stock,
the size of our board of directors could be increased by two members and the holders of the preferred stock, voting separately as a class,
will have the right to vote to fill the two vacancies created thereby until all accrued but unpaid dividends have been paid in full, at
which time such right is terminated. As of March 30, 2010, approximately $1.4 million of dividends remain accrued and unpaid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Conversion</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Conversion Rights</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Holders of our convertible preferred stock may convert the convertible preferred stock at any
time into a number of shares of common stock determined by dividing the $10 liquidation preference
by the conversion price of $23.50, being the original conversion price of $2.35 as adjusted
following a reverse stock split, subject to adjustment as described below. This conversion price is
equivalent to a conversion rate of approximately 0.42553 shares of common stock for each share of
convertible preferred stock. We will not make any adjustment to the conversion price for accrued or
unpaid dividends upon conversion. We will not issue fractional shares of common stock upon
conversion. However, we will instead pay cash for each fractional share based upon the market price
of the common stock on the last business day prior to the conversion date. If we call the
convertible preferred stock for redemption, the holder&#146;s right to convert the convertible preferred
stock will expire at the close of business on the business day immediately preceding the date fixed
for redemption, unless we fail to pay the redemption price.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->53<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Automatic Conversion</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Unless we redeem or exchange the convertible preferred stock, we may elect to convert some or
all of the convertible preferred stock into shares of our common stock if the closing price of our
common stock has exceeded 150% of the conversion price for at least 20 out of 30 consecutive
trading days ending within five trading days prior to the notice of automatic conversion. If we
elect to convert less than all of the shares of convertible preferred stock, we shall select the
shares to be converted by lot or pro rata or in some other equitable manner in our discretion. On or after November&nbsp;3, 2007,
we may not elect to automatically convert the convertible preferred stock if full cumulative
dividends on the convertible preferred stock for all past dividend periods have not been paid or
set aside for payment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Conversion Price Adjustment &#151; General</I></B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The conversion price of $23.50 will be adjusted if:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we dividend or distribute common stock on shares of our common stock;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we subdivide or combine our common stock;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we issue to all holders of common stock certain rights or warrants to purchase
our common stock at less than the current market price;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we dividend or distribute to all holders of our common stock shares of our
capital stock or evidences of indebtedness or assets, excluding:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>those rights, warrants, dividends or distributions referred to in (1)&nbsp;or
(3), or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dividends and distributions paid in cash;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we made a dividend or distribution consisting of cash to all holders of common
stock;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(6)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we purchase common stock pursuant to a tender offer made by us or any of our
subsidiaries; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(7)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a person other than us or any of our subsidiaries makes any payment on a tender
offer or exchange offer and, as of the closing of the offer, the board of directors is
not recommending rejection of the offer. We will only make this adjustment if the
tender or exchange offer increases a person&#146;s ownership to more than 25% of our
outstanding common stock, and only if the payment per share of common stock exceeds the
current market price of our common stock. We will not make this adjustment if the
offering documents disclose our plan to engage in any consolidation, merger, or
transfer of all or substantially all of our properties and if specified conditions are
met.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we implement a stockholder rights plan, this new rights plan must provide that, upon
conversion of the existing convertible preferred stock the holders will receive, in addition to the
common stock issuable upon such conversion, the rights under such rights plan regardless of whether
the rights have separated from the common stock before the time of conversion. The distribution of
rights or warrants pursuant to a stockholder rights plan will not result in an adjustment to the
conversion price of the convertible preferred stock until a specified triggering event occurs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The occurrence and magnitude of certain of the adjustments described above is dependent upon
the current market price of our common stock. For these purposes, &#147;current market price&#148; generally
means the lesser of:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the closing sale price on certain specified dates, or</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->54<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the average of the closing prices of the common stock for the ten trading day period
immediately prior to certain specified dates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may make a temporary reduction in the conversion price of the convertible preferred stock
if our board of directors determines that this decrease would be in our best interest. We may, at
our option, reduce the conversion price if our board of directors deems it advisable to avoid or
diminish any income tax to holders of common stock resulting from any dividend or distribution of
stock or rights to acquire stock or from any event treated as such for income tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Conversion Price Adjustment &#151; Merger, Consolidation or Sale of Assets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we are involved in a transaction in which shares of our common stock are converted into the
right to receive other securities, cash or other property, or a sale or transfer of all or
substantially all of our assets under which the holders of our common stock shall be entitled to
receive other securities, cash or other property, then appropriate provision shall be made so that
the shares of convertible preferred stock will convert into:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the transaction is a common stock fundamental change, as defined below,
common stock of the kind received by holders of common stock as a result of common
stock fundamental change in accordance with paragraph (1)&nbsp;below under the subsection
entitled &#147;&#151; Fundamental Change Conversion Price Adjustments,&#148; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the transaction is not a common stock fundamental change, and subject to
funds being legally available at conversion, the kind and amount of the securities,
cash or other property that would have been receivable upon the recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by a holder
of the number of shares of common stock issuable upon conversion of the convertible
preferred stock immediately prior to the recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving effect to any
adjustment in the conversion price in accordance with paragraph (2)&nbsp;below under the
subsection entitled &#147;&#151; Fundamental Change Conversion Price Adjustments.&#148;</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The company formed by the consolidation, merger, asset acquisition or share acquisition shall
provide for this right in its organizational document. This organizational document shall also
provide for adjustments so that the organizational document shall be as nearly practicably
equivalent to adjustments in this section for events occurring after the effective date of the
organizational document.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The following types of transactions, among others, would be covered by this adjustment:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we recapitalize or reclassify our common stock, except for:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a change in par value,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a change from par value to no par value,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a change from no par value to par value, or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a subdivision or combination of our common stock.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we consolidate or merge into any other person, or any merger of another person
into us, except for a merger that does not result in a reclassification, conversion,
exchange or cancellation of common stock,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we sell, transfer or lease all or substantially all of our assets and holders
of our common stock become entitled to receive other securities, cash or other
property, or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we undertake any compulsory share exchange.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Fundamental Change Conversion Price Adjustments</I></B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If a fundamental change occurs, the conversion price will be adjusted as follows:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of a common stock fundamental change, the conversion price shall be
the conversion price after giving effect to any other prior adjustments effected
pursuant to the preceding paragraphs, multiplied by a fraction, the numerator of which
is the purchaser stock price, as defined below, and the denominator of which is the
applicable price, as defined below. However, in the event of a common stock fundamental
change in which:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>100% of the value of the consideration received by a holder of our common
stock is common stock of the successor, acquirer or other third party, and
cash, if any, paid with respect to any fractional interests in such common
stock resulting from such common stock fundamental change, and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All of our common stock shall have been exchanged for, converted into or
acquired for, common stock of the successor, acquirer or other third party, and
any cash with respect to fractional interests,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conversion price shall be the conversion price in effect immediately
prior to such common stock fundamental change multiplied by a fraction, the
numerator of which is one (1)&nbsp;and the denominator of which is the number of
 shares of common stock of the successor, acquirer or other third party received
by a holder of one share of our common stock as a result of the common stock
fundamental change; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of a non-stock fundamental change, the conversion price shall be the lower of:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conversion price after giving effect to any other prior adjustments
effected pursuant to the preceding paragraph and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the product of</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%">A. the applicable price, and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%">B. a fraction, the numerator of which is $10 and the denominator of which is (x)&nbsp;the
amount of the redemption price for one share of convertible preferred stock if the
redemption date were the date of the non-stock fundamental change (or if the date of
such non-stock fundamental change falls within the period beginning on the first
issue date of the convertible preferred stock through October&nbsp;31, 2005, the
twelve-month period commencing November&nbsp;1, 2005 and the twelve-month period
commencing November&nbsp;1,
2006, the product of 106.0%, 105.4% or 104.8%, respectively, and $10) plus (y)&nbsp;any
then-accrued and unpaid distributions on one share of convertible preferred stock.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Holders of convertible preferred stock may receive significantly different consideration upon
conversion depending upon whether a fundamental change is a non-stock fundamental change or a
common stock fundamental change. In the event of a non-stock fundamental change, the shares of
convertible preferred stock will convert into stock and other securities or property or assets,
including cash, determined by the number of shares of common stock receivable upon conversion at
the conversion price as adjusted in accordance with (2)&nbsp;above. In the event of a common stock
fundamental change, under certain circumstances, the holder of convertible preferred stock will
receive different consideration depending on whether the holder converts his or her shares of
convertible preferred stock on or after the common stock fundamental change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Definitions for the Fundamental Change Adjustment Provision</I></B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>applicable price</B>&#148; means:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in a non-stock fundamental change in which the holders of common stock receive only
cash, the amount of cash received by a holder of one share of common stock, and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the event of any other fundamental change, the average of the daily closing price
for one share of common stock during the 10 trading days immediately prior to the
record date for the determination of the holders of common stock entitled to receive
cash, securities, property or other assets in connection with the fundamental change
or, if there is no such record date, prior to the date upon which the holders of common
stock shall have the right to receive such cash, securities, property or other assets.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">&#147;<B>common stock fundamental change</B>&#148; means any fundamental change in which more than 50% of the
value, as determined in good faith by our board of directors, of the consideration received by
holders of our common stock consists of common stock that, for the 10 trading days immediately
prior to such fundamental change, has been admitted for listing or admitted for listing subject to
notice of issuance on a national securities exchange or quoted on The NASDAQ National Market,
except that a fundamental change shall not be a common stock fundamental change unless either:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we continue to exist after the occurrence of the fundamental change and the
outstanding convertible preferred stock continues to exist as outstanding convertible
preferred stock, or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>not later than the occurrence of the fundamental change, the outstanding convertible
preferred stock is converted into or exchanged for shares of preferred stock, which
preferred stock has rights, preferences and limitations substantially similar, but no
less favorable, to those of the convertible preferred stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">&#147;<B>fundamental change</B>&#148; means the occurrence of any transaction or event or series of
transactions or events pursuant to which all or substantially all of our common stock shall be
exchanged for, converted into, acquired for or shall constitute solely the right to receive cash,
securities, property or other assets, whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization or otherwise.
However, for purposes of adjustment of the conversion price, in the case of any series of
transactions or events, the fundamental change shall be deemed to have occurred when substantially
all of the common stock shall have been exchanged for,
converted into or acquired for, or shall constitute solely the right to receive, such cash,
securities, property or other assets, but the adjustment shall be based upon the consideration that
the holders of our common stock received in the transaction or event as a result of which more than
50% of our common stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other assets.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">&#147;<B>non-stock fundamental change</B>&#148; means any fundamental change other than a common stock
fundamental change.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">&#147;<B>purchaser stock price</B>&#148; means the average of the daily closing price for one share of the
common stock received by holders of the common stock in the common stock fundamental change during
the 10 trading days immediately prior to the date fixed for the determination of the holders of the
common stock entitled to receive such common stock or, if there is no such date, prior to the date
upon which the holders of the common stock shall have the right to receive such common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Dividend Make-Whole Payment</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we elect to automatically convert, or the holder voluntarily converts, some or all of the
convertible preferred stock into shares of our common stock prior to November&nbsp;3, 2007, we will make
an additional payment equal to the total value of the aggregate amount of cumulative dividends that
would have accrued and become payable on the convertible preferred stock from the date of original
issue through and including November&nbsp;3, 2007, less any dividends already paid on the convertible
preferred stock. This additional payment is payable by us, in cash, or, at our option, in shares of
our common stock or a combination of cash and shares of our common stock. In the event of an
automatic conversion or any voluntary conversion undertaken after we provide notice of an automatic
conversion, the shares of common stock issued in payment of the dividend make-whole payment will be
valued at 150% of the conversion price on the effective date of the conversion. In all other
circumstances, any shares of our common stock issued in payment of the dividend make-whole payment
will be valued at the greater of (i)&nbsp;95% of the average closing price of our common stock for the
two trading days prior to the effective date of conversion or (ii) $2.00, which was the last
reported sale price of our common stock on October&nbsp;28, 2004. In the event of an automatic
conversion, the notice of automatic conversion will specify whether we will make the dividend
make-whole payment in cash, shares of our common stock or a combination of cash and shares of our
common stock. We will not issue fractional shares for any additional payment upon conversion but
will instead make a cash adjustment for any fractional share payment.
However, given that the date referenced has passed, these provisions
are no longer applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Liquidation Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the event of our voluntary or involuntary dissolution, liquidation, or winding up, the
holders of the convertible preferred stock shall receive a liquidation preference of $10 per share
and all accrued and unpaid dividends through the distribution date. Holders of any class or series
of preferred stock ranking on the same basis as your convertible preferred stock as to liquidation
shall also be entitled to receive the full respective liquidation preferences and any accrued and
unpaid dividends through the distribution date. Only after the preferred stock holders have
received their liquidation preference and any accrued and unpaid dividends will we distribute
assets to common stock holders or any of our other stock ranking junior to the shares of
convertible preferred stock upon liquidation. If upon such dissolution, liquidation or winding up,
we do not have enough assets to pay in full the amounts due on the convertible preferred stock and
any other preferred stock ranking on the same basis with the convertible preferred stock as to
liquidation, the holders of the convertible preferred stock and such other preferred stock will
share ratably in any such distributions of our assets:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>first in proportion to the liquidation preferences until the preferences are paid in
full, and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->58<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>then in proportion to the amounts of accrued but unpaid dividends.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">After we pay any liquidation preference and accrued dividends, holders of the convertible
preferred stock will not be entitled to participate any further in the distribution of our assets.
The following events will not be deemed to be a dissolution, liquidation or winding up of Cyclacel:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the sale of all or substantially all of the assets;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our merger or consolidation into or with any other corporation; or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our liquidation, dissolution, winding up or reorganization immediately followed by a
reincorporation as another corporation.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Optional Redemption</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On or after November&nbsp;6, 2007 we may redeem the convertible preferred stock, out of legally
available funds, in whole or in part, at our option, at the redemption prices listed below. The
redemption price is as follows for the 12-month period beginning November 1 of the following years,
beginning November&nbsp;6, 2007 and ending on October&nbsp;31, 2008 in the case of the first period:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Redemption</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.06</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">and $10.00 at November&nbsp;1, 2014 and thereafter. In each case we will pay accrued and unpaid
dividends to, but excluding, the redemption date. We are required to give notice of redemption not
more than 60 and not less than 20&nbsp;days before the redemption date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we redeem less than all of the shares of convertible preferred stock, we shall select the
shares to be redeemed by lot or pro rata or in some other equitable manner in our sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Exchange Provisions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We may exchange the convertible preferred stock in whole, but not in part, for debentures on
any dividend payment date on or after November&nbsp;1, 2005 at the rate of $10 principal amount of
debentures for each outstanding share of convertible preferred stock. Debentures will be issuable
in denominations of $1,000 and integral multiples of $1,000, as discussed in the section entitled
&#147;Description of Debentures&#148; below. If the exchange results in an amount of debentures that is not
an integral multiple of $1,000, we will pay in cash an amount in excess of the closest integral
multiple of $1,000. We will mail written notice of our intention to exchange the convertible
preferred stock to each record holder not less than 30 nor more than 60&nbsp;days prior to the exchange
date.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->59<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We refer to the date fixed for exchange of the convertible preferred stock for debentures as
the &#147;exchange date.&#148; On the exchange date, the holder&#146;s rights as a stockholder of Cyclacel shall
cease, the shares of convertible preferred stock will no longer be outstanding, and will only
represent the right to receive the debentures and any accrued and unpaid dividends, without
interest. We may not exercise our option to exchange the convertible preferred stock for the
debentures if:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>full cumulative dividends on the convertible preferred stock to the exchange date
have not been paid or set aside for payment, or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an event of default under the indenture would occur on conversion, or has occurred
and is continuing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Voting Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Holders of our convertible preferred stock have no voting rights except as described below or
as required by law. Shares of our convertible preferred stock held by us or any entity controlled
by us will not have any voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">If we have not paid dividends on the convertible preferred stock or on any outstanding shares
of preferred stock ranking on the same basis as to dividends with the convertible preferred stock
in an aggregate amount equal to at least six quarterly dividends whether or not consecutive, we
will increase the size of our board of directors by two additional directors. So long as dividends
remain due and unpaid, holders of the convertible preferred stock, voting separately as a class
with holders of preferred stock ranking on the same basis as to dividends having like voting
rights, will be entitled to elect two additional directors at any meeting of stockholders at which
directors are to be elected. These directors will be appointed to classes on the board as
determined by our board of directors. These voting rights will terminate when we have declared and
either paid or set aside for payment all accrued and unpaid dividends. The terms of office of all
directors so elected will terminate immediately upon the termination of these voting rights. On
April&nbsp;6, 2009, June&nbsp;22, 2009, October&nbsp;19, 2009, January&nbsp;7, 2010, and March&nbsp;29, 2010, our board
of directors resolved, pursuant to the Certificate of Designations, not to declare payment of the quarterly cash dividend on our convertible
preferred stock scheduled for May&nbsp;1, 2009, August&nbsp;1, 2009, November&nbsp;1, 2009, February&nbsp;1, 2010 and
May&nbsp;1, 2010, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Without the vote or consent of the holders of at least a majority of the shares of convertible
preferred stock, we may not:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adversely change the rights, preferences and limitations of the convertible
preferred stock by modifying our certificate of incorporation or bylaws, or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorize, issue, reclassify any of our authorized stock into, increase the
authorized amount of, or authorize or issue any convertible obligation or security or
right to purchase, any class of stock that ranks senior to the convertible preferred
stock as to dividends or distributions of assets upon liquidation, dissolution or
winding up of the stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">No class vote on the part of convertible preferred stock shall be required (except as
otherwise required by law or resolution of our board of directors) in connection with the
authorization, issuance or increase in the authorized amount of any shares of capital stock ranking
junior to or on parity with the convertible preferred stock both as to the payment of dividends and
as to distribution of assets upon our liquidation, dissolution or winding up, whether voluntary or
involuntary, including our common stock and the convertible preferred stock.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->60<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In addition, without the vote or consent of the holders of at least a majority of the shares
of convertible preferred stock we may not:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enter into a share exchange that affects the convertible preferred stock,</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>consolidate with or merge into another entity, or</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>permit another entity to consolidate with or merge into us,</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">unless the convertible preferred stock remains outstanding and its rights, privileges and
preferences are unaffected or it is converted into or exchanged for convertible preferred stock of
the surviving entity having rights, preferences and limitations substantially similar, but no less
favorable, to the convertible preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In determining a majority under these voting provisions, holders of convertible preferred
stock will vote together with holders of any other preferred stock that rank on parity as to
dividends and that have like voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On November&nbsp;24, 2009, we issued to Kingsbridge Capital Limited, or Kingsbridge, an amended and
restated warrant to purchase 175,000 shares of common stock at an exercise price of $1.40 per
share, such warrant expiring on June&nbsp;10, 2013. Under the terms of the warrant, the warrant may not
be exercised to the extent that such exercise would cause the warrant holder to beneficially own
(or be deemed to beneficially own) a number of shares of our common stock that would exceed 9.9% of
our then outstanding shares of common stock following such exercise.
As of June&nbsp;9, 2010, there were
100,000 shares available for purchase under Kingsbridge&#146;s warrant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Listing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our common stock is listed on the NASDAQ Global Market under the symbol &#147;CYCC.&#148; Our preferred
stock is listed on the NASDAQ Capital Market under the symbol &#147;CYCCP.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Transfer Agent and Registrar</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">American Stock Transfer &#038; Trust Company is the transfer agent and registrar for our common
stock. Their address is 59 Maiden Lane, Plaza Level, New York, NY 10038, and their telephone number
is (800)&nbsp;937-5449.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->61<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>DISCLOSURE OF COMMISSION POSITION ON<BR>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Section&nbsp;145 of the Delaware General Corporation Law (the &#147;Delaware Law&#148;) authorizes a court to
award, or a corporation&#146;s board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Our
amended and restated certificate of incorporation, as amended, provides for indemnification of
officers, directors and other employees of our company to the fullest extent permitted by Delaware
Law and that directors shall not be personally liable to our company or our stockholders for
monetary damages for breach of fiduciary duty as a director, except (i)&nbsp;for any breach of a
director&#146;s duty of loyalty to our company or our stockholders, (ii)&nbsp;acts and omissions that are not
in good faith or that involve intentional misconduct or knowing violation of law, (iii)&nbsp;under
Section&nbsp;174 of the Delaware Law, or (iv)&nbsp;for any transaction from which the director derived any
improper benefit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been information that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->62<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our common stock is traded on The NASDAQ Global Market, or NASDAQ, under the symbol &#147;CYCC.&#148;
Our preferred stock currently trades on NASDAQ under the symbol &#147;CYCCP.&#148; The following table
summarizes, for the periods indicated, the high and low sales prices for the common stock as
reported by NASDAQ:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2010</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter
ended March&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2009</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended March&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended June&nbsp;30, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended September&nbsp;30, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended June&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended September&nbsp;30, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quarter ended December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.23</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On
June 9, 2010, we had approximately 55 registered holders of record of our common stock.
On June&nbsp;9, 2010, the closing sale price of our common stock as
reported by NASDAQ was $1.42 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We have never declared any cash dividends with respect to our common stock. Future payment of
dividends is within the discretion of our board of directors and will depend on our earnings,
capital requirements, financial condition and other relevant factors. Although there are no
material restrictions limiting, or that are likely to limit, our ability to pay dividends on our
common stock, we presently intend to retain future earnings, if any, for use in our business and
have no present intention to pay cash dividends on our common stock.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->63<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Certain legal matters in connection with the offering and the validity of the common stock
offered by this prospectus will be passed upon for us by Mintz, Levin, Cohen, Ferris, Glovsky &#038;
Popeo, P.C.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The financial statements as of December&nbsp;31, 2009, 2008 and 2007 incorporated by reference into
this prospectus have been so included in reliance on the report of Ernst &#038; Young LLP, independent
registered public accounting firm, given on the authority of said firm as experts in auditing and
accounting.
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>INCORPORATION OF DOCUMENTS BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Securities and Exchange Commission allows us to &#147;incorporate by reference&#148; information we
file with it. This means that we can disclose important information to you by referring you to
those documents. Any information we reference in this manner is considered part of this prospectus.
Information contained in this prospectus supersedes information incorporated by reference that we
have filed with the Securities and Exchange Commission prior to the date of this prospectus. We
incorporate by reference the documents listed below, except to the extent that any information
contained in any such document is deemed &#147;furnished&#148; in accordance with the rules of the Securities
and Exchange Commission:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31, 2010 filed on May&nbsp;19,
2010;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Annual Report on Form 10-K for the year ended December&nbsp;31, 2009 filed on March&nbsp;29,
2010, as amended by Amendment No.&nbsp;1 to Annual Report on Form 10-K/A for the year ended
December&nbsp;31, 2009 filed on May&nbsp;17, 2010 and as further amended by Amendment No.&nbsp;2 to Annual
Report on Form 10-K/A for the year ended December&nbsp;31, 2010 filed on May&nbsp;19, 2010;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Current Reports on Form 8-K filed on January 8, 2010,
January 11, 2010, January 13, 2010, January 21, 2010, January 25,
2010, January 27, 2010, March 16, 2010, March&nbsp;31, 2010,
April&nbsp;20, 2010, May&nbsp;13,
2010 and May&nbsp;27, 2010;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of our common stock contained in our Registration Statement on Form
8-A, filed on March&nbsp;8, 2004 (File No.&nbsp;000-50626), which incorporates by reference the
description of the shares of our common stock contained in our Registration Statement
on Form S-1 (File No.&nbsp;333-109653) filed on December&nbsp;22, 2003 and declared effective by
the SEC on March&nbsp;17, 2004, and any amendment or reports filed with the SEC for purposes
of updating such description; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of our preferred stock contained in our Registration Statement on
Form 8-A, filed on October&nbsp;27, 2004 (File No.&nbsp;000-50626), which incorporates by
reference the description of the shares of our preferred stock contained in our
Registration Statement on Form S-1 (File No.&nbsp;333-119585) filed on October&nbsp;7, 2004 and
declared effective by the SEC on November&nbsp;1, 2004, and any amendment or reports filed
with the SEC for purposes of updating such description.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->64<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We will provide to each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the reports or documents that we incorporate by reference in
this prospectus contained in the registration statement but not delivered with this prospectus at
no cost to you, by writing or calling us at: 200 Connell Drive, Suite&nbsp;1500, Berkeley Heights, NJ
07922, telephone (908)&nbsp;517-7330. Information about us is also available at our website at
<u>http://www.cyclacel.com.</u> However, the
information in our website is not a part of this prospectus and is not incorporated by reference
into this prospectus.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We file annual, quarterly and special reports and other information with the SEC. These
filings contain important information that does not appear in this prospectus. For further
information about us, you may read and copy any reports, statements and other information filed by
us at the SEC&#146;s Public Reference Room at 100 F Street, N.E., Room&nbsp;1580, Washington, D.C.
20549-0102. You may obtain further information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available on the SEC Internet site at
http://www.sec.gov, which contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->65<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART II &#151; INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;13. Other Expenses of Issuance and Distributions</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securities and Exchange Commission Registration Fee*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal Fees and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting Fees and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Previously paid. All expenses are estimates.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;14. Indemnification of Directors and Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Our amended and restated certificate of incorporation, as amended, and amended and restated
bylaws, as amended, provide that each person who was or is made a party or is threatened to be made
a party to or is otherwise involved (including, without limitation, as a witness) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or an officer of Cyclacel Pharmaceuticals, Inc. or is or was
serving at our request as a director, officer, or trustee of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or trustee or in any other capacity while serving as a director,
officer or trustee, shall be indemnified and held harmless by us to the fullest extent authorized
by the Delaware General Corporation Law against all expense, liability and loss (including
attorneys&#146; fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Section&nbsp;145 of the Delaware General Corporation Law permits a corporation to indemnify any
director or officer of the corporation against expenses (including attorney&#146;s fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred in connection with any
action, suit or proceeding brought by reason of the fact that such person is or was a director or
officer of the corporation, if such person acted in good faith and in a manner that he reasonably
believed to be in, or not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, if he or she had no reason to believe his or her conduct was
unlawful. In a derivative action, (<I>i.e</I>., one brought by or on behalf of the corporation),
indemnification may be provided only for expenses actually and reasonably incurred by any director
or officer in connection with the defense or settlement of such an action or suit if such person
acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification shall be provided if such
person shall have been adjudged to be liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Pursuant to Section&nbsp;102(b)(7) of the Delaware General Corporation Law, our amended and
restated certificate of incorporation eliminates the liability of a director to us or our
stockholders for monetary damages for such a breach of fiduciary duty as a director, except for
liabilities arising:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from any breach of the director&#146;s duty of loyalty to us or our stockholders;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->66<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>under Section&nbsp;174 of the Delaware General Corporation Law; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from any transaction from which the director derived an improper personal benefit.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">We carry insurance policies insuring our directors and officers against certain liabilities
that they may incur in their capacity as directors and officers. In addition, we expect to enter
into indemnification agreements with each of our directors and executive officers prior to
completion of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Company has entered into indemnification agreements with each of its directors and
executive officers. Pursuant to the indemnification agreements, the Company agrees to hold harmless
and indemnify its directors and executive officers to the fullest extent authorized or permitted by
the provisions of the Company&#146;s amended and restated certificate of incorporation, amended and
restated by-laws and the DGCL, including for any amounts that such director or officer becomes
obligated to pay because of any claim to which such director or officer is made or threatened to be
made a party, witness or participant, by reason of such director&#146;s or officer&#146;s service as a
director, officer, employee or other agent of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">There are certain exceptions from the Company&#146;s obligation to indemnify its directors and
executive officers pursuant to the indemnification agreements, including for &#147;short-swing&#148; profit
claims under Section 16(b) of the Securities Exchange Act of 1934, as amended, losses that are as a
result of conduct that is established by a final judgment as knowingly fraudulent or deliberately
dishonest or that constituted willful misconduct, or that constituted a breach of the duty of
loyalty to the Company or resulted in any improper personal profit or advantage, where payment is
actually made to a director or officer under an insurance policy, indemnity clause, bylaw or
agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or
agreement, for indemnification which is not lawful, or in connection with any proceeding initiated
by such director or officer, or any proceeding against the Company or its directors, officers,
employees or other agents, unless (i)&nbsp;such indemnification is expressly required to be made by law,
(ii)&nbsp;the proceeding was authorized by the board of directors of the Company, (iii)&nbsp;such
indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested
in the Company under the DGCL, or (iv)&nbsp;the proceeding is initiated to enforce a claim for
indemnification pursuant to the indemnification agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All agreements and obligations of the Company contained in the indemnification agreements
shall continue during the period when the director or officer who is a party to an indemnification
agreement is a director, officer, employee or other agent of the Company (or is or is serving at
the request of the Company as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as such director or officer shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative. In addition, the indemnification agreements provide
for partial indemnification and advance of expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Insofar as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;15. Recent Sales of Unregistered Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On April&nbsp;19, 2010, the Company issued upon settlement, an aggregate of 1,416,203 shares of its
common stock to several of its stockholders in exchange for such stockholders&#146; delivery to the
Company of an aggregate of 710,271 shares of the Company&#146;s preferred stock. The shares of common
stock were issued in reliance on the exemption from registration contained in Section&nbsp;3(a)(9) of
the Securities Act for securities exchanged by an issuer and an existing stockholder where no
commission or other remuneration is paid or given directly or indirectly by the issuer for
soliciting such exchange. These transactions settled on or before April&nbsp;23, 2010, after which time,
a total of 1,213,142 shares of preferred stock remain outstanding.
</DIV>


<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->67<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;16. Exhibits</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>EXHIBIT</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NUMBER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>DESCRIPTION</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Placement Agent Agreement, dated July&nbsp;23, 2009, by and between the Company and Lazard
Capital Markets LLC (previously filed as Exhibit&nbsp;1.1 to the Registrant&#146;s Current Report
on Form&nbsp;8-K, originally filed with the SEC on July&nbsp;24, 2009, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Placement Agent Agreement, dated January&nbsp;11, 2010, by and between the Company and ROTH
Capital Partners, LLC (previously filed as Exhibit&nbsp;1.1 to the Registrant&#146;s Current Report
on Form&nbsp;8-K, originally filed with the SEC on January&nbsp;11, 2010, and incorporated herein
by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Placement Agent Agreement, dated January&nbsp;21, 2010, by and between the Company and ROTH
Capital Partners, LLC (previously filed as Exhibit&nbsp;1.1 to the Registrant&#146;s Current Report
on Form&nbsp;8-K, originally filed with the SEC on January&nbsp;21, 2010, and incorporated herein
by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amended and Restated Certificate of Incorporation of Xcyte Therapies, Inc. (previously
filed as Exhibit&nbsp;3.1 to the Registrant&#146;s Registration Statement on Form&nbsp;S-1, File No.
333-109653, originally filed with the SEC on October&nbsp;10, 2003, as subsequently amended,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Amendment of the Amended and Restated Certificate of Incorporation of
Xcyte Therapies, Inc. (previously filed as Exhibit&nbsp;3.3.1 to the Registrant&#146;s Quarterly
Report on Form&nbsp;10-Q, for the quarterly period ended March&nbsp;31, 2006, originally filed with
the SEC on May&nbsp;16, 2006, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amended and Restated Bylaws of Xcyte Therapies, Inc. (Previously filed as Exhibit&nbsp;3.3 to
Registrant&#146;s Registration Statement on Form&nbsp;S-1, File No.&nbsp;333-109653, originally filed
with the SEC on October&nbsp;10, 2003, as subsequently amended, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment No.&nbsp;1 to the Amended and Restated Bylaws of Xcyte Therapies, Inc. (previously
filed as Exhibit&nbsp;3.01 to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed
with the SEC on September&nbsp;8, 2008, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Preferred Stock Certificate of Designations (previously filed as Exhibit&nbsp;3.2 to the
Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on November&nbsp;5,
2004, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Specimen of Common Stock Certificate (previously filed as Exhibit&nbsp;4.1 to Registrant&#146;s
Registration Statement on Form&nbsp;S-1, File No.&nbsp;333-109653, originally filed with the SEC on
October&nbsp;10, 2003, as subsequently amended, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Specimen of Preferred Stock Certificate of Designation (previously filed as Exhibit&nbsp;3.2
to Registrant&#146;s Registration Statement on Form&nbsp;S-1, File No.&nbsp;333-119585, originally filed
with the SEC on October&nbsp;7, 2004, as subsequently amended, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit&nbsp;99.3 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on April&nbsp;28, 2006, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit&nbsp;10.2 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on February&nbsp;15, 2007, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock, dated
December&nbsp;10, 2007, issued to Kingsbridge Capital Limited (previously filed as Exhibit&nbsp;4.1
to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registration Rights Agreement, dated December&nbsp;10, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit&nbsp;4.2 to
the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amended and Restated Warrant to purchase Common Stock, dated as of November&nbsp;24, 2009,
issued by the Company to Kingsbridge Capital Limited. (previously filed as Exhibit&nbsp;4.1 to
the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on November
25, 2009, and incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->68<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>EXHIBIT</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NUMBER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>DESCRIPTION</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Series&nbsp;I Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common
Stock (previously filed as Exhibit&nbsp;4.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on July&nbsp;24, 2009, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Series&nbsp;II Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common
Stock (previously filed as Exhibit&nbsp;4.2 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on July&nbsp;24, 2009, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit&nbsp;4.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on January&nbsp;11, 2010, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.11</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit&nbsp;4.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K,
originally filed with the SEC on January&nbsp;21, 2010, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding legality of
securities being registered (previously filed as Exhibit&nbsp;5.1 to the Registrant&#146;s
Registration Statement on Form&nbsp;S-3, originally filed with the SEC on December&nbsp;11,2007),
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stock Purchase Agreement, dated December&nbsp;15, 2005, between Xcyte Therapies, Inc., and
Cyclacel Group plc (previously filed as Exhibit&nbsp;2.1 to the Registrant&#146;s Current Report on
Form&nbsp;8-K, originally filed with the SEC on December&nbsp;20, 2005, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment No.&nbsp;1 to the Stock Purchase Agreement, dated January&nbsp;13, 2006, between Xcyte
Therapies Inc., and Cyclacel Group plc (previously filed as exhibit 2.1 to the
Registrant&#146;s current report on Form&nbsp;8-K filed with the Commission on January&nbsp;19, 2006,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Securities Purchase Agreement, dated April&nbsp;26, 2006 (previously filed as Exhibit
99.2 to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on
April&nbsp;28, 2006, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Subscription Agreement, dated February&nbsp;13, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and certain purchasers (previously filed as Exhibit&nbsp;10.1 to the
Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on February&nbsp;15,
2007, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Placement Agent Agreement, dated February&nbsp;13, 2007, by and among Cyclacel
Pharmaceuticals, Inc., Lazard Capital Markets LLC, Needham &#038; Company, LLC and ThinkEquity
Partners LLC (previously filed as Exhibit&nbsp;10.3 to the Registrant&#146;s Current Report on Form
8-K, originally filed with the SEC on February&nbsp;15, 2007, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Asset Purchase Agreement by and among ALIGN Pharmaceuticals, LLC, ALIGN Holdings, LLC and
Achilles Acquisition, LLC, dated October&nbsp;5, 2007 (previously filed as Exhibit&nbsp;10.1 to the
Registrant&#146;s Quarterly Report on Form&nbsp;10-Q, for the quarterly period ended September&nbsp;30,
2007, originally filed with the SEC on November&nbsp;7, 2007, and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common Stock Purchase Agreement, dated December&nbsp;10, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit&nbsp;10.1
to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.8 </TD>
    <TD nowrap valign="top" align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Offer Letter by and between Achilles Acquisition, LLC and William C. Collins,
dated October&nbsp;3, 2007 (previously filed as Exhibit&nbsp;10.2 to the Registrant&#146;s Quarterly
Report on Form&nbsp;10-Q, for the quarterly period ended September&nbsp;30, 2007, originally filed
with the SEC on November&nbsp;7, 2007, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.9 </TD>
    <TD nowrap valign="top" align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amended and Restated 2006 Equity Incentive Plan (previously filed as Exhibit&nbsp;10.1 to the
Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on June&nbsp;19, 2007,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.10 </TD>
    <TD nowrap valign="top" align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis,
dated as of January&nbsp;1, 2008 (previously filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Current
Report on Form&nbsp;8-K, originally filed with the SEC on March&nbsp;24, 2008, and incorporated
herein by reference).</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->69<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>EXHIBIT</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NUMBER</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>DESCRIPTION</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.11 </TD>
    <TD nowrap valign="top" align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Paul McBarron,
dated as of January&nbsp;1, 2008 (previously filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Current
Report on Form&nbsp;8-K, originally filed with the SEC on April&nbsp;2, 2008, and incorporated
herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.12 </TD>
    <TD nowrap valign="top" align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment No.&nbsp;1, dated as of December&nbsp;31, 2008, to Employment Agreement by and between
Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis, dated as of January&nbsp;1, 2008
(previously filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Quarterly Report on Form&nbsp;10-Q, for
the quarterly period ended March&nbsp;31, 2009, originally filed with the SEC on May&nbsp;15, 2009,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amendment No.&nbsp;1 to Common Stock Purchase Agreement, dated as of November&nbsp;24, 2009, by and
between the Company and Kingsbridge Capital Limited (previously filed as Exhibit&nbsp;10.1 to
the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed with the SEC on November
25, 2009, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed
with the SEC on July&nbsp;24, 2009, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed
with the SEC on January&nbsp;11, 2010, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit&nbsp;10.1 to the Registrant&#146;s Current Report on Form&nbsp;8-K, originally filed
with the SEC on January&nbsp;21, 2010, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Agreement between the Company and Scottish Enterprise dated March&nbsp;27, 2006 (previously
filed as Exhibit&nbsp;10.2 to the Registrant&#146;s Quarterly Report on Form&nbsp;10-Q, for the
quarterly period ended June&nbsp;30, 2009, originally filed with the SEC on August&nbsp;13, 2009,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Addendum to Agreement between the Company and Scottish Enterprise dated June&nbsp;22, 2009
(previously filed as Exhibit&nbsp;10.3 to the Registrant&#146;s Quarterly Report on Form&nbsp;10-Q, for
the quarterly period ended June&nbsp;30, 2009, originally filed with the SEC on August&nbsp;13,
2009, and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Subsidiaries of Cyclacel Pharmaceuticals, Inc. (previously filed as Exhibit&nbsp;21 to the
Registrant&#146;s Annual Report on Form&nbsp;10-K, as amended, originally filed with the SEC on March&nbsp;29, 2010,
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.1 </TD>
    <TD nowrap valign="top" align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consent of Independent Registered Public Accounting Firm.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">23.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (included in Exhibit&nbsp;5.1).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">24.1 </TD>
    <TD nowrap valign="top" align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Power of Attorney (included on signature page).</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Indicates management compensatory plan, contract or arrangement.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Item&nbsp;17. Undertakings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">(a)&nbsp;The undersigned registrant hereby undertakes:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(1)&nbsp;To file, during any period in which offers or sales of securities are being made, a
post-effective amendment to this registration statement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 16%">(i)&nbsp;To include any prospectus required by Section&nbsp;10(a)(3) of the Securities Act of 1933;
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->70<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 16%">(ii)&nbsp;To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering price set forth in the
&#147;Calculation of Registration Fee&#148; table in the effective registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 16%">(iii)&nbsp;To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such information in
the registration statement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(2)&nbsp;That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(3)&nbsp;To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(4)&nbsp;That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 16%">(A)&nbsp;Each prospectus filed by a registrant pursuant to Rule&nbsp;424(b)(3) shall be deemed to be
part of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(5)&nbsp;If the registrant is subject to Rule&nbsp;430C, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements
relying on Rule&nbsp;430B or other than prospectuses filed in reliance on Rule&nbsp;430A, shall be deemed to
be part of and included in the registration statement as of the date it is first used after
effectiveness. <I>Provided, however</I>, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such
date of first use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">(b)&nbsp;The undersigned registrant hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule&nbsp;14a-3 or Rule&nbsp;14c-3 under the Securities Exchange Act of 1934;
and, where interim financial information required to be presented by Article&nbsp;3 of Regulation&nbsp;S-X
are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom
the prospectus is sent or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">(c)&nbsp;Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the claim has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 3%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->71<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized in the city of Berkley Heights, State of New Jersey,
on June 11, 2010.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>CYCLACEL PHARMACEUTICALS, INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Paul McBarron
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Paul McBarron&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="left">Chief Operating Officer,
Chief Financial Officer, <BR>
and Executive Vice President, Finance&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Power of Attorney</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Each person whose signature appears below constitutes and appoints each of Spiro Rombotis and
Paul McBarron his attorney-in-fact and agent, with the full power of substitution and
resubstitution and full power to act without the other, for them in any and all capacities, to sign
any and all amendments, including post-effective amendments, and any registration statement
relating to the same offering as this registration that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, to this registration statement, and to
file the same, with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Spiro Rombotis
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Spiro Rombotis
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President &#038; Chief Executive Officer<BR>
(Principal Executive Officer)
and Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Paul McBarron
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Paul McBarron
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Operating Officer, Chief
Financial Officer, and Executive Vice
President, Finance (Principal
Financial and Accounting Officer) and
Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Dr.&nbsp;David U&#146;Prichard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Dr.&nbsp;Christopher Henney
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice Chairman&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Dr.&nbsp;Nicholas Bacopoulos
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Dr.&nbsp;Nicholas Bacopoulos
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sir John Banham</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">*
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">June 11, 2010</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Daniel Spiegelman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>By executing his name hereto, Spiro Rombotis is signing this document on behalf of the persons
indicated above pursuant to the powers of attorney executed by such persons and filed with the
Securities and Exchange Commission.
</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>



</BODY>
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sv1
Table of Contents
As filed with the Securities and Exchange Commission on June 11, 2010
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CYCLACEL PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
91-1707622
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification Number)
200 Connell Drive, Suite 1500
Berkeley Heights, NJ 07922
(908) 517-7330
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Spiro Rombotis
Chief Executive Officer
Cyclacel Pharmaceuticals, Inc.
200 Connell Drive, Suite 1500
Berkeley Heights, NJ 07922
(908) 517-7330
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Joel I. Papernik, Esq.
Todd E. Mason, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
666 Third Avenue
New York, New York 10017
(212) 935-3000
Approximate date of commencement of proposed sale to public:
From time to time after the effective
date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:
þ
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering:
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering:
o
If this Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
 pursuant to Rule 462(d) under the Securities Act, check the following
box:
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Proposed Maximum
Title of Each Class of
Amount Being
Offering Price
Aggregate
Amount of
Security Being Registered
Registered
(1)
Per Security
Offering Price
Registration Fee
Shares of common stock, $.001 par value per share
1,266,358
$1.545
(2)
$1,956,523.11
$35.43
Shares
of common stock, $.001 par value per share, issuable upon exercise of
warrants
(4)
100,000
$1.40
(3)
$140,000
$2.37
Total
1,366,358
$2,096,523.11
$149.48*
*
Previously Paid in connection with Registration Statement on Form S-3
(Registration No. 333-147997
(1)
This Registration Statement shall also cover any additional
shares of common stock which become issuable by reason of any stock
dividend, stock split or other similar transaction effected without
the receipt of consideration that results in an increase in the number of the outstanding shares of common stock of the registrant.
(2)
In accordance with Rule 457(c), the aggregate offering price of our stock is estimated
solely for the calculating of the registration fees due for this filing. This estimate is based
on the average of the high and low sales price of our stock reported by the NASDAQ Global Market
on December 5, 2007, which was $5.40.
(3)
The proposed maximum offering price per share was determined
in accordance with Rule 457(g) under the Securities Act of 1933,
under which rule the per share price is estimated by reference to the
exercise price of the securities.
The
Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the registration statement shall become effective on such date
as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Table of Contents
EXPLANATORY NOTE
This
Registration Statement on Form S-1 relates solely to the shares of common stock
that we may issue to Kingsbridge Capital Limited, or Kingsbridge, pursuant to a common stock
purchase agreement between Kingsbridge and ourselves dated December 10, 2007, as amended on
November 24, 2009, and shares of our common stock that we may issue upon exercise of an amended and
restated warrant we issued to Kingsbridge on November 24, 2009, initially registered by the
registrant on the Registration Statement on Form S-3 (File No. 333-147997) declared effective by
the Securities and Exchange Commission on or about December 20,
2007, but which was withdrawn by us on June 11, 2010. This
Registration Statement on Form S-1 is being filed in lieu of such
post-effective amendment on Form S-1 to Registration Statement on Form S-3.
 All filing fees payable in connection with the registration of
these securities were previously paid in connection with the filing of the original registration
statement.
Table of Contents
The information in this prospectus is not complete and may be changed. The selling securityholder
may not sell these securities until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.
Subject
to Completion, dated June 11, 2010
PROSPECTUS
1,366,358 Shares
CYCLACEL PHARMACEUTICALS, INC.
Common Stock, $0.001 Par Value
This prospectus relates to the disposition from time to time of up to
1,366,358 shares of the
common stock of Cyclacel Pharmaceuticals, Inc. ("we," "us," "our company," or "the Company"), by
the selling securityholder listed beginning on page 44 of this prospectus. All of the shares being
offered, when sold, will be sold by the selling securityholder. The shares of common stock
registered for resale under this prospectus are up to (i) 1,266,358 shares of our common stock that
we may issue to Kingsbridge Capital Limited, or Kingsbridge, pursuant to a common stock purchase
agreement between Kingsbridge and ourselves dated December 10, 2007, as amended on November 24,
2009, and (ii) 100,000 shares of our common stock that we may issue upon exercise of an amended and
restated warrant we issued to Kingsbridge on November 24, 2009.
The selling securityholder may offer and sell any of the shares of common stock from time to
time at fixed prices, at market prices or at negotiated prices, and may engage a broker, dealer or
underwriter to sell the shares. For additional information on the possible methods of sale that may
be used by the selling securityholder, see the section entitled "Plan of Distribution" on page 46
of this prospectus. We are not selling any securities under this prospectus and we will not receive
any proceeds from the sale of the shares of common stock by the selling securityholder, although we
may receive proceeds upon the issuance of shares to Kingsbridge or in connection with the exercise
of the warrants by Kingsbridge.
Our common stock is listed on the NASDAQ Global Market under the
symbol "CYCC." On June 9,
2010, the last reported sale price for our common stock was $1.42 per share.
Investing in our securities involves significant risks. We strongly recommend that you read
carefully the risks we describe in this prospectus and the risk factors that are incorporated by
reference in this prospectus from our filings made with the Securities and Exchange Commission. See
"Risk Factors" beginning on page 14 before deciding whether to invest in our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is
, 2010.
TABLE OF CONTENTS
PROSPECTUS SUMMARY
1
RISK FACTORS
14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
42
USE OF PROCEEDS
43
SELLING SECURITYHOLDER
44
PLAN OF DISTRIBUTION
46
DESCRIPTION OF SECURITIES
49
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
63
LEGAL MATTERS
64
EXPERTS
64
INCORPORATION OF DOCUMENTS BY REFERENCE
64
WHERE YOU CAN FIND MORE INFORMATION
65
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
66
SIGNATURES
72
EXHIBIT 23.1
You should read this prospectus and the documents incorporated by reference carefully before
you invest. Such documents contain important information you should consider when making your
investment decision. See "Incorporation of Documents by Reference" on page 64. You should rely only
on the information provided in this prospectus or documents incorporated by reference in this
prospectus. We have not, and the selling securityholder has not, authorized anyone to provide you
with different information. The information contained in this prospectus is accurate only as of the
date of this prospectus and any information we have incorporated by reference is accurate only as
of the date of the document incorporated by reference, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Our business, financial condition, results of
operations and prospects may have changed since that date.
i
Table of Contents
PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the information that may be
important to you. You should carefully read the more detailed information contained in this
prospectus and the information incorporated by reference carefully before you invest. Our business
involves significant risks. You should carefully consider the information under the heading "Risk
Factors" beginning on page 14.
As used in this prospectus, unless otherwise indicated, the terms "we," "us," "our company,"
"the Company" and "Cyclacel" refer to Cyclacel Pharmaceuticals, Inc., a Delaware corporation.
Our Company
We are a biopharmaceutical business dedicated to the discovery, development and commercialization
of novel, mechanism-targeted drugs to treat cancer and other serious disorders. We are focused on
delivering leading edge therapeutic management of cancer patients based on a clinical development
pipeline, led by sapacitabine, of novel drug candidates. Our core area of expertise, and a
foundation of the Company since our inception, is in cell cycle biology; the processes by which
cells divide and multiply. We focus primarily on the development of orally available anticancer
agents that target the cell cycle with the aim of slowing the progression or shrinking the size of
tumors, and enhancing the quality of life and improving survival rates of cancer patients.
We are focusing our clinical development priorities on:
•
Sapacitabine in acute myeloid leukemia, or AML, in elderly patients;
•
Sapacitabine in myelodysplastic syndromes, or MDS, in older patients; and
•
Sapacitabine in non-small cell lung cancer, or NSCLC.
The Company has additional ongoing programs in clinical development which are currently
pending the availability of clinical data. Once these data become available and are reviewed, we
will determine the feasibility of pursuing further development and/or partnering of these assets
including sapacitabine in combination with seliciclib, seliciclib in nasopharyngeal cancer, or NPC,
and NSCLC and CYC116.
We were founded by Professor Sir David Lane, a recognized leader in the field of tumor
suppressor biology who discovered the p53 protein, which operates as one of the body's own
anticancer agents by regulating cell cycle targets. Our Chief Scientist, Professor David Glover, is
a recognized leader in the biology of mitosis or cell division. Professor Glover discovered, among
other cell cycle targets, the mitotic kinases, Polo and Aurora, enzymes that act in the mitosis
phase of the cell cycle.
Although our resources are primarily directed towards advancing our anticancer drug candidate
sapacitabine through in-house development activities we are also progressing, but with lower levels
of investment than in previous years, our other novel drug series which are at earlier stages.
Taken together, our pipeline covers all four phases of the cell cycle, which we believe will
improve the chances of successfully developing and commercializing novel drugs that work on their
own or in combination with approved conventional chemotherapies or with other targeted drugs to
treat human cancers.
Table of Contents
Sapacitabine
Our lead candidate, sapacitabine, is an orally available prodrug of CNDAC, which is a novel
nucleoside analog, or a compound with a structure similar to a nucleoside. A prodrug is a compound
that has a therapeutic effect after it is metabolized within the body. CNDAC has a significantly
longer residence time in the blood when it is produced in the body through metabolism of
sapacitabine than when it is given directly. Sapacitabine acts through a dual mechanism whereby the
compound interferes with DNA synthesis and repair by causing single-strand DNA breaks and induces
arrest of the cell division cycle at G2/M checkpoint. A number of nucleoside drugs, such as
gemcitabine, or Gemzar
®
, from Eli Lilly, and cytarabine, also known as Ara-C, a generic drug, are
in wide use as conventional chemotherapies. Both sapacitabine and its major metabolite, CNDAC, have
demonstrated potent anti-tumor activity in both blood and solid tumors in preclinical studies. In a
liver metastatic mouse model, sapacitabine was shown to be superior to gemcitabine and 5-FU, two
widely used nucleoside analogs, in delaying the onset and growth of liver metastasis. We have
retained worldwide rights to commercialize sapacitabine, except for Japan, for which Daiichi-Sankyo
Co., Ltd, or Daiichi-Sankyo, has a right of first negotiation.
We are currently exploring sapacitabine in both hematological cancers and solid tumors. To
date, sapacitabine has been evaluated in approximately 400 patients in several Phase 1 and 2
studies and has shown signs of anti-cancer activity.
Hematological Cancers
Phase 1 clinical trial in patients with advanced leukemias and myelodysplastic syndromes
In December 2007, at the ASH annual meeting, we reported interim results from a Phase 1
clinical trial of oral sapacitabine in patients with advanced leukemias and MDS. The data
demonstrated that sapacitabine had a favorable safety profile and promising anti-leukemic activity
in patients with relapsed and refractory AML and MDS when administered by two different dosing
schedules. The primary objective of the study is to determine the maximum tolerated dose, or MTD,
of sapacitabine administered twice daily for seven consecutive days every 21 days or three
consecutive days per week for two weeks every 21 days. The MTD was reached at 375 mg on the
seven-day schedule and 475 mg on the three-day schedule. Dose-limiting toxicity was
gastrointestinal which included abdominal pain, diarrhea, small bowel obstruction and neutropenic
colitis. One patient treated at the MTD of 375 mg on the seven-day schedule died of complications
from neutropenic colitis. Among 46 patients, 42 with AML and 4 with MDS, in this dose escalating
study, the best responses were complete remission, or CR, or complete remission without platelet
recovery, or CRp, in six patients for an Overall Response Rate of 13%. In addition, 15 patients had
a significant decrease in bone marrow blasts including seven with blast reduction to 5% or less.
The study was conducted at The University of Texas M. D. Anderson Cancer Center and is led by Hagop
Kantarjian, M.D., Professor of Medicine and Chairman of the Leukemia Department and Dr. William
Plunkett, Professor and Chief, Section of Molecular and Cellular Oncology, Department of
Experimental Therapeutics.
Phase 2 randomized clinical trial in elderly patients with AML previously untreated or in first
relapse
In December 2007, we initiated an open-label, multicenter, randomized Phase 2 clinical trial
of oral sapacitabine in 60 elderly patients with AML aged 70 or older who are previously untreated
or in first relapse. The Phase 2 study, led by Dr. Kantarjian, has a primary endpoint of 1-year
survival rate of three dosing schedules of sapacitabine in elderly patients with previously
untreated or first relapsed AML. Secondary objectives are to assess CR or CRp, partial remission,
or PR, duration of CR or CRp, or major hematological improvement and their corresponding durations,
transfusion requirements, number of hospitalized days and safety. The study uses a selection design
with the objective of identifying a dosing schedule among three different arms, A. 200 mg twice
daily for seven days every 3-4 weeks, B. 300 mg
twice daily for seven days every 3-4 weeks, and C. 400 mg twice daily for three days per week for
two weeks every 3-4 weeks, which produces a better 1-year survival rate in the event that all three
dosing schedules are active. Each arm enrolled and treated 20 patients. Approximately 55% of
patients had AML de novo and the rest had AML preceded by antecedent hematological disorder, or
AHD, such as MDS, or myeloproliferative disease. Eighty percent of the patients were untreated and
20% in first relapse. We completed enrollment of 60 AML patients in this study in October 2008. In
December 2009, at the 51st Annual Meeting of ASH we reported 1-year survival data.
2
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The primary endpoint of 1-year survival was 35% on Arm A, 30% on Arm C and 10% on Arm B. The
median overall survival was 212 days on Arm C (range of 13 to over 654 days), 197 days on Arm A
(range of 26 to over 610 days) and 100 days on Arm B (range of 6 to over 646 days). Overall
response rate, or ORR, a secondary endpoint, was 45% on Arm A, 35% on Arm C and 25% on Arm B with
CR rate of 25% on Arm C and 10% on Arms A and B. Thirty-day mortality was 10% on Arm C and Arm A
and 20% on Arm B. Approximately 30% of all patients received sapacitabine for at least 6 cycles.
Fifteen patients who survived one year or more received an average of 12 treatment cycles.
Exploratory subgroup analysis suggests that (i) Arm C may be more effective for de novo AML
and (ii) Arm A may be more effective for AML preceded by AHD, such as MDS.
The 3-day dosing schedule in Arm C was selected for further clinical development in elderly
patients with de novo AML based on a 1-year survival rate of 30%, ORR of 35% with durable CRs. The
7-day dosing schedule in Arm A was selected for further clinical development in elderly patients
with AML preceded by AHD based on a 1-year survival rate of 35%, ORR of 45% with durable
hematological improvement.
Randomized Phase 2 clinical trial in older patients with MDS as a second-line treatment
In September 2008, we advanced sapacitabine into Phase 2 development as a second-line
treatment in patients aged 60 or older with MDS who are previously treated with hypomethylating
agents. The MDS stratum of the study is designed as a protocol amendment expanding the ongoing
Phase 2 trial of sapacitabine in AML described above, to include a cohort of patients with MDS.
Patients with MDS often progress to AML. The primary objective of the MDS stratum is to evaluate
the 1-year survival rate of three dosing schedules of sapacitabine. Secondary objectives are to
assess the number of patients who have achieved CR or CRp, PR, hematological improvement and their
corresponding durations, transfusion requirements, number of hospitalization days and safety. The
study uses a selection design with the objective of identifying a dosing schedule which produces a
better 1-year survival rate for each stratum in the event that all three dosing schedules are
active.
In June
2010, at the American Society of Clinical Oncology, or ASCO, meeting we reported interim response
data for the ongoing Phase 2 clinical trial of sapacitabine in older patients with MDS. The study
has recently completed enrollment of 61 patients aged 60 or older
with MDS who were previously
treated with azacitidine or decitabine or both. In this three-arm study, Arms B & C enrolled
20 patients each while Arm C enrolled 21 patients across the same three randomized dosing schedules
of sapacitabine tested in the AML stratum of the study. All patients
have received at least one
hypomethylating agent and 15 patients (25%) have received two hypomethylating agents, i.e.,
azacitidine and decitabine. Approximately 51% of the 61 patients had baseline bone marrow blast
counts above 10%. Based on interim data, the overall response rate is 24% on Arm A, the 7-day
low dose schedule, 35% on Arm B, the 7-day high dose schedule, and 10% on Arm C, the 3-day high
dose schedule. Two patients achieved complete remission and both were treated on Arm A.
Thirty-day mortality from all-causes is 4.8% on Arm A, 0% on Arm B and 15% on Arm C.
Approximately 34% of the patients received 4 or more cycles of sapacitabine.
3
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Pivotal trial plan for sapacitabine for the treatment of hematological malignancies
In December 2009, we announced that we held a Type A meeting with the FDA to discuss a
randomized Phase 3 study design for our oral sapacitabine capsules in AML and separately in MDS.
Based on the FDA's confirmation that the proposed study design would be acceptable for a SPA, we
submitted a SPA request during the first quarter of 2010. Should the SPA be granted we would plan
to start such a study during 2010. The SPA process allows for official FDA evaluation of clinical
protocols of a Phase 3 clinical trial intended to form the primary basis for an efficacy claim. A
SPA provides trial sponsors with an FDA agreement that the design and analysis of the trial
adequately address objectives in support of a submission for a marketing application if the trial
is performed according to the SPA. The SPA may only be changed through a written agreement between
the sponsor and the FDA, or if the FDA becomes aware of a substantial scientific issue essential to
product efficacy or safety. However, a SPA does not provide any assurance that a marketing
application would be approved by the FDA. Furthermore, Phase 3 clinical trials are time-consuming
and expensive, and because we have limited resources, we may be required to collaborate with a
third party or raise additional funds. However, there is no assurance that we will be able to do
so.
Solid Tumors
Phase 1 clinical trials in patients with refractory solid tumors or lymphomas
Two Phase 1 studies of sapacitabine were completed by Daiichi-Sankyo, from which we
in-licensed sapacitabine, evaluating 87 patients in refractory solid tumors. In addition, we
conducted a Phase 1b dose escalation clinical trial in patients with refractory solid tumors or
lymphomas. Preliminary results of the Phase 1b study were reported at the EORTC-NCI-AACR Molecular
Targets and Cancer Therapeutics meeting in November 2006. The primary objective of the study was to
evaluate the safety profile of sapacitabine administered twice daily for 14 consecutive days or 7
consecutive days every 21 days. Of the 37 treated patients, 28 received the drug twice daily for 14
days and 9 received the drug twice daily for 7 days. The dose-limiting toxicity was reversible
myelosuppression. One patient treated at the maximum tolerated dose died of candida sepsis in the
setting of grade 4 neutropenia and thrombocytopenia. Non-hematological toxicities were mostly mild
to moderate. The best response by investigator assessment was stable disease in 13 patients, five
with non-small cell lung cancer, two with breast cancer, two with ovarian cancer and one each with
colorectal cancer, adenocarcinoma of unknown primary, gastrointestinal stromal tumor, and parotid
acinar carcinoma.
Phase 2 clinical trial in patients with non-small cell lung cancer
In January 2009, we began treating patients in a Phase 2, open label, single arm, multicenter
clinical trial in patients with NSCLC who have had one prior chemotherapy. This study builds on the
observation of prolonged stable disease of four months or longer experienced by heavily pretreated
NSCLC patients involved in two Phase 1 studies of sapacitabine. The multicenter Phase 2 trial is
led by Philip D. Bonomi, M.D., at Rush University Medical Center, Chicago. The primary objective of
the study is to evaluate the rate of response and stable disease in patients with previously
treated NSCLC. Secondary objectives are to assess progression-free survival, duration of response,
duration of stable disease, 1-year survival, overall survival and safety. The study will enroll
approximately 40 patients and has a lead-in phase for dose escalation with the objective of
defining a recommended dose followed by a second stage in which patients will be treated at the
recommended dose.
Phase 2 clinical trial in patients with cutaneous T-cell lymphoma, or CTCL
In April 2007, we initiated a Phase 2 clinical trial in patients with advanced CTCL, a cancer
of T-lymphocytes, or white blood cells, which causes disfiguring skin lesions and severe itching.
The primary objective of the study is to evaluate tolerability and response rate of 50 mg and 100
mg regimens of
sapacitabine both twice a day for three days per week for two weeks in a three week cycle in
patients with progressive, recurrent, or persistent CTCL on or following two systemic therapies.
The study uses a selection design to choose an optimal dose if both are active. Secondary
objectives are to assess response duration, time to response, time to progression and relief of
pruritus or itching. Non-hematological toxicities were mostly mild to moderate. The best response
by investigator assessment was partial response in 3 patients out of 16 enrolled. We stopped the
trial in order to re-direct our resources to sapacitabine clinical trials with a higher priority.
4
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EU Orphan Designation
During May 2008, we received designation from the European Medicines Evaluation Agency, or
EMEA, for sapacitabine as an orphan medicine in two separate indications: AML and MDS. The EMEA's
Committee for Orphan Medicinal Products, or COMP, adopted a positive opinion on the Company's
application to designate sapacitabine as an orphan medicinal product for the indications of AML and
MDS. The objective of European orphan medicines legislation is to stimulate research and
development of medicinal products for rare diseases by providing incentives to industry. An orphan
designation in the European Union confers a range of benefits to sponsor companies including market
exclusivity for a period of 10 years, EMEA scientific advice on protocol development, direct access
to the centralized procedure for review of marketing authorizations, EMEA fee reductions and
eligibility for grant support from European agencies.
Seliciclib
Our second drug candidate, seliciclib, is a novel, first-in-class, orally available, CDK
inhibitor. The compound selectively inhibits a spectrum of enzyme targets -CDK2/E, CDK2/A, CDK7 and
CDK9- that are central to the process of cell division and cell cycle control. The target profile
of seliciclib is differentiated from the published target profile of other CDK inhibitors. Its
selectivity is differentiated by recent publications by independent investigators which showed that
seliciclib (i)
is more
active against NSCLC cells with K-Ras or N-Ras mutations than those
with wild type Ras and (ii) overcomes resistance to letrozole (Femara
®
) in breast cancer cells
caused by a particular form of cyclin E in complex with CDK2. Preclinical studies have shown that
the drug works by inducing cell apoptosis, or cell suicide, in multiple phases of the cell cycle.
To date, seliciclib has been evaluated in approximately 450 patients in several Phase 1 and 2
studies and has shown signs of anti-cancer activity. We have retained worldwide rights to
commercialize seliciclib.
Phase 1 clinical trials in patients with refractory solid tumors
We have completed two Phase 1 trials that enrolled 24 healthy volunteers and three Phase 1
trials that enrolled a total of 84 cancer patients testing different doses and schedules. The
primary toxicities observed were of a non-hematological nature, including asthenia or weakness,
elevation of liver enzymes, hypokalemia or decreased potassium levels, nausea and vomiting and
elevation in creatinine. Although these trials were designed to test safety rather than efficacy of
seliciclib given alone as monotherapy in patients with solid tumors who failed multiple previous
treatments, several of these patients appeared to have benefited from seliciclib treatment.
Seliciclib was shown in a further Phase 1 study sponsored and conducted by independent
investigators to have clinical antitumor activity in patients with nasopharyngeal cancer, measured
as a decrease in the size of primary tumor and involved lymph nodes, as well as an increase in
tumor cell deaths by biomarker analyses.
5
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Phase 2 clinical trials in patients with NSCLC or breast cancer
Four Phase 2 trials have been conducted in cancer patients to evaluate the tolerability and
antitumor activities of seliciclib alone or in combination with standard chemotherapies used in the
treatment of advanced NSCLC or breast cancer. Interim data from two Phase 2 open-label studies of a
total of 52 patients with NSCLC, suggest that seliciclib treatment did not aggravate the known
toxicities of standard first and second-line chemotherapies nor appear to cause unexpected
toxicities, although these trials were not designed to provide statistically significant
comparisons. The combination of seliciclib with a standard dose of Capecitabine (Xeloda
®
) was not
well tolerated in patients with advanced breast cancer.
Seliciclib is currently being investigated in the Phase 2b APPRAISE study as a treatment for
patients with advanced NSCLC. APPRAISE is a double-blinded, randomized study of single agent
seliciclib versus best supportive care in patients with NSCLC treated with at least two prior
systemic therapies. APPRAISE is led by Chandra P. Belani, M.D. at Milton S. Hershey Medical Center,
Penn State University. The study's main objective is to learn the anti-tumor activity of seliciclib
as a single agent in refractory NSCLC and help determine further development strategies. The study
design is randomized discontinuation. All patients receive seliciclib at a dose of 1200 mg twice a
day for three days for at least three cycles of two weeks each. Patients who achieve stable disease
after three cycles will be randomized to continue on seliciclib or receive placebo with best
supportive care. Patients in the placebo arm who progress will be given the option to cross-over
and again receive seliciclib. The primary efficacy endpoint of APPRAISE is doubling progression
free survival, or PFS, measured in the randomized portion of the study.
In August 2008, we announced that an independent data review committee, or IDRC, completed a
review of the first interim analysis data from the study. The IDRC assessed the safety profile of
seliciclib and recommended that the study continue after reviewing data from 173 patients with
previously-treated NSCLC, of whom 45 proceeded into the blinded portion of the study and were
randomized to receive either seliciclib or best supportive care. Based on the interim data, the
IDRC reached the following main conclusions: there were no safety concerns that would warrant
stopping the study; there was no trend favoring the seliciclib treatment arm; and as a definitive
conclusion could not be reached because of the low number of events, it was recommended that the
study be continued. Based on our cost versus benefit analysis, we decided not to enroll additional
patients. The APPRAISE trial continues with the 191 patients already enrolled until the last
enrolled patient has completed follow-up. In accordance with the protocol, we remain blinded to the
study data.
Phase 2 clinical trials in patients with NPC
In November 2007, we commenced a Phase 2 multicenter, international, blinded randomized study
of oral seliciclib as a single agent in patients with NPC. The primary objective is to evaluate
6-month progression free survival, or PFS, of two dosing schedules of seliciclib in approximately
75 patients with previously treated NPC. Secondary objectives are overall survival, response rate,
response duration, safety and tolerability. The first part of the study is designed to confirm
safety and tolerability of 400 mg twice a day for four days per week or 800 mg once a day for four
days per week of seliciclib. It is open to approximately 12 to 24 patients with advanced solid
tumors as well as patients with NPC. The second part of the study is designed to detect major
differences between the two dosing schedules of seliciclib and a placebo group in terms of 6-month
PFS in approximately 51 patients. The start of the second part of the study is dependent on
clinical data from the lead-in phase and available resources.
In May 2009, at the ASCO annual meeting, we reported interim data from the lead-in portion of
the Phase 2 study which demonstrated that oral seliciclib could be safely administered in two
dosing schedules which were well tolerated and met the criteria for proceeding to the randomized
stage of the
study. Seliciclib treatment resulted in prolonged stable disease in 70% of previously-treated NPC
patients, including 3 with stable disease lasting longer than 8 months, suggesting seliciclib
inhibits tumor growth in NPC. The data support further clinical development of oral seliciclib in
NPC.
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CYC116
In June 2007, we initiated a multicenter Phase 1 pharmacologic clinical trial of CYC116, an
orally-available inhibitor of Aurora kinase A and B and VEGFR2, in patients with advanced solid
tumors. The multicenter Phase 1 trial, now completed, is designed to examine the safety and
tolerability of CYC116 in patients with advanced solid tumors. The primary objective of the study
is to determine the maximum tolerated dose. Secondary objectives are to evaluate pharmacokinetic
and pharmacodynamic effects of the drug and document anti-tumor activity. Aurora kinases, or AK,
are a family of serine/threonine protein kinases discovered by Professor David Glover, our Chief
Scientist, that are only expressed in actively dividing cells and are crucial for the process of
cell division or mitosis. These proteins, which have been found to be over-expressed in many types
of cancer, have generated significant scientific and commercial interest as cancer drug targets.
VEGFR2 is a receptor protein that plays a key regulatory role in the angiogenesis pathway, or blood
vessel formation. VEGFR is targeted by recently approved drugs such as bevacizumab and sorafenib
indicated for the treatment of several solid cancers, such as breast, colorectal, kidney, liver and
lung. We have retained worldwide rights to commercialize CYC116. Further work on CYC116 will be
undertaken when appropriate levels of resource are available to direct to the program.
Other programs
We have allocated limited resources to other programs allowing us to maintain and build on our
core competency in cell cycle biology and related drug discovery. In our second generation CDK
inhibitor program, we have discovered several series of CDK inhibitors that we believe may prove to
be more potent anticancer agents than seliciclib based on preclinical observations. Our polo-like
kinase or Plk inhibitor program targets the mitotic phase of the cell cycle with the objective of
identifying potent and selective small molecule inhibitors of Plk1, a kinase active during mitosis.
Plk was discovered by Professor David Glover, our Chief Scientist. The Company has a number of
earlier stage programs for which limited or no resources will be allocated. For example, extensive
preclinical data published by independent investigators evidence activity by our CDK inhibitors,
including seliciclib, in various autoimmune and inflammatory diseases of aberrant cell
proliferation including glaucoma, lupus nephritis, idiopathic pulmonary fibrosis, polycystic kidney
disease, and rheumatoid arthritis. In our GSK-3 inhibitor program we have demonstrated evidence of
activity in preclinical models of Type 2 Diabetes.
Where appropriate we intend to progress such programs through collaboration with groups that
specialize in the particular mechanism of action or disease area until such times that these
programs can be partnered and/or progressed should funding become available.
Commercial products
We have exclusive rights to sell and distribute three products in the United States and Canada
used primarily to manage the effects of radiation or chemotherapy in cancer patients: Xclair
®
Cream, Numoisyn
®
Liquid and Numoisyn
®
Lozenges. All three products are approved in the United
States under FDA 510 (k) or medical device registrations.
Xclair
®
Cream
Xclair
®
is an aqueous cream containing sodium hyaluronate, or hyaluronic acid, and
glycyrrhetinic acid that is formulated to relieve symptoms associated with radiation dermatitis.
Sodium
hyaluronate is the key water-regulating substance in human skin. Sodium hyaluronate has high
viscoelasticity and lubricity. When sodium hyaluronate solution is applied on the surface of skin,
it forms an air permeable layer that keeps skin moist and smooth. Small molecular weight sodium
hyaluronate can penetrate into the dermis where it combines with water to promote microcirculation,
nutrient absorption, and metabolism. Glycyrrhetinic acid reduces inflammation and is believed to
have immunomodulatory properties.
7
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Numoisyn
®
Liquid
Numoisyn
®
Liquid is an oral solution used to replace natural saliva when salivary glands are
damaged. The viscosity of Numoisyn
®
Liquid is similar to that of natural saliva. Linseed extract in
Numoisyn
®
Liquid contains mucins that provide superior viscosity and reduced friction compared to
water or carboxymethylcellulose or CMC solutions. Linseed extract significantly reduces the
symptoms of dry mouth with increasing effect over time while Numoisyn
®
Liquid is used.
Numoisyn
®
Lozenges
Numoisyn
®
Lozenges dissolve slowly while moved around in the mouth. They contain sorbitol and
malic acid to stimulate normal salivation and provide temporary relief of dry mouth in patients who
have some residual secretory function and taste perception. Numoisyn
®
Lozenges support saliva's
natural protection of teeth so that teeth are not damaged with repeated and use of the lozenges.
They are sugar free and buffered with calcium to protect teeth. Numoisyn
®
Lozenges have been
demonstrated to be safe and effective for long-term use and are well tolerated by patients. Use of
Numoisyn
®
Lozenges improves subjective symptoms of dry mouth and does not cause bacteria or plaque
formation or loss of tooth enamel hardness.
Equity Financing Facility With Kingsbridge Capital
On December 10, 2007, we entered into a Committed Equity Financing Facility, or CEFF, with
Kingsbridge, as amended on November 24, 2009, pursuant to which Kingsbridge committed to purchase,
subject to certain conditions, up to $60 million of our common stock. As part of the CEFF, we
entered into a common stock purchase agreement, dated December 10, 2007, as amended on November 24,
2009, and a registration rights agreement, dated December 10, 2007, with Kingsbridge. On December
10, 2007 we also issued a warrant to Kingsbridge, which warrant was amended and restated on
November 24, 2009. Pursuant to the amended and restated warrant, Kingsbridge is entitled to
purchase up to 175,000 shares of our common stock at an exercise price of $1.40 per share, which
represented 175% of the closing bid price of our common stock on
November 23, 2009. The warrant is exercisable, subject to certain exceptions and conditions, until June 10, 2013.
The common stock purchase agreement entitles us to sell and obligates Kingsbridge to purchase,
from time to time over a period of three years from December 10, 2007, shares of our common stock
for cash consideration up to an aggregate of $60 million, subject to certain conditions and
restrictions. The shares of common stock that may be issued to Kingsbridge under the common stock
purchase agreement and the warrant will be issued pursuant to an exemption from registration under
the Securities Act of 1933, as amended, or the Securities Act. Pursuant to the registration rights
agreement, we have filed a registration statement of which this prospectus is a part, covering the
possible resale by Kingsbridge of any shares that we may issue to Kingsbridge under the common
stock purchase agreement or upon exercise of the warrant. Through this prospectus, the selling
securityholder may offer to the public for resale shares of our common stock that we may issue to
Kingsbridge pursuant to the common stock purchase agreement or that Kingsbridge may acquire upon
exercise of the warrant.
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For a period from the first trading day following the effective date of this prospectus to
December 10, 2010, we may, from time to time, at our discretion, and subject to certain conditions
that we must satisfy, draw down funds under the CEFF by selling shares of our common stock to
Kingsbridge. The purchase price of these shares will be at a price that is between 80% and 94% of
the volume weighted average price for each trading day during an eight-day pricing period. The
discount on each of these eight trading days will be determined as follows:
Percent
of
(Applicable
VWAP*
VWAP
Discount)
Greater than $11.00 per share
94%
(6)%
Less than or equal to $11.00 per share but greater than $6.50 per share
92%
(8)%
Less than or equal to $6.50 per share but greater than $2.00 per share
90%
(10)%
Less than or equal to $2.00 per share but greater than $1.00 per share
88%
(12)%
Less than or equal to $1.00 per share but greater than $0.90 per share
85%
(15)%
Less than or equal to $0.90 per share but greater than $0.65 per share
83%
(17)%
Less than or
equal to $0.65 per share but greater than or equal to $0.40 per share
80%
(20)%
*
As set forth in the common stock purchase agreement, "VWAP" means the
volume weighted average price (the aggregate sales price of all trades
of our common stock during each trading day divided by the total
number of shares of common stock traded during that trading day) of
our common stock during any trading day as reported by Bloomberg, L.P.
using the AQR function. The VWAP and corresponding discount will be
determined for each of the eight trading days during a draw down
pricing period.
During the eight trading day pricing period for a draw down, if the VWAP for any one trading
day is less than the greater of (i) $0.40, or (ii) 85% of the closing price of our common stock for
the trading day immediately preceding the beginning of the draw down period, the VWAP from that
trading day will not be used in calculating the number of shares to be issued in connection with
that draw down, and the draw down amount for that pricing period will be reduced by one-eighth of
the draw down amount we had initially specified. In addition, if trading in our common stock is
suspended for any reason for more than three consecutive or non-consecutive hours during any
trading day during a draw down pricing period, that trading day will not be used in calculating the
number of shares to be issued in connection with that draw down, and the draw down amount for that
pricing period will be reduced by one-eighth of the draw down amount we had initially specified.
The maximum number of shares of common stock that we can now issue pursuant to the CEFF is the
lesser of 1,266,358 shares and $55.9 million of our common stock. An additional 100,000 shares of
common stock are issuable if Kingsbridge exercises the amended and restated warrant that we issued
to Kingsbridge. We intend to exercise our right to draw down amounts under the CEFF, if and to the
extent available, at such times as we have a need for additional capital and when we believe that
sales of stock under the CEFF provide an appropriate means of raising capital. We may exercise our
right to draw down shortly after the effective date of the registration statement of which this
prospectus is a part.
Our ability to require Kingsbridge to purchase our common stock is subject to various
limitations.
We may access capital under the CEFF in maximum draw downs of (i) 3.0% of our market capitalization
at the time of the draw down with respect to one draw down per calendar quarter beginning on
February 1, 2010, and (ii) 2.0% of our market capitalization at the time of the draw down with
respect to all other draw downs.
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During the term of the CEFF, without Kingsbridge's prior written consent, we may not issue
securities that are, or may become, convertible or exchangeable into shares of common stock where
the purchase, conversion or exchange price for our common stock is determined using a floating
discount or other post-issuance adjustable discount to the market price of the common stock,
including pursuant to an equity line or other financing that is substantially similar to the
arrangement provided for in the CEFF, with certain exceptions.
The issuance of our common stock under the CEFF or upon exercise of the Kingsbridge warrant
will have no effect on the rights or privileges of existing holders of common stock except that the
economic and voting interests of each stockholder will be diluted as a result of any such issuance.
Although the number of shares of common stock that stockholders presently own will not decrease,
these shares will represent a smaller percentage of our total shares that will be outstanding after
any issuances of shares of common stock to Kingsbridge. If we draw down amounts under the CEFF when
our share price is decreasing, we will need to issue more shares to raise the same amount than if
our stock price was higher. Such issuances will have a dilutive effect and may further decrease our
stock price.
Kingsbridge agreed in the common stock purchase agreement that during the term of the CEFF, neither
Kingsbridge nor any of its affiliates, nor any entity managed or controlled by it, will enter into
any short sale of any shares of our common stock as defined in Regulation SHO promulgated under the
Securities Exchange Act of 1934, as amended.
Before Kingsbridge is obligated to buy any shares of our common stock pursuant to a draw down,
the following conditions, none of which is in Kingsbridge's control, must be met:
•
Each of our representations and warranties in the common stock purchase agreement shall be
true and correct in all material respects as of the date when made and as of the draw down exercise
date as though made at that time, except for representations and warranties that are expressly made
as of a particular date.
•
We shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the common stock purchase agreement, the registration rights
agreement and the warrant to be performed, satisfied or complied with by us.
•
We shall have complied in all material respects with all applicable federal, state and local
governmental laws, rules, regulations and ordinances in connection with the execution, delivery and
performance of the common stock purchase agreement and the consummation of the transactions it
contemplates.
•
The registration statement, which includes this prospectus, shall have previously become
effective and shall remain effective.
•
We shall not have knowledge of any event that could reasonably be expected to have the
effect of causing the registration statement applicable to Kingsbridge's resale of shares of our
common stock to be suspended or otherwise ineffective.
•
Trading in our common stock shall not have been suspended by the Securities and Exchange
Commission, or SEC, The NASDAQ Global Market or the Financial Industry Regulatory Authority and
trading in securities generally on The NASDAQ Global Market shall not have been suspended or
limited.
•
No statute, rule, regulation, executive order, decree, writ, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by any court or governmental authority which
prohibits the consummation of or would materially modify or delay any of the transactions contemplated by the
common stock purchase agreement.
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•
No action, suit or proceeding before any arbitrator or any governmental authority shall have
been commenced, and to our knowledge no investigation by any governmental authority shall have been
threatened, against us or any of our officers, directors or affiliates seeking to enjoin, prevent
or change the transactions contemplated by the common stock purchase agreement.
•
We shall have sufficient shares of common stock, calculated using the closing trade price of
the common stock as of the trading day immediately preceding a draw down, registered under the
registration statement to issue and sell such shares in accordance with such draw down.
•
The warrant to purchase up to 100,000 shares of our common stock shall have been duly
executed, delivered and issued to Kingsbridge, and we shall not be in default in any material
respect under the warrant.
•
Kingsbridge shall have received an opinion in the form previously agreed to.
There is no guarantee that we will be able to meet the foregoing conditions or any other
conditions under the common stock purchase agreement or that we will be able to draw down any
portion of the amounts available under the CEFF.
We also entered into a registration rights agreement with Kingsbridge. Pursuant to the
registration rights agreement, we have filed a registration statement, which includes this
prospectus, with the SEC relating to Kingsbridge's resale of any shares of common stock purchased
by Kingsbridge under the common stock purchase agreement or issued to Kingsbridge as a result of
the exercise of the Kingsbridge warrant. The effectiveness of this registration statement is a
condition precedent to our ability to sell common stock to Kingsbridge under the common stock
purchase agreement. In the event that we fail to maintain the effectiveness of the registration
statement of which this prospectus is a part (other than during a blackout period as discussed
below), and such failure was within our reasonable control, we must pay to Kingsbridge certain
amounts based on the change in market price of our common stock during the period of
ineffectiveness of the registration statement or offer to repurchase our shares from Kingsbridge at
a price based on the market price of our common stock on the trading day prior to the first day of
ineffectiveness of the registration statement. We are entitled in certain circumstances, including
the existence of certain kinds of nonpublic information, to deliver a blackout notice to
Kingsbridge to suspend the use of this prospectus and prohibit Kingsbridge from selling shares
under this prospectus. If we deliver a blackout notice in the 15 trading days following the
settlement of a draw down, then we must pay amounts to Kingsbridge, or issue Kingsbridge additional
shares in lieu of payment, calculated by means of a varying percentage of an amount based on the
number of shares held by Kingsbridge that were purchased pursuant to the draw down and the change
in the market price of our common stock between the date the blackout notice is delivered and the
date the prospectus again becomes available.
The foregoing summary of the CEFF does not purport to be complete and is qualified by
reference to the common stock purchase agreement, the registration rights agreement and the
warrant, copies of which have been filed as exhibits to the registration statement of which this
prospectus is a part.
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Legal Proceedings
On April 27, 2010, we were served with a complaint filed by Celgene Corporation in the United
States District Court for the District of Delaware seeking a Declaratory Judgment that four of our
owned patents, claiming the use of romidepsin injection in T-cell lymphomas, are not infringed by
Celgene's products and are invalid. The four patents cited in the complaint do not involve our
clinical development candidates nor our commercial products. We are presently required to answer or
otherwise move in response to the complaint by June 17, 2010. We intend to vigorously defend the
validity of these patents and enforce our patent rights.
Corporate Information
Our corporate headquarters are located at 200 Connell Drive, Suite 1500, Berkeley Heights, New
Jersey, 07922, and our telephone number is (908) 517-7330. This is also where our marketing,
medical and regulatory functions are located. Our research facility is located in Dundee, Scotland,
which is also the center of our translational work and development programs.
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THE OFFERING
Common stock offered by selling
securityholder
Up to 1,366,358 shares, of which
(i) 1,266,358 represent unissued
shares of our common stock to be
offered for resale by the selling
securityholder, and (ii) 100,000
represent unissued shares of our
common stock to be offered for
resale by selling stockholders
following issuance upon exercise
of the amended and restated
warrant.
Offering price
Determined at the time of sale by
the selling securityholder.
Common stock outstanding
as of June 9, 2010
36,873,986 shares.
Use of proceeds
We will not receive any of the
proceeds from the sale of the
shares offered by the selling
securityholder. We may receive
proceeds from the sales of our
common stock by us to Kingsbridge
under the common stock purchase
agreement or in connection with
the exercise of the amended and
restated warrant, if and when
exercised by Kingsbridge. Such
proceeds will be used by us for
general corporate purposes,
including capital expenditures,
the advancement of our drug
candidates in clinical trials, and
to meet working capital needs. The
amounts and timing of the
expenditures will depend on
numerous factors, such as the
timing and progress of our
clinical trials and research and
development efforts, technological
advances and the competitive
environment for our drug
candidates. We expect from time to
time to evaluate the acquisition
of businesses, products and
technologies for which a portion
of the net proceeds may be used,
although we currently are not
planning or negotiating any such
transactions. As of the date of
this prospectus, we cannot specify
with certainty all of the
particular uses for the net
proceeds to us from the sale of
shares to Kingsbridge or the
exercise of warrants by the
Kingsbridge. Accordingly, we will
retain broad discretion over the
use of these proceeds, if any.
Risk factors
The shares of common stock offered
hereby involve a high degree of
risk. See "Risk Factors" beginning
on page 14.
Dividend policy
We currently intend to retain any
future earnings to fund the
development and growth of our
business. Therefore, we do not
currently anticipate paying cash
dividends on our common stock.
Trading Symbol
Our shares of common stock currently trade
on the NASDAQ Global Market under
the symbol "CYCC."
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RISK FACTORS
Any investment in our common stock involves a high degree of risk. Investors should carefully
consider the risks described below, together with all of the other information included in this
prospectus, before deciding whether to purchase shares of our common stock. Each of the following
risk factors, either alone or taken together, could adversely affect our business, operating
results and financial condition, as well as adversely affect the value of an investment in our
company. This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our operating results could differ materially from those anticipated in these
forward-looking statements as a result of certain risk factors, including the risks we face as
described below and elsewhere in this prospectus.
We believe regulatory agencies will not accept registration pathways based on Phase 2 data and,
therefore, we will need to conduct randomized Phase 3 studies, which are time-consuming and
expensive.
Regulatory agencies, including, but not limited to, the FDA, have in certain instances
accepted Phase 2 data from uncontrolled studies as sufficient for approval in indications where an
unmet medical need exists or in exceptional circumstances.  However,
in September 2009, the Oncologic Drugs
Advisory Committee (ODAC), which is the cancer drug advisory panel of the FDA, voted in favor of
completion of a randomized trial prior to regulatory approval with respect to drugs submitted for
approval as treatments for patients with AML and likely in respect of drugs submitted for approval
as treatments for patients with other forms of cancer. Therefore, we believe that to gain
regulatory approval from the FDA, we will need to conduct a randomized Phase 3 trial. Randomized
Phase 3 studies are time-consuming and expensive, and because we have limited resources any such
requirements may adversely impact our operating results and financial condition and delay or block
our ability to commercialize our lead drug candidates.
Even if we believe that the data collected from clinical trials of our drug candidates are
promising with respect to safety and efficacy, such data may not be deemed sufficient by regulatory
authorities to warrant product approval. Clinical data can be interpreted in different ways.
Regulatory officials could interpret such data in different ways than we do which could delay,
limit or prevent regulatory approval. The FDA, other regulatory authorities or we may suspend or
terminate clinical trials at any time. Any failure or significant delay in completing clinical
trials for our lead drug candidates, or in receiving regulatory approval for the commercialization
of our lead drug candidates, may adversely affect our business.
The current economic conditions and financial market turmoil could adversely affect our business
and results of operations.
Economic conditions remain difficult with the continuing uncertainty in the global credit
markets, the financial services industry and the United States capital markets and with the United
States economy as a whole experiencing a period of substantial turmoil and uncertainty
characterized by unprecedented intervention by the United States federal government and the
failure, bankruptcy, or sale of various financial and other institutions. We believe the current
economic conditions and financial market turmoil could adversely affect our operations, business
and prospects, as well as our ability to obtain funds and manage our liquidity. If these
circumstances persist or continue to worsen, our future operating results could be adversely
affected, particularly relative to our current expectations.
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We are at an early stage of development as a company and we do not have, and may never have, any
products that generate significant revenues.
We are at an early stage of development as a company and have a limited operating history on
which to evaluate our business and prospects. While we have earned modest product revenues from the
ALIGN business acquired in October 2007, since beginning operations in 1996, we have not generated
any product revenues from our product candidates currently in development. We cannot guarantee that
any of our product candidates currently in development will ever become marketable products and we
do not anticipate material revenues from the ALIGN products in the foreseeable future. We must
demonstrate that our drug candidates satisfy rigorous standards of safety and efficacy for their
intended uses before the FDA, and other regulatory authorities in the United States, the European
Union and elsewhere. Significant additional research, preclinical testing and clinical testing is
required before we can file applications with the FDA or other regulatory authorities for premarket
approval of our drug candidates. In addition, to compete effectively, our drugs must be easy to
administer, cost-effective and economical to manufacture on a commercial scale. We may not achieve
any of these objectives. Sapacitabine and seliciclib, our most advanced drug candidates for the
treatment of cancer, are currently our only drug candidates in Phase 2 clinical trials. A
combination trial of sapacitabine and seliciclib and CYC116 are currently in a Phase 1 clinical
trial. We cannot be certain that the clinical development of these or any other drug candidates in
preclinical testing or clinical development will be successful, that we will receive the regulatory
approvals required to commercialize them or that any of our other research and drug discovery
programs will yield a drug candidate suitable for investigation through clinical trials. Our
commercial revenues from our product candidates currently in development, if any, will be derived
from sales of drugs that will not become marketable for several years, if at all.
We have a history of operating losses and we may never become profitable. Our stock is a highly
speculative investment.
We have incurred operating losses in each year since beginning operations in 1996 due to costs
incurred in connection with our research and development activities and selling, general and
administrative costs associated with our operations, and we may never achieve profitability. As of
March 31, 2010, our accumulated deficit was $227.8 million. Our net loss for each of the three months ended
March 31, 2009 and 2010  was $5.1 million. Our net loss
applicable to common stockholders from inception through March 31, 2010 was $268.8 million.
Our drug candidates are in the mid-stages of clinical testing and we must conduct significant
additional clinical trials before we can seek the regulatory approvals necessary to begin
commercial sales of our drugs. We expect to incur continued losses for several years, as we
continue our research and development of our drug candidates, seek regulatory approvals,
commercialize any approved drugs and market and promote the ALIGN products: Xclair
®
Cream, Numoisyn
®
Liquid and Numoisyn
®
Lozenges. If our drug candidates are
unsuccessful in clinical trials or we are unable to obtain regulatory approvals, or if our drugs
are unsuccessful in the market, we will not be profitable. If we fail to become and remain
profitable, or if we are unable to fund our continuing losses, particularly in light of the current
economic conditions, you could lose all or part of your investment.
Capital markets are currently experiencing a period of disruption and instability, which has had
and could continue to have a negative impact on the availability and cost of capital.
The general disruption in the United States capital markets has impacted the broader worldwide
financial and credit markets and reduced the availability of debt and equity capital for the market
as a whole. These global conditions could persist for a prolonged period of time or worsen in the
future. Our ability to access the capital markets may be restricted at a time when we would like,
or need, to access those markets, which could have an impact on our flexibility to react to
changing economic and business
conditions. The resulting lack of available credit, lack of confidence in the financial
sector, increased volatility in the financial markets could materially and adversely affect the
cost of debt financing and the proceeds of equity financing may be materially adversely impacted by
these market conditions.
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If we fail to comply with the continued listing requirements of the NASDAQ Global Market our common
stock price may be delisted and the price of our common stock and our ability to access the capital
markets could be negatively impacted.
Our common stock is currently listed for trading on the NASDAQ Global Market. We must satisfy
NASDAQ's continued listing requirements, including among other things, a minimum stockholders'
equity of $10.0 million and a minimum bid price for our common stock of $1.00 per share, or risk
delisting, which would have a material adverse affect on our business. A delisting of our common
stock from the NASDAQ Global Market could materially reduce the liquidity of our common stock and
result in a corresponding material reduction in the price of our common stock. In addition,
delisting could harm our ability to raise capital through alternative financing sources on terms
acceptable to us, or at all, and may result in the potential loss of confidence by investors,
suppliers, customers and employees and fewer business development opportunities. During 2009,
Cyclacel received notification from the NASDAQ Stock Market that the Company was not in compliance
with the minimum $10 million stockholders' equity requirement for continued listing set forth in
NASDAQ Marketplace Rule 5450(b)(1)(A). On January 27, 2010, NASDAQ notified the Company that it
regained compliance with the minimum $50 million market value of listed securities requirement and
that it currently complies with all other applicable standards for continued listing on The NASDAQ
Global Market. Accordingly, the Company's shares of common and preferred stock will continue to
trade on The NASDAQ Global Market.
Raising additional capital in the future may not be available to us on reasonable terms, if at all,
when or as we require additional funding. If we issue additional shares of our common stock or
other securities that may be convertible into, or exercisable or exchangeable for, our common
stock, our existing stockholders would experience further dilution. If we fail to obtain additional
funding, we may be unable to complete the development and commercialization of our lead drug
candidate, sapacitabine, or continue to fund our research and development programs.
We have funded all of our operations and capital expenditures with proceeds from the issuance
of public equity securities, private placements of our securities, interest on investments,
licensing revenue, government grants, research and development tax credits and product revenue. In
order to conduct the lengthy and expensive research, preclinical testing and clinical trials
necessary to complete the development and marketing of our drug candidates, we will require
substantial additional funds. Based on our current operating plans of focusing on the advancement
of sapacitabine, we expect our existing resources to be sufficient to fund our planned operations
for at least the next twelve months. To meet our long-term financing requirements, we may raise
funds through public or private equity offerings, debt financings or strategic alliances. Raising
additional funds by issuing equity or convertible debt securities may cause our stockholders to
experience substantial dilution in their ownership interests and new investors may have rights
superior to the rights of our other stockholders. Raising additional funds through debt financing,
if available, may involve covenants that restrict our business activities and options. To the
extent that we raise additional funds through collaborations and licensing arrangements, we may
have to relinquish valuable rights to our drug discovery and other technologies, research programs
or drug candidates, or grant licenses on terms that may not be favorable to us. Additional funding
may not be available to us on favorable terms, or at all, particularly in light of the current
economic conditions. If we are unable to obtain additional funds, we may be forced to delay or
terminate our current clinical trials and the development and marketing of our drug candidates
including sapacitabine.
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Our committed equity financing facility with Kingsbridge may not be available to us if we elect to
make a draw down or may require us to make additional "blackout" or other payments to Kingsbridge,
which may result in dilution to our stockholders.
On December 10, 2007 and as amended on November 24, 2009, we entered into the committed equity
financing facility, or CEFF, with Kingsbridge Capital Limited, or Kingsbridge. The CEFF entitles us
to sell and obligates Kingsbridge to purchase from us the lesser of 4,084,590 shares of our common
stock or $60 million of our common stock, during the three years term of the CEFF, subject to
certain conditions and restrictions. Kingsbridge will not be obligated to purchase shares under the
CEFF unless certain conditions are met, which include, among other things, a minimum price for our
common stock of $0.40 per share, effectiveness of the registration statement covering the shares
subject to the CEFF and the continued listing of our stock on The NASDAQ Global Market. However,
because we have not declared dividends on our preferred stock for several quarters during fiscal
year 2009 and the first quarter of 2010, we are not able to use our Registration Statement on Form
S-3, which covers the shares subject to the CEFF and therefore, we cannot access the CEFF until
such time as an effective registration statement covering such shares be in place. This may limit
our ability to access capital markets on short notice or make the cost of capital more expensive.
As
of June 9, 2010, following the sale of an aggregate of 2,818,232 shares of our common stock
during the period from December 2009 through March 2010, the CEFF entitles us to sell and obligates
Kingsbridge to purchase from us the lesser of 1,266,358 or $55.9 million of our shares of common
stock during the remaining term of the CEFF which ends on December 10, 2010.
Kingsbridge is permitted to terminate the CEFF if it determines that a material and adverse
event has occurred affecting our business, operations, properties or financial condition and if
such condition continues for a period of 10 days from the date Kingsbridge provides us notice of
such material and adverse event. In such a case, we would be unable to access any capital through
the CEFF.
We are entitled, in certain circumstances, to deliver a blackout notice to Kingsbridge to
suspend the use of the registration statement which became effective in December 2007, and prohibit
Kingsbridge from selling shares. If we deliver a blackout notice in the 15 trading days following
the settlement of a draw down, or if the registration statement is not effective in circumstances
not permitted by the CEFF, then we must make a payment to Kingsbridge, or issue Kingsbridge
additional shares in lieu of this payment, calculated on the basis of the number of shares held by
Kingsbridge exclusive of shares that Kingsbridge may hold pursuant to exercise of the Kingsbridge
warrant and the change in the market price of our common stock during the period in which the use
of the registration statement is suspended. If the trading price of our common stock declines
during a suspension of the registration statement, the blackout or other payment to be made by us
could be significant.
Should we sell shares to Kingsbridge under the CEFF, or issue shares in lieu of a blackout
payment, it will have a dilutive effective on the holdings of our current stockholders, and may
result in downward pressure on the price of our common stock. If we draw down under the CEFF, we
will issue shares to Kingsbridge at a discount of up to 20% from the volume weighted average price
of our common stock. If we draw down amounts under the CEFF when our share price is decreasing, we
will need to issue more shares to raise the same amount than if our stock price was higher.
Issuances in the face of a declining share price will have an even greater dilutive effect than if
our share price were stable or increasing, and may further decrease our share price.
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To the extent we elect to fund the development of a drug candidate or the commercialization of a
drug at our expense, we will need substantial additional funding.
We plan to market drugs on our own, with or without a partner, that can be effectively
commercialized and sold in concentrated markets that do not require a large sales force to be
competitive. To achieve this goal, we will need to establish our own specialized sales force,
marketing organization and supporting distribution capabilities. The development and
commercialization of our drug candidates is very expensive, including our anticipated Phase 3
clinical trials for sapacitabine. To the extent we elect to fund the full development of a drug
candidate or the commercialization of a drug at our expense, we will need to raise substantial
additional funding to:
•
fund research and development and clinical trials connected with our research;
•
fund clinical trials and seek regulatory approvals;
•
build or access manufacturing and commercialization capabilities;
•
implement additional internal control systems and infrastructure;
•
commercialize and secure coverage, payment and reimbursement of our drug candidates,
if any such candidates receive regulatory approval;
•
maintain, defend and expand the scope of our intellectual property; and
•
hire additional management, sales and scientific personnel.
Our future funding requirements will depend on many factors, including:
•
the scope, rate of progress and cost of our clinical trials and other research and
development activities;
•
the costs and timing of seeking and obtaining regulatory approvals;
•
the costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
•
the costs associated with establishing sales and marketing capabilities;
•
the effect of competing technological and market developments; and
•
the payment, other terms and timing of any strategic alliance, licensing or other
arrangements that we may establish.
If we are not able to secure additional funding when needed, especially in light of the
current economic conditions and financial market turmoil, we may have to delay, reduce the scope of
or eliminate one or more of our clinical trials or research and development programs or future
commercialization efforts.
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If we do not realize the expected benefits from the restructuring plans we announced in September
2008 and June 2009, our operating results and financial conditions could be negatively impacted.
In September 2008 and June 2009, we announced a strategic restructuring designed to focus our
resources on our lead drug, sapacitabine, while maintaining the Company's core competency in drug
discovery and cell cycle biology. We cannot guarantee that we will not have to undertake additional
restructuring activities, that any of our restructuring efforts will be successful, or that we will
be able to realize the cost savings and other anticipated benefits from our restructuring. If we
are unable to realize the expected operational efficiencies from our restructuring activities, our
operating results and financial condition could be adversely affected.
Any future workforce and expense reductions may have an adverse impact on our internal programs,
strategic plans, and our ability to hire and retain key personnel, and may also be distracting to
our management.
Further workforce and expense reductions in addition to those carried out in September 2008
and June 2009 could result in significant delays in implementing our strategic plans. In addition,
employees, whether or not directly affected by such reduction, may seek future employment with our
business partners or competitors. Although our employees are required to sign a confidentiality
agreement at the time of hire, the confidential nature of certain proprietary information may not
be maintained in the course of any such future employment. In addition, any additional workforce
reductions or restructurings would be expected to involve significant expense as a result of
contractual terms in certain of our existing agreements, including potential severance obligations
as well as any payments that may, under certain circumstances, be required under our agreement with
the Scottish Enterprise. Further, we believe that our future success will depend in large part upon
our ability to attract and retain highly skilled personnel. We may have difficulty retaining and
attracting such personnel as a result of a perceived risk of future workforce and expense
reductions. Finally, the implementation of expense reduction programs may result in the diversion
of the time and attention of our executive management team and other key employees, which could
adversely affect our business.
Budget constraints resulting from our restructuring plan may negatively impact our research and
development, forcing us to delay our efforts to develop certain product candidates in favor of
developing others, which may prevent us from commercializing our product candidates as quickly as
possible.
Research and development is an expensive process. As part of our restructuring plan, we have
decided to focus our clinical development priorities on sapacitabine, while still possibly
continuing to progress additional programs pending the availability of clinical data and the
availability of funds, at which time we will determine the feasibility of pursuing, if at all,
further advanced development of seliciclib, CYC116 or additional programs. Because we have had to
prioritize our development candidates as a result of budget constraints, we may not be able to
fully realize the value of our product candidates in a timely manner, if at all.
If we fail to enter into and maintain successful strategic alliances for our drug candidates, we
may have to reduce or delay our drug candidate development or increase our expenditures.
An important element of our strategy for developing, manufacturing and commercializing our
drug candidates is entering into strategic alliances with pharmaceutical companies or other
industry participants to advance our programs and enable us to maintain our financial and
operational capacity.
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We face significant competition in seeking appropriate alliances. We may not be able to
negotiate alliances on acceptable terms, if at all. In addition, these alliances may be
unsuccessful. If we fail to create and maintain suitable alliances, we may have to limit the size
or scope of, or delay, one or more of our drug development or research programs. If we elect to
fund drug development or research programs on our own, we will have to increase our expenditures
and will need to obtain additional funding, which may be unavailable or available only on
unfavorable terms.
We are exposed to risks related to foreign currency exchange rates.
Some of our costs and expenses are denominated in foreign currencies. Most of our foreign
expenses are associated with our research and development operations of our United Kingdom-based
wholly-owned subsidiary. When the United States dollar weakens against the British pound, the
United States dollar value of the foreign currency denominated expense increases, and when the
United States dollar strengthens against the British pound, the United States dollar value of the
foreign currency denominated expense decreases. Consequently, changes in exchange rates, and in
particular a weakening of the United States dollar, may adversely affect our results of operations.
We are exposed to risk related to the marketable securities we may purchase.
We may invest cash not required to meet short term obligations in short term marketable
securities. We may purchase securities in United States government, government-sponsored agencies
and highly rated corporate and asset-backed securities subject to an approved investment policy.
Historically, investment in these securities has been highly liquid and has experienced only very
limited defaults. However, recent volatility in the financial markets has created additional
uncertainty regarding the liquidity and safety of these investments. Although we believe our
marketable securities investments are safe and highly liquid, we cannot guarantee that our
investment portfolio will not be negatively impacted by recent or future market volatility or
credit restrictions.
Clinical trials are expensive, time consuming, subject to delay and may be required to continue
beyond our available funding.
Clinical trials are expensive, complex can take many years to conduct and may have uncertain
outcomes. We estimate that clinical trials of our most advanced drug candidates may be required to
continue beyond our available funding and may take several years more to complete. The designs used
in some of our trials have not been used widely by other pharmaceutical companies. Failure can
occur at any stage of the testing and we may experience numerous unforeseen events during, or as a
result of, the clinical trial process that could delay or prevent commercialization of our current
or future drug candidates, including but not limited to:
•
delays in securing clinical investigators or trial sites for our clinical trials;
•
delays in obtaining institutional review board, or IRB, and other regulatory
approvals to commence a clinical trial; slower than anticipated rates of patient recruitment and enrollment, or reaching the
targeted number of patients because of competition for patients from other trials or
other reasons;
•
negative or inconclusive results from clinical trials;
•
unforeseen safety issues;
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•
uncertain dosing issues may or may not be related to suboptimal pharmacokinetic and
pharmacodynamic behaviors;
•
approval and introduction of new therapies or changes in standards of practice or
regulatory guidance that render our clinical trial endpoints or the targeting of our
proposed indications obsolete;
•
inability to monitor patients adequately during or after treatment or problems with
investigator or patient compliance with the trial protocols;
•
inability to replicate in large controlled studies safety and efficacy data obtained
from a limited number of patients in uncontrolled trials;
•
inability or unwillingness of medical investigators to follow our clinical
protocols; and
•
unavailability of clinical trial supplies.
If we suffer any significant delays, setbacks or negative results in, or termination of, our
clinical trials, we may be unable to continue development of our drug candidates or generate
revenue and our development costs could increase significantly.
Adverse events have been observed in our clinical trials and may force us to stop development of
our product candidates or prevent regulatory approval of our product candidates.
Adverse or inconclusive results from our clinical trials may substantially delay, or halt
entirely, any further development of our drug candidates. Many companies have failed to demonstrate
the safety or effectiveness of drug candidates in later stage clinical trials notwithstanding
favorable results in early stage clinical trials. Previously unforeseen and unacceptable side
effects could interrupt, delay or halt clinical trials of our drug candidates and could result in
the FDA or other regulatory authorities denying approval of our drug candidates. We will need to
demonstrate safety and efficacy for specific indications of use, and monitor safety and compliance
with clinical trial protocols throughout the development process. To date, long-term safety and
efficacy has not been demonstrated in clinical trials for any of our drug candidates. Toxicity and
"serious adverse events" as defined in trial protocols have been noted in preclinical and clinical
trials involving certain of our drug candidates. For example, neutropenia and gastro-intestinal
toxicity were observed in patients receiving sapacitabine and elevations of liver enzymes and
decrease in potassium levels have been observed in patients receiving seliciclib.
In addition, we may pursue clinical trials for sapacitabine and seliciclib in more than one
indication. There is a risk that severe toxicity observed in a trial for one indication could
result in the delay or suspension of all trials involving the same drug candidate. Even if we
believe the data collected from clinical trials of our drug candidates are promising with respect
to safety and efficacy, such data may not be deemed sufficient by regulatory authorities to warrant
product approval. Clinical data can be interpreted in different ways. Regulatory officials could
interpret such data in different ways than we do which could delay, limit or prevent regulatory
approval. The FDA, other regulatory authorities or we may suspend or terminate clinical trials at
any time. Any failure or significant delay in completing clinical trials for our drug candidates,
or in receiving regulatory approval for the commercialization of our drug candidates, may severely
harm our business and reputation.
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If our understanding of the role played by CDKs or AKs in regulating the cell cycle is incorrect,
this may hinder pursuit of our clinical and regulatory strategy.
Our development of small molecule inhibitors of CDK and AK is based on our understanding of
the mechanisms of action of CDK and AK inhibitors and their interaction with other cellular
mechanisms. One of our drug candidates, seliciclib, is a CDK inhibitor, and CYC116 is an AK and
VEGFR2 inhibitor. Although a number of pharmaceutical and biotechnology companies are attempting to
develop CDK or AK inhibitor drugs for the treatment of cancer, no CDK or AK inhibitor has yet
reached the market. If our understanding of the role played by CDK or AK inhibitors in regulating
the cell cycle is incorrect, seliciclib and/or CYC116 may fail to produce therapeutically relevant
results hindering our ability to pursue our clinical and regulatory strategy.
We are making use of biomarkers, which are not scientifically validated, and our reliance on
biomarker data may thus lead us to direct our resources inefficiently.
We are making use of biomarkers in an effort to facilitate our drug development and to
optimize our clinical trials. Biomarkers are proteins or other substances whose presence in the
blood can serve as an indicator of specific cell processes. We believe that these biological
markers serve a useful purpose in helping us to evaluate whether our drug candidates are having
their intended effects through their assumed mechanisms, and thus enable us to identify more
promising drug candidates at an early stage and to direct our resources efficiently. We also
believe that biomarkers may eventually allow us to improve patient selection in connection with
clinical trials and monitor patient compliance with trial protocols.
For most purposes, however, biomarkers have not been scientifically validated. If our
understanding and use of biomarkers is inaccurate or flawed, or if our reliance on them is
otherwise misplaced, then we will not only fail to realize any benefits from using biomarkers, but
may also be led to invest time and financial resources inefficiently in attempting to develop
inappropriate drug candidates. Moreover, although the FDA has issued for comment a draft guidance
document on the potential use of biomarker data in clinical development, such data are not
currently accepted by the FDA or other regulatory agencies in the United States, the European Union
or elsewhere in applications for regulatory approval of drug candidates and there is no guarantee
that such data will ever be accepted by the relevant authorities in this connection. Our biomarker
data should not be interpreted as evidence of efficacy.
Due to our reliance on contract research organizations or other third parties to conduct clinical
trials, we may be unable to directly control the timing, conduct and expense of our clinical
trials.
We do not have the ability to independently conduct clinical trials required to obtain
regulatory approvals for our drug candidates. We must rely on third parties, such as contract
research organizations, data management companies, contract clinical research associates, medical
institutions, clinical investigators and contract laboratories to conduct our clinical trials. In
addition, we rely on third parties to assist with our preclinical development of drug candidates.
If these third parties do not successfully carry out their contractual duties or regulatory
obligations or meet expected deadlines, if the third parties need to be replaced or if the quality
or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our preclinical development activities
or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to
obtain regulatory approval for or successfully commercialize our drug candidates.
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To the extent we are able to enter into collaborative arrangements or strategic alliances, we will
be exposed to risks related to those collaborations and alliances.
Although we are not currently party to any collaboration arrangement or strategic alliance
that is material to our business, in the future we expect to be dependent upon collaborative
arrangements or strategic alliances to complete the development and commercialization of some of
our drug candidates particularly after the Phase 2 stage of clinical testing. These arrangements
may place the development of our drug candidates outside our control, may require us to relinquish
important rights or may otherwise be on terms unfavorable to us.
We may be unable to locate and enter into favorable agreements with third parties, which could
delay or impair our ability to develop and commercialize our drug candidates and could increase our
costs of development and commercialization. Dependence on collaborative arrangements or strategic
alliances will subject us to a number of risks, including the risk that:
•
we may not be able to control the amount and timing of resources that our
collaborators may devote to the drug candidates;
•
our collaborators may experience financial difficulties;
•
we may be required to relinquish important rights such as marketing and distribution
rights; business combinations or significant changes in a collaborator's business
strategy may also adversely affect a collaborator's willingness or ability to complete
our obligations under any arrangement;
•
a collaborator could independently move forward with a competing drug candidate
developed either independently or in collaboration with others, including our
competitors; and
•
collaborative arrangements are often terminated or allowed to expire, which would
delay the development and may increase the cost of developing our drug candidates.
We have no manufacturing capacity and will rely on third party manufacturers for the late stage
development and commercialization of any drugs or devices we may develop or sell.
We do not currently operate manufacturing facilities for clinical or commercial production of
our drug candidates under development or our currently marketed ALIGN products. We currently lack
the resources or the capacity to manufacture any of our products on a clinical or commercial scale.
We depend upon a third party, Sinclair, to manufacture the commercial products sold by our ALIGN
subsidiary and we can not rely upon Sinclair to continue to supply the products. We anticipate
future reliance on a limited number of third party manufacturers until we are able, or decide to,
expand our operations to include manufacturing capacities. Any performance failure on the part of
manufacturers could delay late stage clinical development or regulatory approval of our drug, the
commercialization of our drugs or our ability to sell our commercial products, producing additional
losses and depriving us of potential product revenues.
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If the FDA or other regulatory agencies approve any of our drug candidates for commercial
sale, or if we significantly expand our clinical trials, we will need to manufacture them in larger
quantities and will be required to secure alternative third-party suppliers to our current
suppliers. To date, our drug candidates have been manufactured in small quantities for preclinical
testing and clinical trials and we may not be able to successfully increase the manufacturing
capacity, whether in collaboration with our current or future third-party manufacturers or on our
own, for any of our drug candidates in a timely or
economic manner, or at all. Significant scale-up of manufacturing may require additional
validation studies, which the FDA and other regulatory bodies must review and approve. If we are
unable to successfully increase the manufacturing capacity for a drug candidate whether for late
stage clinical trials or for commercial sale or are unable to secure alternative third-party
suppliers to our current suppliers, the drug development, regulatory approval or commercial launch
of any related drugs may be delayed or blocked or there may be a shortage in supply. Even if any
third party manufacturer makes improvements in the manufacturing process for our drug candidates,
we may not own, or may have to share, the intellectual property rights to such innovation.
As we evolve from a company primarily involved in discovery and development to one also involved in
the commercialization of drugs and devices, we may encounter difficulties in managing our growth
and expanding our operations successfully.
In order to execute our business strategy, we will need to expand our development, control and
regulatory capabilities and develop financial, manufacturing, marketing and sales capabilities or
contract with third parties to provide these capabilities for us. If our operations expand, we
expect that we will need to manage additional relationships with various collaborative partners,
suppliers and other third parties. Our ability to manage our operations and any growth will require
us to make appropriate changes and upgrades, as necessary, to our operational, financial and
management controls, reporting systems and procedures wherever we may operate. Any inability to
manage growth could delay the execution of our business plan or disrupt our operations.
The failure to attract and retain skilled personnel and key relationships could impair our drug
development and commercialization efforts.
We are highly dependent on our senior management and key scientific, technical and sales and
marketing personnel. Competition for these types of personnel is intense. The loss of the services
of any member of our senior management, scientific, technical or sales or marketing staff may
significantly delay or prevent the achievement of drug development and other business objectives
and could have a material adverse effect on our business, operating results and financial
condition. We also rely on consultants and advisors to assist us in formulating our strategy. All
of our consultants and advisors are either self-employed or employed by other organizations, and
they may have conflicts of interest or other commitments, such as consulting or advisory contracts
with other organizations, that may affect their ability to contribute to us. The success of the
commercialization of the ALIGN products depends, in large part, on our continued ability to develop
and maintain important relationships with distributors and research and medical institutions.
Failure to do that could have a material adverse effect on our ability to commercialize the ALIGN
products.
We intend to expand and develop new drug candidates. We will need to hire additional employees
in order to continue our clinical trials and market our drug candidates and medical devices. This
strategy will require us to recruit additional executive management and scientific and technical
personnel. There is currently intense competition for skilled executives and employees with
relevant scientific and technical expertise, and this competition is likely to continue. The
inability to attract and retain sufficient scientific, technical and managerial personnel could
limit or delay our product development efforts, which would adversely affect the development of our
drug candidates and commercialization of our potential drugs and growth of our business.
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Our drug candidates are subject to extensive regulation, which can be costly and time-consuming,
and we may not obtain approvals for the commercialization of any of our drug candidates.
The clinical development, manufacturing, selling and marketing of our drug candidates are
subject to extensive regulation by the FDA and other regulatory authorities in the United States,
the European Union and elsewhere. These regulations also vary in important, meaningful ways from
country to country. We are not permitted to market a potential drug in the United States until we
receive approval of an NDA from the FDA. We have not received an NDA approval from the FDA for any
of our drug candidates.
Obtaining an NDA approval is expensive and is a complex, lengthy and uncertain process. The
FDA approval process for a new drug involves completion of preclinical studies and the submission
of the results of these studies to the FDA, together with proposed clinical protocols,
manufacturing information, analytical data and other information in an Investigational New Drug, or
IND, which must become effective before human clinical trials may begin. Clinical development
typically involves three phases of study: Phase 1, 2 and 3. The most significant costs associated
with clinical development are the pivotal or suitable for registration late Phase 2 or Phase 3
clinical trials as they tend to be the longest and largest studies conducted during the drug
development process. After completion of clinical trials, an NDA may be submitted to the FDA. In
responding to an NDA, the FDA may refuse to file the application, or if accepted for filing, the
FDA may grant marketing approval, request additional information or deny the application if it
determines that the application does not provide an adequate basis for approval. In addition,
failure to comply with the FDA and other applicable foreign and U.S. regulatory requirements may
subject us to administrative or judicially imposed sanctions. These include warning letters, civil
and criminal penalties, injunctions, product seizure or detention, product recalls, total or
partial suspension of production and refusal to approve either pending NDAs, or supplements to
approved NDAs.
Despite the substantial time and expense invested in preparation and submission of an NDA or
equivalents in other jurisdictions, regulatory approval is never guaranteed. The FDA and other
regulatory authorities in the United States, the European Union and elsewhere exercise substantial
discretion in the drug approval process. The number, size and design of preclinical studies and
clinical trials that will be required for FDA or other regulatory approval will vary depending on
the drug candidate, the disease or condition for which the drug candidate is intended to be used
and the regulations and guidance documents applicable to any particular drug candidate. The FDA or
other regulators can delay, limit or deny approval of a drug candidate for many reasons, including,
but not limited to:
•
those discussed in the risk factor which immediately follows;
•
the fact that the FDA or other regulatory officials may not approve our or our third
party manufacturer's processes or facilities; or
•
the fact that new regulations may be enacted by the FDA or other regulators may
change their approval policies or adoption of new regulations requiring new or
different evidence of safety and efficacy for the intended use of a drug candidate.
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With regard to the ALIGN products, and following regulatory approval of any of our drug candidates,
we are subject to ongoing regulatory obligations and restrictions, which may result in significant
expense and limit our ability to commercialize our potential products.
With regard to our ALIGN products and our drug candidates, if any, approved by the FDA or by
another regulatory authority, we are held to extensive regulatory requirements over product
manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion
and record keeping. Regulatory approvals may also be subject to significant limitations on the
indicated uses or marketing of the drug candidates. Potentially costly follow-up or post-marketing
clinical studies may be required as a condition of approval to further substantiate safety or
efficacy, or to investigate specific issues of interest to the regulatory authority. Previously
unknown problems with the product or drug candidate, including adverse events of unanticipated
severity or frequency, may result in restrictions on the marketing of the drug or device, and could
include withdrawal of the drug or device from the market.
In addition, the law or regulatory policies governing pharmaceuticals may change. New
statutory requirements may be enacted or additional regulations may be enacted that could prevent
or delay regulatory approval of our drug candidates. We cannot predict the likelihood, nature or
extent of adverse government regulation that may arise from future legislation or administrative
action, either in the United States or elsewhere. If we are not able to maintain regulatory
compliance, we might not be permitted to market our drugs and our business could suffer.
Our applications for regulatory approval could be delayed or denied due to problems with studies
conducted before we in-licensed the rights to some of our product candidates.
We currently license some of the compounds and drug candidates used in our research programs
from third parties. These include sapacitabine which was licensed from Daiichi-Sankyo. Our present
research involving these compounds relies upon previous research conducted by third parties over
whom we had no control and before we in-licensed the drug candidates. In order to receive
regulatory approval of a drug candidate, we must present all relevant data and information obtained
during our research and development, including research conducted prior to our licensure of the
drug candidate. Although we are not currently aware of any such problems, any problems that emerge
with preclinical research and testing conducted prior to our in-licensing may affect future results
or our ability to document prior research and to conduct clinical trials, which could delay, limit
or prevent regulatory approval for our drug candidates.
We face intense competition and our competitors may develop drugs that are less expensive, safer,
or more effective than our drug candidates.
A large number of drug candidates are in development for the treatment of leukemia, lung
cancer, lymphomas and nasopharyngeal cancer. Several pharmaceutical and biotechnology companies
have nucleoside analogs or other products on the market or in clinical trials which may be
competitive to sapacitabine in both hematological and oncology indications. These include Celgene,
Cephalon, Eisai, Johnson & Johnson, Eli Lilly, Genzyme, GlaxoSmithKline, Hospira, Pfizer, Seattle
Genetics, Sunesis and Vion. We believe that we are currently the only company that has an orally
available CDK-specific agent in Phase 2 clinical trials but that there are a number of companies,
including AstraZeneca, Eisai, Pfizer, Piramal Life Sciences, Roche Merck and Bayer-Schering that
are developing CDK inhibitors in early stage clinical trials in cancer patients. Although Aventis,
a predecessor of Sanofi-Aventis, had previously announced that it has ceased Phase 2 development of
alvocidib or flavopiridol, a CDK inhibitor, we believe that the National Cancer Institute's Cancer
Therapy Evaluation Program, or CTEP, is continuing to enroll patients in a CTEP sponsored trial in
patients with chronic leukemia. A number of companies are pursuing discovery and research
activities in each of the other areas that are the subject of our research and drug development
programs. We believe that AstraZeneca, Entremed, Merck, jointly with Vertex, Nerviano Medical
Sciences, Pfizer, Rigel, Sunesis and Takeda-Millennium have commenced Phase 1 or Phase 2 clinical
trials of Aurora kinase inhibitors in patients with advanced cancers. Several companies have
reported selection of Aurora kinase inhibitor candidates for development and may have started or
are expected to start clinical trials within the next twelve months. We believe that Boehringer
Ingelheim, GlaxoSmithKline, Onconova and Nerviano Medical Sciences have commenced Phase 1 or Phase
2 clinical trials with Plk inhibitor candidates for oncology indications. For our ALIGN products,
we believe that Beiersdorf, Daiichi-Sankyo, Eisai, Johnson & Johnson, MPM Medical and other
companies market products for radiation dermatitis and xerostomia.
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Our competitors, either alone or together with collaborators, may have substantially greater
financial resources and research and development staff. Our competitors may also have more
experience:
•
developing drug candidates;
•
conducting preclinical and clinical trials;
•
obtaining regulatory approvals; and
•
commercializing product candidates.
Our competitors may succeed in obtaining patent protection and regulatory approval and may
market drugs before we do. If our competitors market drugs that are less expensive, safer, more
effective or more convenient to administer than our potential drugs, or that reach the market
sooner than our potential drugs, we may not achieve commercial success. Scientific, clinical or
technical developments by our competitors may render our drug candidates obsolete or
noncompetitive. We anticipate that we will face increased competition in the future as new
companies enter the markets and as scientific developments progress. If our drug candidates obtain
regulatory approvals, but do not compete effectively in the marketplace, our business will suffer.
The commercial success of the ALIGN products and our drug candidates depends upon their market
acceptance among physicians, patients, healthcare providers and payors and the medical community.
It is necessary that our and our distribution partners' products, including Xclair
®
Cream, Numoisyn
®
Liquid and Numoisyn
®
Lozenges achieve and maintain market
acceptance. If our drug candidates are approved by the FDA or by another regulatory authority, the
resulting drugs, if any, may not gain market acceptance among physicians, healthcare providers and
payors, patients and the medical community. The degree of market acceptance of any of our approved
drugs or devices will depend on a variety of factors, including:
•
timing of market introduction, number and clinical profile of competitive drugs;
•
our ability to provide acceptable evidence of safety and efficacy;
•
relative convenience and ease of administration;
•
cost-effectiveness;
•
availability of coverage, reimbursement and adequate payment from health maintenance
organizations and other third party payors;
•
prevalence and severity of adverse side effects; and
•
other potential advantages over alternative treatment methods.
If our drugs fail to achieve market acceptance, we may not be able to generate significant
revenue and our business would suffer.
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If we are unable to compete successfully in our market place, it will harm our business.
There are existing products in the marketplace that compete with our products. Companies may
develop new products that compete with our products. Certain of these competitors and potential
competitors have longer operating histories, substantially greater product development capabilities
and financial, scientific, marketing and sales resources. Competitors and potential competitors may
also develop products that are safer, more effective or have other potential advantages compared to
our products. In addition, research, development and commercialization efforts by others could
render our products obsolete or non-competitive. Certain of our competitors and potential
competitors have broader product offerings and extensive customer bases allowing them to adopt
aggressive pricing policies that would enable them to gain market share. Competitive pressures
could result in price reductions, reduced margins and loss of market share. We could encounter
potential customers that, due to existing relationships with our competitors, are committed to
products offered by those competitors. As a result, those potential customers may not consider
purchasing our products.
There is uncertainty related to coverage, reimbursement and payment by healthcare providers and
payors for the ALIGN products and newly approved drugs, if any. The inability or failure to obtain
or maintain coverage could affect our ability to market the ALIGN products and our future drugs and
decrease our ability to generate revenue.
The availability and levels of coverage and reimbursement of newly approved drugs by
healthcare providers and payors is subject to significant uncertainty. The commercial success of
the ALIGN products and our drug candidates in both the United States and international markets is
substantially dependent on whether third party coverage and reimbursement is available. The United
States Centers for Medicare and Medicaid Services, health maintenance organizations and other third
party payors in the United States, the European Union and other jurisdictions are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of
new drugs and, as a result, they may not cover or provide adequate payment for our potential drugs.
The ALIGN products and our drug candidates may not be considered cost-effective and reimbursement
may not be available to consumers or may not be sufficient to allow the ALIGN products or our drug
candidates to be marketed on a competitive basis.
In some countries, pricing of prescription drugs is subject to government control. In such
countries, pricing negotiations with governmental authorities can take three to 12 months or longer
following application to the competent authorities. To obtain reimbursement or pricing approval in
such countries may require conducting an additional clinical trial comparing the cost-effectiveness
of the drug to other alternatives. In the United States, the Medicare Part D drug benefit
implemented in 2006 will limit drug coverage through formularies and other cost and utilization
management programs, while Medicare Part B limits drug payments to a certain percentage of average
price or through restrictive payment policies of "least costly alternatives" and "inherent
reasonableness" Our business could be materially harmed if coverage, reimbursement or pricing is
unavailable or set at unsatisfactory levels.
We may be exposed to product liability claims that may damage our reputation and we may not be able
to obtain adequate insurance.
Because we conduct clinical trials in humans, we face the risk that the use of our drug
candidates will result in adverse effects. We believe that we have obtained reasonably adequate
product liability insurance coverage for our trials. We cannot predict, however, the possible harm
or side effects that may result from our clinical trials. Such claims may damage our reputation and
we may not have sufficient resources to pay for any liabilities resulting from a claim excluded
from, or beyond the limit of, our insurance coverage.
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As we market commercialized products through our ALIGN subsidiary we are exposed to additional
risks of product liability claims. These risks exist even with respect to drugs and devices that
are approved for commercial sale by the FDA or other regulatory authorities in the United States,
the European Union or elsewhere and manufactured in facilities licensed and regulated by the FDA or
other such regulatory authorities. We have secured limited product liability insurance coverage,
but may not be able to maintain such insurance on acceptable terms with adequate coverage, or at a
reasonable cost. There is also a risk that third parties that we have agreed to indemnify could
incur liability. Even if we were ultimately successful in product liability litigation, the
litigation would consume substantial amounts of our financial and managerial resources and may
exceed insurance coverage creating adverse publicity, all of which would impair our ability to
generate sales of the litigated product as well as our other potential drugs.
We may be subject to damages resulting from claims that our employees or we have wrongfully used or
disclosed alleged trade secrets of their former employers.
Many of our employees were previously employed at universities or other biotechnology or
pharmaceutical companies, including our competitors or potential competitors. Although no claims
against us are currently pending, we may be subject to claims that these employees or we have
inadvertently or otherwise used or disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend against these claims. If we fail in
defending such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. A loss of key research personnel or their work product could hamper
or prevent our ability to commercialize certain potential drugs, which could severely harm our
business. Even if we are successful in defending against these claims, litigation could result in
substantial costs and be a distraction to management.
Defending against claims relating to improper handling, storage or disposal of hazardous chemical,
radioactive or biological materials could be time consuming and expensive.
Our research and development involves the controlled use of hazardous materials, including
chemicals, radioactive and biological materials such as chemical solvents, phosphorus and bacteria.
Our operations produce hazardous waste products. We cannot eliminate the risk of accidental
contamination or discharge and any resultant injury from those materials. Various laws and
regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. We
may be sued for any injury or contamination that results from our use or the use by third parties
of these materials. Compliance with environmental laws and regulations may be expensive, and
current or future environmental regulations may impair our research, development and production
efforts.
We may be required to defend lawsuits or pay damages in connection with the alleged or actual
violation of healthcare statutes such as fraud and abuse laws, and our corporate compliance
programs can never guarantee that we are in compliance with all relevant laws and regulations.
Our commercialization efforts in the United States are subject to various federal and state
laws pertaining to promotion and healthcare fraud and abuse, including federal and state
anti-kickback, fraud and false claims laws. Anti-kickback laws make it illegal for a manufacturer
to offer or pay any remuneration in exchange for, or to induce, the referral of business, including
the purchase of a product. The federal government has published many regulations relating to the
anti-kickback statutes, including numerous safe harbors or exemptions for certain arrangements.
False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be
presented for payment to third-party payers including Medicare and Medicaid, claims for reimbursed
products or services that are false or fraudulent,
claims for items or services not provided as claimed, or claims for medically unnecessary
items or services.
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Our activities relating to the sale and marketing of our products will be subject to scrutiny
under these laws and regulations. It may be difficult to determine whether or not our activities,
comply with these complex legal requirements. Violations are punishable by significant criminal
and/or civil fines and other penalties, as well as the possibility of exclusion of the product from
coverage under governmental healthcare programs, including Medicare and Medicaid. If the government
were to investigate or make allegations against us or any of our employees, or sanction or convict
us or any of our employees, for violations of any of these legal requirements, this could have a
material adverse effect on our business, including our stock price. Our activities could be subject
to challenge for many reasons, including the broad scope and complexity of these laws and
regulations, the difficulties in interpreting and applying these legal requirements, and the high
degree of prosecutorial resources and attention being devoted to the biopharmaceutical industry and
health care fraud by law enforcement authorities. During the last few years, numerous
biopharmaceutical companies have paid multi-million dollar fines and entered into burdensome
settlement agreements for alleged violation of these requirements, and other companies are under
active investigation. Although we have developed and implemented corporate and field compliance
programs as part of our commercialization efforts, we cannot assure you that we or our employees,
directors or agents were, are or will be in compliance with all laws and regulations or that we
will not come under investigation, allegation or sanction.
In addition, we may be required to prepare and report product pricing-related information to
federal and state governmental authorities, such as the Department of Veterans Affairs and under
the Medicaid program. The calculations used to generate the pricing-related information are complex
and require the exercise of judgment. If we fail to accurately and timely report product
pricing-related information or to comply with any of these or any other laws or regulations,
various negative consequences could result, including criminal and/or civil prosecution,
substantial criminal and/or civil penalties, exclusion of the approved product from coverage under
governmental healthcare programs including Medicare and Medicaid, costly litigation and restatement
of our financial statements. In addition, our efforts to comply with this wide range of laws and
regulations are, and will continue to be, time-consuming and expensive.
If we fail to enforce adequately or defend our intellectual property rights our business may be
harmed.
Our commercial success depends in large part on obtaining and maintaining patent and trade
secret protection for our drug candidates, the methods used to manufacture those drug candidates
and the methods for treating patients using those drug candidates. Specifically, sapacitabine is
covered in granted, composition of matter patents that expire in 2014 in the U.S. and 2012 outside
the U.S. Sapacitabine is further protected by additional granted, composition of matter patents
claiming certain, stable crystalline forms of sapacitabine and their pharmaceutical compositions
and therapeutic uses that expire in 2022. In early development, amorphous sapacitabine was used. We
have used one of the stable, crystalline forms of sapacitabine in nearly all our Phase 1 and in all
of our Phase 2 clinical studies. We have also chosen this form for commercialization. Additional
patents claim certain medical uses and formulations of
sapacitabine which have emerged in our clinical trials. Seliciclib is protected by granted,
composition of matter patents that expire in 2016. Additional patents claim certain medical uses
which have emerged from our research programs.
Failure to obtain, maintain or extend the patents could adversely affect our business. We will
only be able to protect our drug candidates and our technologies from unauthorized use by third
parties to the extent that valid and enforceable patents or trade secrets cover them.
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Our ability to obtain patents is uncertain because legal means afford only limited protections
and may not adequately protect our rights or permit it to gain or keep any competitive advantage.
Some legal principles remain unresolved and the breadth or interpretation of claims allowed in
patents in the United States, the European Union or elsewhere can still be difficult to ascertain
or predict. In addition, the specific content of patents and patent applications that are necessary
to support and interpret patent claims is highly uncertain due to the complex nature of the
relevant legal, scientific and factual issues. Changes in either patent laws or in interpretations
of patent laws in the United States, the European Union or elsewhere may diminish the value of our
intellectual property or narrow the scope of our patent protection. Our existing patents and any
future patents we obtain may not be sufficiently broad to prevent others from practicing our
technologies or from developing competing products and technologies. In addition, we generally do
not control the patent prosecution of subject matter that we license from others and have not
controlled the earlier stages of the patent prosecution. Accordingly, we are unable to exercise the
same degree of control over this intellectual property as we would over our own.
Even if patents are issued regarding our drug candidates or methods of using them, those
patents can be challenged by our competitors who may argue such patents are invalid and/or
unenforceable. On April 27, 2010, we were served with a complaint filed by Celgene Corporation in the United
States District Court for the District of Delaware seeking a Declaratory Judgment that four of our
owned patents, claiming the use of romidepsin injection in T-cell lymphomas, are not infringed by
Celgene's products and are invalid. The four patents cited in the complaint do not involve our
clinical development candidates nor commercial products. We are presently required to answer or
otherwise move in response to the complaint by June 17, 2010. We intend to vigorously defend the
validity of these patents and enforce our patent rights.
Patents also will not protect our drug candidates if competitors devise ways of
making or using these product candidates without legally infringing our patents. The U.S. Federal
Food, Drug and Cosmetic, or FD&C, Act and FDA regulations and policies and equivalents in other
jurisdictions provide incentives to manufacturers to challenge patent validity or create modified,
noninfringing versions of a drug in order to facilitate the approval of abbreviated new drug
applications for generic substitutes. These same types of incentives encourage manufacturers to
submit new drug applications that rely on literature and clinical data not prepared for or by the
drug sponsor.
Proprietary trade secrets and unpatented know-how are also very important to our business. We
rely on trade secrets to protect our technology, especially where we do not believe that patent
protection is appropriate or obtainable. However, trade secrets are difficult to protect. Our
employees, consultants, contractors, outside scientific collaborators and other advisors may
unintentionally or willfully disclose our confidential information to competitors, and
confidentiality agreements may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. Enforcing a claim that a third party obtained illegally and
is using trade secrets is expensive and time consuming, and the outcome is unpredictable. Moreover,
our competitors may independently develop equivalent knowledge, methods and know-how. Failure to
obtain or maintain trade secret protection could adversely affect our competitive business
position.
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Intellectual property rights of third parties may increase our costs or delay or prevent us from
being able to commercialize our drug candidates and/or the ALIGN products.
There is a risk that we are infringing or will infringe the proprietary rights of third
parties because patents and pending applications belonging to third parties exist in the United
States, the European Union and elsewhere in the world in the areas of our research and/or the ALIGN
products. Others might have been the first to make the inventions covered by each of our or our
licensors' pending patent applications and issued patents and might have been the first to file
patent applications for these inventions. We are aware of several published patent applications,
and understand that others may exist, that could support claims that, if granted, could cover
various aspects of our developmental programs, including in some cases particular uses of our lead
drug candidate sapacitabine, seliciclib or other therapeutic candidates, or gene sequences and
techniques that we use in the course of our research and development. In addition, we understand
that other applications and patents exist relating to potential uses of sapacitabine and seliciclib
that are not part of our current clinical programs for these compounds. Numerous third-party United
States and foreign issued patents and pending applications exist in the area of kinases, including
CDK, AK and Plk for which we have research programs. For example, some pending patent applications
contain broad claims that could represent freedom to operate limitations for some of our kinase
programs should they be issued unchanged. Although we intend to continue to monitor these
applications, we cannot predict what claims will ultimately be allowed and if allowed what their
scope would be. In addition, because the patent application process can take several years to
complete, there may be currently pending applications, unknown to us, which may later result in
issued patents that cover the production, manufacture, commercialization or use of our drug
candidates. If we wish to use the technology or compound claimed in issued and unexpired patents
owned by others, we will need to obtain a license from the owner, enter into litigation to
challenge the validity of the patents or incur the risk of litigation in the event that the owner
asserts that we infringe its patents. In one case we have opposed a European patent relating to
human aurora kinase and the patent has been finally revoked (no appeal was filed). We are also
aware of a corresponding U.S. patent containing method of treatment claims for specific cancers
using aurora kinase modulators which, if held valid, could potentially restrict the use of our
aurora kinase inhibitors once clinical trials are completed.
There has been substantial litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical and biotechnology industries. Defending against
third party claims, including litigation in particular, would be costly and time consuming and
would divert management's attention from our business, which could lead to delays in our
development or commercialization efforts. If third parties are successful in their claims, we might
have to pay substantial damages or take other actions that are adverse to our business. As a result
of intellectual property infringement claims, or to avoid potential claims, we might:
•
be prohibited from selling or licensing any product that we may develop unless the
patent holder licenses the patent to us, which it is not required to do;
•
be required to pay substantial royalties or grant a cross license to our patents to
another patent holder;
•
decide to move some of our screening work outside Europe;
•
be required to pay substantial damages for past infringement, which we may have to
pay if a court determines that our product candidates or technologies infringe a
competitor's patent or other proprietary rights; or
•
be required to redesign the formulation of a drug candidate so it does not infringe,
which may not be possible or could require substantial funds and time.
The development programs for our two lead drug candidates are based in part on intellectual
property rights we license from others, and any termination of those licenses could seriously harm
our business.
We have in-licensed certain patent rights in connection with the development programs for each
of our two lead drug candidates. Both of these license agreements impose payment and other material
obligations on us. Under the Daiichi-Sankyo license, we are obligated to pay license fees,
milestone payments and royalties. We are also obligated to use commercially reasonable efforts to
commercialize products based on the licensed rights and to use reasonable efforts to obtain
regulatory approval to sell the products in at least one country by September 2011, unless we have
in-licensed certain patent rights in connection with the development programs for each of our two
lead drug candidates. Under both of the license agreements relating to these drug candidates we are
obligated to pay license fees, milestone payments and royalties. We are also obligated to use
reasonable efforts to develop and commercialize products based on the licensed patents.
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Pursuant to the Daiichi-Sankyo license under which we license sapacitabine, we are obligated
to pay license fees, milestone payments and royalties, provide regular progress reports and use
commercially reasonable efforts to commercialize products based on the licensed rights and obtain
regulatory approval to sell the products in at least one country by September 2011, unless we are
prevented from doing so by virtue of certain causes outside of our reasonable control, including
but not limited to difficulties in patient recruitment into trials or significant, unexpected
change in regulatory requirements affecting the development of our drug. Pursuant to the CNRS and
Institut Curie license under which we license seliciclib, we are obligated to pay license fees,
milestone payments and royalties and provide regular progress reports.
Although we are currently in compliance with all of our material obligations under these
licenses, if we were to breach any such obligations our counterparties may be entitled to terminate
the licenses. This would restrict or delay or eliminate our ability to develop and commercialize
these drug candidates, which could adversely affect our business. With respect to seliciclib we
hold a license from CNRS and Institut Curie under which we are obligated to pay license fees,
milestone payments and royalties. We are obligated to use reasonable efforts to develop and
commercialize products based on the licensed patents. Although we are currently in compliance with
all of our material obligations under these licenses, if we were to breach any such obligations our
counterparties could attempt to terminate the licenses and there can be no assurance as to what
would constitute exceptional cause. This would restrict or delay or eliminate our ability to
develop and commercialize these drug candidates, which could adversely affect our business.
Failure to achieve and maintain internal controls in accordance with Sections 302 and 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price
.
We just recently completed a restatement of our financial statements and filed an amendment to
our Annual Report on Form 10-K as and for the year ended December 31, 2009, in which we reported a
material weakness in our internal control over financial reporting for the year then ended,
specifically related to the operational failure of the controls in place to ensure the correct
computation of net loss per share and presentation of preferred stock dividends in the consolidated
statement of cash flows. If we fail to maintain our internal controls or fail to implement required
new or improved controls, as such control standards are modified, supplemented or amended from time
to time, we may not be able to conclude on an ongoing basis that we have effective internal
controls over financial reporting. Effective internal controls are necessary for us to produce
reliable financial reports and are important in the prevention of financial fraud. If we cannot
produce reliable financial reports or prevent fraud, our business and operating results could be
harmed, investors may lose confidence in our reported financial information, and there could be a
material adverse effect on our stock price.
We incur increased costs and management resources as a result of being a public company, and we
still may fail to comply with public company obligations.
As a public company, we face and will continue to face increased legal, accounting,
administrative and other costs and expenses as a public company that we would not incur as a
private company. Compliance with the Sarbanes Oxley Act of 2002, as well as other rules of the SEC,
the Public Company Accounting Oversight Board and the NASDAQ Global Market resulted in a
significant initial cost to us as well as an ongoing compliance costs. As a public company, we are
subject to Section 404 of the Sarbanes Oxley Act relating to internal control over financial
reporting. We completed, and later revisited, our formal process to evaluate our internal controls
for purposes of Section 404. In performing this assessment, our management identified a deficiency
in our internal control over financial reporting. As our business grows and changes, there can be
no assurances that we can maintain the effectiveness of our internal controls over financial
reporting that constitutes a material weakness under standards established by the Public Company
Accounting Oversight Board, or PCAOB, as of December 31, 2009. Specifically related to the
operational failure of the controls in place to ensure the correct
computation of net loss per share and presentation of preferred stock dividends in the statement of
cash flows. Due to this deficiency, we concluded that the material weakness in internal control
over financial reporting existed as of December 31, 2009 and continued as of March 31, 2010. Solely
as a result of this material weakness, management concluded that we did not maintain effective
internal control over financial reporting as of March 31, 2010, based on the criteria established
in "Internal Control — Integrated Framework," issued by the COSO. As our business grows and
changes, there can be no assurances that we can maintain the effectiveness of our internal controls
over financial reporting. Effective internal controls over financial reporting are necessary for us
to provide reliable financial reports and, together with adequate disclosure controls and
procedures, are designed to prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. We have completed a formal process to
evaluate our internal control over financial reporting. However, guidance from regulatory
authorities in the area of internal controls continues to evolve and substantial uncertainty exists
regarding our on-going ability to comply by applicable deadlines. Any failure to implement required
new or improved controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations. Ineffective internal
controls could also cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable
financial reports and, together with adequate disclosure controls and procedures, are designed to
prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating
results could be harmed.
We have completed a formal process to evaluate our internal control over financial reporting.
However, guidance from regulatory authorities in the area of internal controls continues to evolve
and substantial uncertainty exists regarding our on-going ability to comply by applicable
deadlines. Any failure to implement required new or improved controls, or difficulties encountered
in their implementation, could harm our operating results or cause us to fail to meet our reporting
obligations. Ineffective internal controls could also cause investors to lose confidence in our
reported financial information, which could have a negative effect on the trading price of our
common stock.
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Our common stock may have a volatile public trading price.
An active public market for our common stock has not developed. Our stock can trade in small
volumes which may make the price of our stock highly volatile. The last reported price of our stock
may not represent the price at which you would be able to buy or sell the stock. The market prices
for securities of companies comparable to us have been highly volatile. Often, these stocks have
experienced significant price and volume fluctuations for reasons that are both related and
unrelated to the operating performance of the individual companies. In addition, the stock market
as a whole and biotechnology and other life science stocks in particular have experienced
significant recent volatility. Like our common stock, these stocks have experienced significant
price and volume fluctuations for reasons unrelated to the operating performance of the individual
companies. In addition, due to our existing stock price, we may not continue to qualify for
continued listing on the NASDAQ Global Market. To maintain listing, we are required to maintain a
minimum closing bid price of $1.00 per share and, among other requirements, to maintain a minimum
stockholders equity value of $10 million. Factors giving rise to this volatility may include:
•
disclosure of actual or potential clinical results with respect to product
candidates we are developing;
•
regulatory developments in both the United States and abroad;
•
developments concerning proprietary rights, including patents and litigation
matters;
•
public concern about the safety or efficacy of our product candidates or technology,
or related technology, or new technologies generally;
•
public announcements by our competitors or others; and
•
general market conditions and comments by securities analysts and investors.
Fluctuations in our operating losses could adversely affect the price of our common stock.
Our operating losses may fluctuate significantly on a quarterly basis. Some of the factors
that may cause our operating losses to fluctuate on a period-to-period basis include the status of
our preclinical and clinical development programs, level of expenses incurred in connection with
our preclinical and clinical development programs, implementation or termination of collaboration,
licensing, manufacturing or other material agreements with third parties, non-recurring revenue or
expenses under any such agreement, and compliance with regulatory requirements. Period-to-period
comparisons of our historical and future financial results may not be meaningful, and investors
should not rely on them as an indication of future performance. Our fluctuating losses may fail to
meet the expectations of securities analysts or investors. Our failure to meet these expectations
may cause the price of our common stock to decline.
If securities or industry analysts do not publish research or reports about us, if they change
their recommendations regarding our stock adversely or if our operating results do not meet their
expectations, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that
industry or securities analysts publish about us. If one or more of these analysts cease coverage
of us or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one
or more of the analysts who cover us
downgrade our stock or if our operating results do not meet their expectations, our stock
price could decline.
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Anti-takeover provisions in our charter documents and provisions of Delaware law may make an
acquisition more difficult and could result in the entrenchment of management.
We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our amended and
restated certificate of incorporation and amended and restated bylaws may make a change in control
or efforts to remove management more difficult. Also, under Delaware law, our board of directors
may adopt additional anti-takeover measures.
We have the authority to issue up to 5 million shares of preferred stock and to determine the terms
of those shares of stock without any further action by our stockholders. If the board of directors
exercises this power to issue preferred stock, it could be more difficult for a third party to
acquire a majority of our outstanding voting stock and vote the stock they acquire to remove
management or directors.
Our amended and restated certificate of incorporation and amended and restated bylaws also
provides staggered terms for the members of our board of directors. Under Section 141 of the
Delaware General Corporation Law, our directors may be removed by stockholders only for cause and
only by vote of the holders of a majority of voting shares then outstanding. These provisions may
prevent stockholders from replacing the entire board in a single proxy contest, making it more
difficult for a third party to acquire control of us without the consent of our board of directors.
These provisions could also delay the removal of management by the board of directors with or
without cause. In addition, our directors may only be removed for cause and amended and restated
bylaws limit the ability our stockholders to call special meetings of stockholders.
Under Section 203 of the Delaware General Corporation Law, a corporation may not engage in a
business combination with any holder of 15% or more of its capital stock until the holder has held
the stock for three years unless, among other possibilities, the board of directors approves the
transaction. Our board of directors could use this provision to prevent changes in management. The
existence of the foregoing provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.
Certain severance-related agreements in our executive employment agreements may make an acquisition
more difficult and could result in the entrenchment of management.
In March 2008 (as amended in December 2008 with respect to our President and Chief Executive
Officer), we entered into employment agreements with our President and Chief Executive Officer and
our Executive Vice President, Finance, Chief Financial Officer and Chief Operating Officer, which
contain severance arrangements in the event that such executive's employment is terminated without
"cause" or as a result of a "change of control" (as each such term is defined in each agreement).
The financial obligations triggered by these provisions may prevent a business combination or
acquisition that would be attractive to stockholders and could limit the price that investors would
be willing to pay in the future for our stock.
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In the event of an acquisition of our common stock, we cannot assure our common stockholders that
we will be able to negotiate terms that would provide for a price equivalent to, or more favorable
than, the price at which our shares of common stock may be trading at such time.
We may not effect a consolidation or merger with another entity without the vote or consent of
the holders of at least a majority of the shares of our preferred stock (in addition to the
approval of our common stockholders), unless the preferred stock that remains outstanding and its
rights, privileges and preferences are unaffected or are converted into or exchanged for preferred
stock of the surviving entity having rights, preferences and limitations substantially similar, but
no less favorable, to our convertible preferred stock.
In addition, in the event a third party seeks to acquire our company or acquire control of our
company by way of a merger, but the terms of such offer do not provide for our preferred stock to
remain outstanding or be converted into or exchanged for preferred stock of the surviving entity
having rights, preferences and limitations substantially similar, but no less favorable, to our
preferred stock, the terms of the Certificate of Designations of our preferred stock provide for an
adjustment to the conversion ratio of our preferred stock such that, depending on the terms of any
such transaction, preferred stockholders may be entitled, by their terms, to receive up to $10.00
per share in common stock, causing our common stockholders not to receive as favorable a price as
the price at which such shares may be trading at the time of any such
transaction. As of June 9,
2010, there were 1,213,142 shares of our preferred stock issued and outstanding. If the transaction
were one in which proceeds were received by the Company for distribution to stockholders, and the
terms of the Certificate of Designations governing the preferred stock were strictly complied with,
approximately $13 million would be paid to the preferred holders before any distribution to the
common stockholders, although the form of transaction could affect how the holders of preferred
stock are treated. In such an event, although such a transaction would be subject to the approval
of our holders of common stock, we cannot assure our common stockholders that we will be able to
negotiate terms that would provide for a price equivalent to, or more favorable than, the price at
which our shares of common stock may be trading at such time. Thus, the terms of our preferred
stock might hamper a third party's acquisition of our company.
Our certificate of incorporation and bylaws and certain provisions of Delaware law may delay or
prevent a change in our management and make it more difficult for a third party to acquire us.
Our amended and restated certificate of incorporation and bylaws contain provisions that could
delay or prevent a change in our board of directors and management teams. Some of these provisions:
•
authorize the issuance of preferred stock that can be created and issued by the
board of directors without prior stockholder approval, commonly referred to as "blank
check" preferred stock, with rights senior to those of our common stock;
•
provide for the board of directors to be divided into three classes; and
•
require that stockholder actions must be effected at a duly called stockholder
meeting and prohibit stockholder action by written consent.
In addition, because we are incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporation Law, which limits the ability of large stockholders
to complete a business combination with, or acquisition of, us. These provisions may prevent a
business combination or acquisition that would be attractive to stockholders and could limit the
price that investors would be willing to pay in the future for our stock.
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These provisions also make it more difficult for our stockholders to replace members of our
board of directors. Because our board of directors is responsible for appointing the members of our
management team, these provisions could in turn affect any attempt to replace our current
management team. Additionally, these provisions may prevent an acquisition that would be attractive
to stockholders and could limit the price that investors would be willing to pay in the future for
our common stock.
We may have limited ability to pay cash dividends on the convertible preferred stock.
Delaware law may limit our ability to pay cash dividends on the convertible preferred stock.
Under Delaware law, cash dividends on our convertible preferred stock may only be paid from surplus
or, if there is no surplus, from the corporation's net profits for the current or preceding fiscal
year. Delaware law defines "surplus" as the amount by which the total assets of a corporation,
after subtracting its total liabilities, exceed the corporation's capital, as determined by its
board of directors. Since we are not profitable, our ability to pay cash dividends will require the
availability of adequate surplus. Even if adequate surplus is available to pay cash dividends on
the convertible preferred stock, we may not have sufficient cash to pay dividends on the
convertible preferred stock or we may choose not to declare the dividends. If that was to happen,
holders of preferred stock would be granted certain additional rights until such dividends were
paid.
If we continue not to declare the quarterly dividends on our 6% Convertible Exchangeable Preferred
Stock for a total of six quarterly dividend periods, we will have to grant additional rights to our
holders of preferred stock with respect to the management of the Company.
On April 6, 2009, June 22, 2009, October 19, 2009, January 7, 2010 and March 29, 2010, our
board of directors resolved, pursuant to the Certificate of Designations, not to declare payment of
the quarterly cash dividend on the Company's 6% Convertible Exchangeable Preferred Stock, with
respect to the dividends that would otherwise been payable on May 1, 2009, August 1, 2009, November
1, 2009, February 1, 2010 and May 1, 2010, respectively. To the extent that any dividends payable
on the preferred stock are not paid, such unpaid dividends are accumulated. We have not declared
dividends with respects to five quarters and if dividends with respect to at least six quarters
(whether or not consecutive) are not paid, the size of our board of directors will be increased by
two and the holders of the preferred stock will have the right to vote to fill the two vacancies
created thereby until all accrued but unpaid dividends have been paid in full, at which time such
right is terminated.
Our common and convertible preferred stock may experience extreme price and volume fluctuations,
which could lead to costly litigation for the Company and make an investment in the Company less
appealing.
The market price of our common and convertible preferred stock may fluctuate substantially due
to a variety of factors, including:
•
additions to or departures of our key personnel;
•
announcements of technological innovations or new products or services by us or our
competitors;
•
announcements concerning our competitors or the biotechnology industry in general;
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•
new regulatory pronouncements and changes in regulatory guidelines;
•
general and industry-specific economic conditions;
•
changes in financial estimates or recommendations by securities analysts;
•
variations in our quarterly results;
•
announcements about our collaborators or licensors; and
•
changes in accounting principles.
The market prices of the securities of biotechnology companies, particularly companies like us
without product revenues and earnings, have been highly volatile and are likely to remain highly
volatile in the future. This volatility has often been unrelated to the performance of particular
companies. In the past, companies that experience volatility in the market price of their
securities have often faced securities class action litigation. Moreover, market prices for stocks
of biotechnology-related and technology companies frequently reach levels that bear no relationship
to the performance of these companies. These market prices generally are not sustainable and are
highly volatile. Whether or not meritorious, litigation brought against us could result in
substantial costs, divert our management's attention and resources and harm our financial condition
and results of operations. In addition, due to our stock price from time to time, we may not
continue to qualify for continued listing on the NASDAQ Global Market. Please see Risk Factor:
Our
common stock may have a volatile public trading price.
The future sale of our common and preferred stock and future issuances of our common stock upon
conversion of our preferred stock, could negatively affect our stock price.
If our common or preferred stockholders sell substantial amounts of our stock in the public
market, or the market perceives that such sales may occur, the market price of our common and
preferred stock could fall. Thus if holders of preferred stock elect to convert their
shares to shares of common stock at renegotiated prices, and the holders of an aggregate of 833,671
preferred stock have elected to so convert into an aggregate of 1,655,599 common stock, such
conversion as well as the sale of substantial amounts of our common or preferred stock, could cause
dilution to existing holders of our common stock, thereby also negatively affecting the price of
our common stock.
If we exchange the convertible preferred stock for debentures, the exchange will be taxable but we
will not provide any cash to pay any tax liability that any convertible preferred stockholder may
incur.
An exchange of convertible preferred stock for debentures, as well as any dividend make-whole
or interest make-whole payments paid in our common stock, will be taxable events for United States
federal income tax purposes, which may result in tax liability for the holder of convertible
preferred stock without any corresponding receipt of cash by the holder. In addition, the
debentures may be treated as having original issue discount, a portion of which would generally be
required to be included in the holder's gross income even though the cash to which such income is
attributable would not be received until maturity or redemption of the debenture. We will not
distribute any cash to the holders of the securities to pay these potential tax liabilities.
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If we automatically convert the convertible preferred stock, there is a substantial risk of
fluctuation in the price of our common stock from the date we elect to automatically convert to the
conversion date.
We may automatically convert the convertible preferred stock into common stock if the closing
price of our common stock has exceeded $35.30. There is a risk of fluctuation in the price of our
common stock between the time when we may first elect to automatically convert the preferred and
the automatic conversion date.
We do not intend to pay cash dividends on our common stock in the foreseeable future.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any
payment of cash dividends will depend on our financial condition, results of operations, capital
requirements, the outcome of the review of our strategic alternatives and other factors and will be
at the discretion of our board of directors. Accordingly, investors will have to rely on capital
appreciation, if any, to earn a return on their investment in our common stock. Furthermore, we may
in the future become subject to contractual restrictions on, or prohibitions against, the payment
of dividends.
The number of shares of common stock which are registered, including the shares to be issued upon
exercise of our outstanding warrants, is significant in relation to our currently outstanding
common stock and could cause downward pressure on the market price for our common stock.
The number of shares of common stock registered for resale, including those shares which are
to be issued upon exercise of our outstanding warrants, is significant in relation to the number of
shares of common stock currently outstanding. If the security holder determines to sell a
substantial number of shares into the market at any given time, there may not be sufficient demand
in the market to purchase the shares without a decline in the market price for our common stock.
Moreover, continuous sales into the market of a number of shares in excess of the typical trading
volume for our common stock, or even the availability of such a large number of shares, could
depress the trading market for our common stock over an extended period of time.
If persons engage in short sales of our common stock, including sales of shares to be issued upon
exercise of our outstanding warrants, the price of our common stock may decline.
Selling short is a technique used by a stockholder to take advantage of an anticipated decline
in the price of a security. In addition, holders of options and warrants will sometimes sell short
knowing they can, in effect, cover through the exercise of an option or warrant, thus locking in a
profit. A significant number of short sales or a large volume of other sales within a relatively
short period of time can create downward pressure on the market price of a security. Further sales
of common stock issued upon exercise of our outstanding warrants could cause even greater declines
in the price of our common stock due to the number of additional shares available in the market
upon such exercise, which could encourage short sales that could further undermine the value of our
common stock. You could, therefore, experience a decline in the value of your investment as a
result of short sales of our common stock.
Our distribution rights to the ALIGN products are licensed from others, and any termination of that
license could harm our business.
We have in-licensed from Sinclair the distribution rights to the ALIGN products. This license
agreement imposes obligations on us. Although we are currently in compliance with all of our
material obligations under this license, if we were to breach any such obligations, Sinclair would
be permitted to terminate the license. This would restrict us from distributing the ALIGN products.
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If our supplier upon whom we rely fails to produce on a timely basis the finished goods in the
volumes that we require or fails to meet quality standards and maintain necessary licensure from
regulatory authorities, we may be unable to meet demand for our products, potentially resulting in
lost revenues.
Our licensor and supplier Sinclair contracts with third party manufacturers to supply the
finished goods to us to meet our needs. If any of Sinclair's third party manufacturers service
providers do not meet our or our licensor's requirements for quality, quantity or timeliness, or do
not achieve and maintain compliance with all applicable regulations, demand for our products or our
ability to continue supplying such products could substantially decline. As the third party
manufacturers are the sole supplier of the products any delays may impact our sales.
In all the countries where we sell or may sell our products, governmental regulations exist to
define standards for manufacturing, packaging, labeling and storing. All of our suppliers of raw
materials and contract manufacturers must comply with these regulations. Failure to do so could
result in supply interruptions. In the United States, the FDA requires that all suppliers of
pharmaceutical bulk material and all manufacturers of pharmaceuticals for sale in or from the
United States achieve and maintain compliance with the FDA's Current Good Manufacturing Practice or
cGMP regulations and guidelines. Failure of our third-party manufacturers to comply with applicable
regulations could result in sanctions being imposed on them or us, including fines, injunctions,
civil penalties, disgorgement, suspension or withdrawal of approvals, license revocation, seizures
or recalls of products, operating restrictions and criminal prosecutions, any of which could
significantly and adversely affect supplies of our products. In addition, before any product batch
produced by our manufacturers can be shipped, it must conform to release specifications
pre-approved by regulators for the content of the pharmaceutical product. If the operations of one
or more of our manufacturers were to become unavailable for any reason, any required FDA review and
approval of the operations of an alternative supplier could cause a delay in the manufacture of our
products.
Our customer base is highly concentrated.
Our principal customers are a small number of wholesale drug distributors. These customers
comprise a significant part of the distribution network for pharmaceutical products in the United
States. Three large wholesale distributors, AmerisourceBergen Corporation, Cardinal Health, Inc.
and McKesson Corporation, control a significant share of the market in the United States. Our
ability to distribute any product, including Xclair
®
Cream, Numoisyn
®
Liquid
and Numoisyn
®
Lozenges and to recognize revenues on a timely basis is substantially
dependent on our ability to maintain commercially reasonable agreements with each of these
wholesale distributors and the extent to which these distributors, over whom we have no control,
comply with such agreements. Our agreements with wholesaler distributors may contain terms that are
not favorable, given our relative lack of market leverage as a company with only three approved
products or other factors, which could adversely affect our commercialization of Xclair
®
Cream, Numoisyn
®
Liquid and Numoisyn
®
Lozenges. The loss of any of these
customers could materially and adversely affect our ability to distribute our products, resulting
in a negative impact on our operations and financial condition.
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We may be unable to accurately estimate demand and monitor wholesaler inventory of
Xclair
®
Cream, Numoisyn
®
Liquid or Numoisyn
®
Lozenges. Although we
attempt to monitor wholesaler inventory of Xclair
®
Cream, Numoisyn
®
Liquid or
Numoisyn
®
Lozenges, we also rely on third party information, which is inherently
uncertain and may not be accurate, to assist us in monitoring estimated inventory levels and
prescription trends. Inaccurate estimates of the demand and inventory levels of the product may
cause our revenues to fluctuate significantly from quarter to quarter and may cause our operating
results for a particular quarter to be below expectations.
Inventory levels of Xclair
®
Cream, Numoisyn
®
Liquid or
Numoisyn
®
Lozenges held by wholesalers can also cause our operating results to fluctuate
unexpectedly. For the three months ended March 31, 2009 and 2010, approximately 85% and 91%,
respectively, of our product sales in the United States were to three wholesalers, Cardinal Health,
Inc., McKesson Corporation and AmerisourceBergen. Inventory levels held by those wholesalers can
cause our operating results to fluctuate unexpectedly if our sales to wholesalers do not match end
user demand. We have entered into inventory management agreements with these U.S. wholesalers under
which they provide us with data regarding inventory levels at these wholesalers. However, these
wholesalers may not be completely effective in matching inventory levels to end user demand, as
they make estimates to determine end user demand. In addition, inventory is held at retail
pharmacies and other non-wholesaler locations, for which we have no inventory management agreements
and have no control in respect to their buying patterns. Also, the non-retail sector in the United
States, which includes government institutions and large health maintenance organizations, tends to
be less consistent in terms of buying patterns, and often causes quarter-over-quarter fluctuations
in inventory and ordering patterns. We attempt to monitor inventory of Xclair
®
,
Numoisyn
®
Liquid or Numoisyn
®
Lozenges in the United States through the use
of internal sales forecasts and the expiration dates of product shipped, among other factors.
The commercialization of our products is substantially dependent on our ability to develop
effective sales and marketing capabilities.
Our successful commercialization of Xclair
®
Cream, Numoisyn
®
Liquid and
Numoisyn
®
Lozenges in the United States will depend on our ability to establish and
maintain an effective sales and marketing organization in the United States. We hired trained and
deployed additional marketing personnel and a small oncology specialty sales force. We may increase
or decrease the size of our sales force in the future, depending on many factors, including the
effectiveness of the sales force, the level of market acceptance of Xclair
®
Cream,
Numoisyn
®
Liquid and Numoisyn
®
Lozenges and the results of our clinical
trials. Prior to our launches of these products, we had never sold or marketed any products.
For our product candidates currently under development, our strategy is to develop compounds
through the Phase 2 stage of clinical testing and market or co-promote certain of our drugs on our
own. We have limited sales, marketing or distribution capabilities. We will depend primarily on
strategic alliances with third parties, which have established distribution systems and sales
forces, to commercialize our drugs. To the extent that we are unsuccessful in commercializing any
drugs or devices ourselves or through a strategic alliance, product revenues will suffer, we will
incur significant additional losses and our share price will be negatively affected.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Securities and Exchange Commission encourages companies to disclose forward-looking
information so that investors can better understand a company's future prospects and make informed
investment decisions. This prospectus contains such "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in
this prospectus, and they may also be made a part of this prospectus by reference to other
documents filed with the Securities and Exchange Commission, which is known as "incorporation by
reference."
Words such as "may," "anticipate," "estimate," "expects," "projects," "intends," "plans,"
"believes" and words and terms of similar substance used in connection with any discussion of
future operating or financial performance identify forward-looking statements. All forward-looking
statements are management's present expectations of future events and are subject to a number of
risks and uncertainties that could cause actual results to differ materially from those described
in the forward-looking statements. Forward-looking statements might include one or more of the
following:
•
anticipated results of financing activities;
•
anticipated agreements with marketing partners;
•
anticipated clinical trial timelines or results;
•
anticipated research and product development results;
•
projected regulatory timelines;
•
descriptions of plans or objectives of management for future operations, products or
services;
•
forecasts of future economic performance; and
•
descriptions or assumptions underlying or relating to any of the above items.
Please also see the discussion of risks and uncertainties under the heading "Risk Factors"
beginning on page 14.
In light of these assumptions, risks and uncertainties, the results and events discussed in
the forward-looking statements contained in this prospectus or in any document incorporated by
reference might not occur. Investors are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this prospectus or the date of the
document incorporated by reference in this prospectus. We are not under any obligation, and we
expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a
result of new information, future events or otherwise. All subsequent forward-looking statements
attributable to Cyclacel or to any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our common stock by the
selling securityholder. The selling securityholder will receive all of the net proceeds from the
sales of common stock offered by it under this prospectus. Any issuance of shares by us to the
selling securityholder under the common stock purchase agreement or in connection with the exercise
of the amended and restated warrant will be made pursuant to an exemption from the registration
requirements of the Securities Act. The proceeds from these sales and from the exercise of the
warrants, if and when exercised by the selling securityholder, will be used by us for general
corporate purposes, including capital expenditures, the advancement of our drug candidates in
clinical trials, and to meet working capital needs. The amounts and timing of the expenditures will
depend on numerous factors, such as the timing and progress of our clinical trials and research and
development efforts, technological advances and the competitive environment for our drug
candidates. We expect, from time to time, to evaluate the acquisition of businesses, products, and
technologies for which a portion of the net proceeds may be used, although we currently are not
planning or negotiating any such transactions. As of the date of this prospectus, we cannot specify
with certainty all of the particular uses for the net proceeds to us from the sale of shares to the
selling securityholder or the exercise of warrants by the selling securityholder. Accordingly, we
will retain broad discretion over the use of these proceeds, if any.
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SELLING SECURITYHOLDER
This prospectus relates to the possible resale by the selling securityholder, Kingsbridge
Capital Limited ("Kingsbridge" or the "selling securityholder"), of shares of common stock that we
may issue pursuant to the common stock purchase agreement we entered into with Kingsbridge on
December 10, 2007, as amended on November 24, 2009, or upon exercise of the amended and restated
warrant we issued to Kingsbridge. Pursuant to common stock purchase agreement, Kingsbridge
committed to purchase, subject to certain conditions, up to the lesser of 4,084,590 shares of
common stock and $60 million of common stock over a three-year period. Pursuant to the amended and
restated warrant, we issued a warrant to Kingsbridge to purchase 175,000 shares of our common stock
at an exercise price of $1.40 per share, such warrant expiring on
June 10, 2012. As of June 9, 2010,
there were 1,266,358 shares of common stock available for purchase by Kingsbridge under the CEFF
and 100,000 shares available for purchase under Kingsbridge's warrant. We are not obligated to
utilize any of the funds available under the CEFF, and there are no minimum commitments or minimum
use penalties.
The shares to be issued to the selling securityholder are "restricted securities" under
applicable federal and state securities laws and are being registered pursuant to the provisions of
the registration rights agreement we entered into with Kingsbridge on December 10, 2007. The
registration of the shares does not necessarily mean, however, that any of these shares will be
offered or sold by the selling securityholder.
The selling securityholder may from time to time offer and sell pursuant to this prospectus
any or all of the shares that it acquires under the common stock purchase agreement or upon
exercise of the warrant. We do not know how long the selling securityholder will hold its shares
before selling them, and we currently have no agreements, arrangements or understandings with the
selling securityholder regarding the sale of any of the shares.
We will receive no proceeds from the sale of the registered shares, and we have agreed to bear
the expenses of registration of the shares, other than commissions and discounts of agents or
broker-dealers and transfer taxes, if any.
The following table presents information regarding Kingsbridge and the shares that it may
offer and sell from time to time under this prospectus. This table is prepared based on information
supplied to us by the selling securityholder, and reflects holdings
as of June 9, 2010. As used in
this prospectus, the term "selling securityholder" includes Kingsbridge and any donees, pledgees,
transferees or other successors in interest selling shares received after the date of this
prospectus from the Selling Stockholder as a gift, pledge or other non-sale related transfer. The
number of shares in the column "Number of Shares Being Offered" represents all of the shares that
the selling securityholder may offer under this prospectus. The selling securityholder may sell
some, all or none of its shares. We do not know how long the selling securityholder will hold the
shares before selling them, and we currently have no agreements, arrangements or understandings
with the selling securityholder regarding the sale of any of the shares.
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Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The
percentage of shares beneficially owned prior to the offering is based both on 36,873,986 shares of
our common stock actually outstanding as of June 9, 2010 and on the assumption that all shares of
common stock that remain issuable under the common stock purchase agreement we entered into with
Kingsbridge on December 10, 2007, as amended on November 24, 2009 and all shares of common stock
issuable upon exercise of the warrant held by Kingsbridge are outstanding as of that date.
Shares of Common Stock
Shares of Common Stock
Beneficially Owned Prior to
Beneficially Owned After
Offering
Number of Shares
Offering
Security Holders
Number
Percent
Being Offered
Number
Percent
Kingsbridge Capital Limited (1)
100,000
(2)
*
1,366,358
(3)
0
0
%
*
Represents beneficial ownership of less than 1% of the
outstanding shares of our common stock.
(1)
The address of Kingsbridge is Kingsbridge Capital Limited, Attention: Mr. Tony Hillman, P.O.
Box 1075, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE42QP, Channel Islands.
(2)
Consists of 100,000 shares of common stock issuable upon
exercise of a warrant, issued to Kingsbridge on December 10,
2007, which warrant is exercisable beginning June 10, 2008 and
until June 10, 2013.
(3)
Consists of (a) 1,266,358 shares of common stock issuable under the common stock purchase
agreement we entered into with Kingsbridge on December 10, 2007, as amended, and (b) 100,000 shares of common
stock issuable upon exercise of a warrant, issued to Kingsbridge on December 10, 2007, as amended, which
warrant is exercisable beginning June 10, 2008 and until June 10, 2013. For the purposes hereof,
we assume the issuance of all 1,366,358 shares under (a) and (b). Adam Gurney and Maria O'Donoghue
have voting and investment control of the securities held by Kingsbridge. Kingsbridge does not
accept third party investments.
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PLAN OF DISTRIBUTION
We
are registering up to 1,366,358 shares of common stock under this prospectus on behalf of
the selling securityholder. Except as described below, to our knowledge, the selling securityholder
has not entered into any agreement, arrangement or understanding with any particular broker or
market maker with respect to the shares of common stock offered hereby, nor, except as described
below, do we know the identity of the brokers or market makers that will participate in the sale of
the shares.
The selling securityholder may decide not to sell any shares. The selling securityholder may,
from time to time, offer some or all of the shares of common stock through brokers, dealers or
agents who may receive compensation in the form of discounts, concessions or commissions from the
selling securityholder and/or the purchasers of the shares of common stock for whom they may act as
agent. In effecting sales, broker-dealers that are engaged by the selling securityholder may
arrange for other broker-dealers to participate. Kingsbridge is an "underwriter" within the meaning
of the 1933 Securities Act, as amended, or the Securities Act. Any brokers, dealers or agents who
participate in the distribution of the shares of common stock may also be deemed to be
"underwriters," and any profits on the sale of the shares of common stock by them and any
discounts, commissions or concessions received by any such brokers, dealers or agents may be deemed
to be underwriting discounts and commissions under the Securities Act. The selling securityholder
has advised us that it may effect resales of our common stock through any one or more registered
broker-dealers. To the extent the selling securityholder may be deemed to be an underwriter, the
selling securityholder will be subject to the prospectus delivery requirements of the Securities
Act and may be subject to certain statutory liabilities of, including but not limited to, Sections
11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as
amended, or the Exchange Act.
The selling securityholder will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made over The NASDAQ Global Market, on
the over-the-counter market, otherwise or in a combination of such methods of sale, at then
prevailing market prices, at prices related to prevailing market prices or at negotiated prices.
The shares of common stock may be sold according to one or more of the following methods:
•
ordinary brokerage transactions and transactions in which the broker dealer solicits
purchasers;
•
block trades in which the broker dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
•
purchases by a broker dealer as principal and resale by the broker dealer for its
account;
•
an exchange distribution in accordance with the rules of the applicable exchange;
•
privately negotiated transactions;
•
settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
•
broker dealers may agree with the selling securityholder to sell a specified number
of such shares at a stipulated price per share;
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•
a combination of any such methods of sale;
•
through the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise; or
•
any other method permitted pursuant to applicable law.
Any shares covered by this prospectus which qualify for sale pursuant to Rule 144 of the
Securities Act may be sold under Rule 144 rather than pursuant to this prospectus. In addition, the
selling securityholder may transfer the shares by other means not described in this prospectus.
Any broker-dealer participating in such transactions as agent may receive commissions from the
selling securityholder (and, if they act as agent for the purchaser of such shares, from such
purchaser). Broker-dealers may agree with the selling securityholder to sell a specified number of
shares at a stipulated price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for the selling securityholder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the selling securityholder.
Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time
in transactions (which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described above) on The
NASDAQ Global Market, on the over-the-counter market, in privately-negotiated transactions or
otherwise at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such shares commissions
computed as described above. To the extent required under the Securities Act, an amendment to this
prospectus or a supplemental prospectus will be filed, disclosing:
•
the name of any such broker-dealers;
•
the number of shares involved;
•
the price at which such shares are to be sold;
•
the commission paid or discounts or concessions allowed to such broker-dealers,
where applicable;
•
that such broker-dealers did not conduct any investigation to verify the information
set out or incorporated by reference in this prospectus, as supplemented; and
•
other facts material to the transaction.
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Underwriters and purchasers that are deemed underwriters under the Securities Act may engage
in transactions that stabilize maintain or otherwise affect the price of the securities, including
the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty bids.
The selling securityholder and any other persons participating in the sale or distribution of the
shares will be subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Regulation M. These provisions may restrict
certain activities of, and limit the timing of, purchases by the selling securityholder or other
persons or entities. Furthermore, under Regulation M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior to the commencement
of such distributions, subject to special exceptions or exemptions. Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in market-making
and certain other activities with respect to those securities. In addition, the
anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market.
All of these limitations may affect the marketability of the shares and the ability of any person
to engage in market-making activities with respect to the securities.
We have agreed to pay the expenses of registering the shares of common stock under the
Securities Act, including registration and filing fees, printing expenses, administrative expenses
and certain legal and accounting fees, as well as certain fees of counsel for the selling
securityholder incurred in the preparation of the CEFF agreements and the registration statement of
which this prospectus forms a part. The selling securityholder will bear all discounts, commissions
or other amounts payable to underwriters, dealers or agents, as well as transfer taxes and certain
other expenses associated with the sale of securities.
Under the terms of the common stock purchase agreement and the registration rights agreement
we entered into with the selling securityholder, we have agreed to indemnify the selling
securityholder and certain other persons against certain liabilities in connection with the
offering of the shares of common stock offered hereby, including liabilities arising under the
Securities Act or, if such indemnity is unavailable, to contribute toward amounts required to be
paid in respect of such liabilities.
At any time a particular offer of the shares of common stock is made, a revised prospectus or
prospectus supplement, if required, will be distributed. Such prospectus supplement or
post-effective amendment will be filed with the SEC, to reflect the disclosure of required
additional information with respect to the distribution of the shares of common stock. We may
suspend the sale of shares by the selling securityholder pursuant to this prospectus for certain
periods of time for certain reasons, including if the prospectus is required to be supplemented or
amended to include additional material information.
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DESCRIPTION OF SECURITIES
Description of Common Stock
We are authorized to issue 100,000,000 shares of common stock, $0.001 par value per share. As
of June 9, 2010, 36,873,986 shares of common stock were issued and outstanding. The following
descriptions of our common stock and provisions of our amended and restated certificate of
incorporation and amended and restated by-laws are only summaries, and we encourage you to review
complete copies of these documents, which have been filed as exhibits to our periodic reports with
the Securities and Exchange Commission.
Dividends, Voting Rights and Liquidation
Holders of common stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders, and do not have cumulative voting rights. Subject to
preferences that may be applicable to any outstanding shares of preferred stock, holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared from time to time
by our board of directors out of funds legally available for dividend payments. All outstanding
shares of common stock are fully paid and non-assessable, and the shares of common stock to be
issued upon completion of this offering will be fully paid and non-assessable. The holders of
common stock have no preferences or rights of conversion, exchange, pre-emption or other
subscription rights. There are no redemption or sinking fund provisions applicable to the common
stock. In the event of any liquidation, dissolution or winding-up of our affairs, holders of common
stock will be entitled to share ratably in our assets that are remaining after payment or provision
for payment of all of our debts and obligations and after liquidation payments to holders of
outstanding shares of preferred stock, if any.
Delaware Law and Certain Charter and By-law Provisions
The provisions of (1) Delaware law, (2) our amended and restated certificate of incorporation,
and (3) our amended and restated bylaws discussed below could discourage or make it more difficult
to accomplish a proxy contest or other change in our management or the acquisition of control by a
holder of a substantial amount of our voting stock. It is possible that these provisions could make
it more difficult to accomplish, or could deter, transactions that stockholders may otherwise
consider to be in their best interests or in our best interests. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of our board of directors and
in the policies formulated by the board of directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of us. These provisions are
designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also
are intended to discourage certain tactics that may be used in proxy fights. Such provisions also
may have the effect of preventing changes in our management.
Delaware Statutory Business Combinations Provision.
We are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is, or the transaction in
which the person became an interested stockholder was, approved in a prescribed manner or another
prescribed exception applies. For purposes of Section 203, a "business combination" is defined
broadly to include a merger, asset sale or other transaction resulting in a financial benefit to
the interested stockholder, and, subject to certain exceptions, an "interested stockholder" is a
person who, together with his or her affiliates and associates, owns (or within three years prior,
did own) 15% or more of the corporation's voting stock.
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Classified Board of Directors; Removal of Directors for Cause.
Our amended and restated
certificate of incorporation and amended and restated bylaws provide that our board of directors is
divided into three classes, each serving staggered three-year terms ending at the annual meeting of
our stockholders. All directors elected to our classified board of directors will serve until the
election and qualification of their respective successors or their earlier resignation or removal.
The board of directors is authorized to create new directorships and to fill such positions so
created and is permitted to specify the class to which any such new position is assigned. The
person filling such position would serve for the term applicable to that class. The board of
directors (or its remaining members, even if less than a quorum) is also empowered to fill
vacancies on the board of directors occurring for any reason for the remainder of the term of the
class of directors in which the vacancy occurred. Members of the board of directors may only be
removed for cause and only by the affirmative vote of 80% of our outstanding voting stock. These
provisions are likely to increase the time required for stockholders to change the composition of
the board of directors. For example, in general, at least two annual meetings will be necessary for
stockholders to effect a change in a majority of the members of the board of directors.
Advance Notice Provisions for Stockholder Proposals and Stockholder Nominations of Directors.
Our amended and restated bylaws provide that, for nominations to the board of directors or for
other business to be properly brought by a stockholder before a meeting of stockholders, the
stockholder must first have given timely notice of the proposal in writing to our Secretary. For an
annual meeting, a stockholder's notice generally must be delivered not less than 45 days nor more
than 75 days prior to the anniversary of the mailing date of the proxy statement for the previous
year's annual meeting. For a special meeting, the notice must generally be delivered by the later
of 90 days prior to the special meeting or ten days following the day on which public announcement
of the meeting is first made. Detailed requirements as to the form of the notice and information
required in the notice are specified in the amended and restated bylaws. If it is determined that
business was not properly brought before a meeting in accordance with our bylaw provisions, such
business will not be conducted at the meeting.
Special Meetings of Stockholders.
Special meetings of the stockholders may be called only by
our board of directors pursuant to a resolution adopted by a majority of the total number of
directors.
No Stockholder Action by Written Consent.
Our amended and restated certificate of
incorporation and amended and restated bylaws do not permit our stockholders to act by written
consent. As a result, any action to be effected by our stockholders must be effected at a duly
called annual or special meeting of the stockholders.
Super-Majority Stockholder Vote Required for Certain Actions.
The Delaware General
Corporation Law provides generally that the affirmative vote of a majority of the shares entitled
to vote on any matter is required to amend a corporation's certificate of incorporation or bylaws,
unless the corporation's certificate of incorporation or bylaws, as the case may be, requires a
greater percentage. Our amended and restated certificate of incorporation requires the affirmative
vote of the holders of at least 80% of our outstanding voting stock to amend or repeal any of the
provisions discussed in this section of this prospectus entitled "Anti-Takeover Provisions" or to
reduce the number of authorized shares of common stock or preferred stock. This 80% stockholder
vote would be in addition to any separate class vote that might in the future be required pursuant
to the terms of any preferred stock that might then be outstanding. In addition, an 80% vote is
also required for any amendment to, or repeal of, our amended and restated bylaws by the
stockholders. Our amended and restated bylaws may be amended or repealed by a simple majority vote
of the board of directors.
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Preferred Stock
We
have the authority to issue up to 5,000,000 shares of preferred
stock. As of June 9, 2010,
1,213,142 shares of our preferred stock were outstanding (see "6% Convertible Exchangeable
Preferred Stock" below). The description of preferred stock provisions set forth below is not
complete and is subject to and qualified in its entirety by reference to our certificate of
incorporation and the certificate of designations relating to each series of preferred stock.
The board of directors has the right, without the consent of holders of common stock, to
designate and issue one or more series of preferred stock, which may be convertible into common
stock at a ratio determined by the board of directors. A series of preferred stock may bear rights superior to
common stock as to voting, dividends, redemption, distributions in liquidation, dissolution, or
winding up, and other relative rights and preferences. The board may set the following terms of any
series preferred stock, and a prospectus supplement will specify these terms for each series
offered:
•
the number of shares constituting the series and the distinctive designation of the
series;
•
dividend rates, whether dividends are cumulative, and, if so, from what date; and
the relative rights of priority of payment of dividends;
•
voting rights and the terms of the voting rights;
•
conversion privileges and the terms and conditions of conversion, including
provision for adjustment of the conversion rate;
•
redemption rights and the terms and conditions of redemption, including the date or
dates upon or after which shares may be redeemable, and the amount per share payable in
case of redemption, which may vary under different conditions and at different
redemption dates;
•
sinking fund provisions for the redemption or purchase of shares;
•
rights in the event of voluntary or involuntary liquidation, dissolution or winding
up of the corporation, and the relative rights of priority of payment; and
•
any other relative powers, preferences, rights, privileges, qualifications,
limitations and restrictions of the series.
Dividends on outstanding shares of preferred stock will be paid or declared and set apart for
payment before any dividends may be paid or declared and set apart for payment on the common stock
with respect to the same dividend period.
If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets available for distribution to holders of preferred stock are insufficient to pay the
full preferential amount to which the holders are entitled, then the available assets will be
distributed ratably among the shares of all series of preferred stock in accordance with the
respective preferential amounts (including unpaid cumulative dividends, if any) payable with
respect to each series.
Holders of preferred stock will not be entitled to preemptive rights to purchase or subscribe
for any shares of any class of capital stock of the corporation. The preferred stock will, when
issued, be fully
paid and non-assessable. The rights of the holders of preferred stock will be subordinate to
those of our general creditors.
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We have previously issued 2,990,000 shares of preferred stock in one series, designated as 6%
Convertible Exchangeable Preferred Stock, of which 1,213,142 are currently outstanding and are
quoted on the NASDAQ Global Market under the symbol "CYCCP."
6% Convertible Exchangeable Preferred Stock
General
Our board of directors has designated 2,990,000 shares of the preferred stock that were issued
as convertible preferred stock on November 3, 2004. The shares of convertible preferred stock are
duly and validly issued, fully paid and non-assessable. These shares will not have any preemptive
rights if we issue other series of preferred stock. The convertible preferred stock is not subject
to any sinking fund. We have no obligation to retire the convertible preferred stock. The
convertible preferred stock has a perpetual maturity and may remain outstanding indefinitely,
subject to the holder's right to convert the convertible preferred stock and our right to cause the
conversion of the convertible preferred stock and exchange or redeem the convertible preferred
stock at our option. Any convertible preferred stock converted, exchanged or redeemed or acquired
by us will, upon cancellation, have the status of authorized but unissued shares of convertible
preferred stock. We will be able to reissue these cancelled shares of convertible preferred stock.
Dividends
When and if declared by our board of directors out of the legally available funds, holders of
the convertible preferred stock are entitled to receive cash dividends at an annual rate of 6% of
the liquidation preference of the convertible preferred stock. Dividends are payable, and have been
paid since February 1, 2005, quarterly on the first day of February, May, August and November. If
any dividends are not declared, they will accrue and be paid at such later date, if any, as
determined by our board of directors. Dividends on the convertible preferred stock will be
cumulative from the issue date. Dividends will be payable to holders of record as they appear on
our stock books not more than 60 days nor less than 10 days preceding the payment dates, as fixed
by our board of directors. If the convertible preferred stock is called for redemption on a
redemption date between the dividend record date and the dividend payment date and the holder does
not convert the convertible preferred stock (as described below), the holder shall receive the
dividend payment together with all other accrued and unpaid dividends on the redemption date
instead of receiving the dividend on the dividend date. Dividends payable on the convertible
preferred stock for any period greater or less than a full dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Accrued but unpaid dividends will not
bear interest.
If we do not pay or set aside cumulative dividends in full on the convertible preferred stock
and any other preferred stock ranking on the same basis as to dividends, all dividends declared
upon shares of the convertible preferred stock and any other preferred stock ranking on the same
basis as to dividends will be declared on a pro rata basis until all accrued dividends are paid in
full. For these purposes, "pro rata" means that the amount of dividends declared per share on the
convertible preferred stock and any other preferred stock ranking on the same basis as to dividends
bear to each other will be the same ratio that accrued and unpaid dividends per share on the shares
of the convertible preferred stock and such other preferred stock bear to each other. We will not
be able to redeem, purchase or otherwise acquire any of our stock ranking on the same basis as the
convertible preferred stock as to dividends or liquidation preferences unless we have paid or set
aside full cumulative dividends, if any, accrued on all outstanding shares of convertible preferred
stock.
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Unless we have paid or set aside cumulative dividends in full on the convertible preferred
stock and any other of the convertible preferred stock ranking on the same basis as to dividends:
•
we may not declare or pay or set aside dividends on common stock or any other stock
ranking junior to the convertible preferred stock as to dividends or liquidation
preferences, excluding dividends or distributions of shares, options, warrants or
rights to purchase common stock or other stock ranking junior to the convertible
preferred stock as to dividends; or
•
we will not be able to redeem, purchase or otherwise acquire any of our other stock
ranking junior to the convertible preferred stock as to dividends or liquidation
preferences, except in very limited circumstances.
Under Delaware law, we may only make dividends or distributions to our stockholders from:
•
our surplus; or
•
the net profits for the current fiscal year or the fiscal year before which the
dividend or distribution is declared under certain circumstances.
On April 6, 2009, June 22, 2009, October 19, 2009,
January 7, 2010, and March 29, 2010, our board of directors resolved, pursuant to the Certificate of Designations, not to declare the
quarterly cash dividend on the Company's 6% Convertible Exchangeable Preferred Stock with respect to the dividends that would otherwise
been payable on May 1, 2009, August 1, 2009, November 1, 2009, February 1, 2010 and May 1, 2010, respectively. To the extent that any
dividends payable on the preferred stock are not paid, such unpaid dividends are accrued. We have not declared dividends with respect
to five quarters and if dividends with respect to at least six quarters (whether or not consecutive) are not paid on the preferred stock,
the size of our board of directors could be increased by two members and the holders of the preferred stock, voting separately as a class,
will have the right to vote to fill the two vacancies created thereby until all accrued but unpaid dividends have been paid in full, at
which time such right is terminated. As of March 30, 2010, approximately $1.4 million of dividends remain accrued and unpaid.
Conversion
Conversion Rights
Holders of our convertible preferred stock may convert the convertible preferred stock at any
time into a number of shares of common stock determined by dividing the $10 liquidation preference
by the conversion price of $23.50, being the original conversion price of $2.35 as adjusted
following a reverse stock split, subject to adjustment as described below. This conversion price is
equivalent to a conversion rate of approximately 0.42553 shares of common stock for each share of
convertible preferred stock. We will not make any adjustment to the conversion price for accrued or
unpaid dividends upon conversion. We will not issue fractional shares of common stock upon
conversion. However, we will instead pay cash for each fractional share based upon the market price
of the common stock on the last business day prior to the conversion date. If we call the
convertible preferred stock for redemption, the holder's right to convert the convertible preferred
stock will expire at the close of business on the business day immediately preceding the date fixed
for redemption, unless we fail to pay the redemption price.
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Automatic Conversion
Unless we redeem or exchange the convertible preferred stock, we may elect to convert some or
all of the convertible preferred stock into shares of our common stock if the closing price of our
common stock has exceeded 150% of the conversion price for at least 20 out of 30 consecutive
trading days ending within five trading days prior to the notice of automatic conversion. If we
elect to convert less than all of the shares of convertible preferred stock, we shall select the
shares to be converted by lot or pro rata or in some other equitable manner in our discretion. On or after November 3, 2007,
we may not elect to automatically convert the convertible preferred stock if full cumulative
dividends on the convertible preferred stock for all past dividend periods have not been paid or
set aside for payment.
Conversion Price Adjustment — General
The conversion price of $23.50 will be adjusted if:
(1)
we dividend or distribute common stock on shares of our common stock;
(2)
we subdivide or combine our common stock;
(3)
we issue to all holders of common stock certain rights or warrants to purchase
our common stock at less than the current market price;
(4)
we dividend or distribute to all holders of our common stock shares of our
capital stock or evidences of indebtedness or assets, excluding:
•
those rights, warrants, dividends or distributions referred to in (1) or
(3), or
•
dividends and distributions paid in cash;
(5)
we made a dividend or distribution consisting of cash to all holders of common
stock;
(6)
we purchase common stock pursuant to a tender offer made by us or any of our
subsidiaries; and
(7)
a person other than us or any of our subsidiaries makes any payment on a tender
offer or exchange offer and, as of the closing of the offer, the board of directors is
not recommending rejection of the offer. We will only make this adjustment if the
tender or exchange offer increases a person's ownership to more than 25% of our
outstanding common stock, and only if the payment per share of common stock exceeds the
current market price of our common stock. We will not make this adjustment if the
offering documents disclose our plan to engage in any consolidation, merger, or
transfer of all or substantially all of our properties and if specified conditions are
met.
If we implement a stockholder rights plan, this new rights plan must provide that, upon
conversion of the existing convertible preferred stock the holders will receive, in addition to the
common stock issuable upon such conversion, the rights under such rights plan regardless of whether
the rights have separated from the common stock before the time of conversion. The distribution of
rights or warrants pursuant to a stockholder rights plan will not result in an adjustment to the
conversion price of the convertible preferred stock until a specified triggering event occurs.
The occurrence and magnitude of certain of the adjustments described above is dependent upon
the current market price of our common stock. For these purposes, "current market price" generally
means the lesser of:
•
the closing sale price on certain specified dates, or
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•
the average of the closing prices of the common stock for the ten trading day period
immediately prior to certain specified dates.
We may make a temporary reduction in the conversion price of the convertible preferred stock
if our board of directors determines that this decrease would be in our best interest. We may, at
our option, reduce the conversion price if our board of directors deems it advisable to avoid or
diminish any income tax to holders of common stock resulting from any dividend or distribution of
stock or rights to acquire stock or from any event treated as such for income tax purposes.
Conversion Price Adjustment — Merger, Consolidation or Sale of Assets
If we are involved in a transaction in which shares of our common stock are converted into the
right to receive other securities, cash or other property, or a sale or transfer of all or
substantially all of our assets under which the holders of our common stock shall be entitled to
receive other securities, cash or other property, then appropriate provision shall be made so that
the shares of convertible preferred stock will convert into:
(1)
if the transaction is a common stock fundamental change, as defined below,
common stock of the kind received by holders of common stock as a result of common
stock fundamental change in accordance with paragraph (1) below under the subsection
entitled "— Fundamental Change Conversion Price Adjustments," and
(2)
if the transaction is not a common stock fundamental change, and subject to
funds being legally available at conversion, the kind and amount of the securities,
cash or other property that would have been receivable upon the recapitalization,
reclassification, consolidation, merger, sale, transfer or share exchange by a holder
of the number of shares of common stock issuable upon conversion of the convertible
preferred stock immediately prior to the recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving effect to any
adjustment in the conversion price in accordance with paragraph (2) below under the
subsection entitled "— Fundamental Change Conversion Price Adjustments."
The company formed by the consolidation, merger, asset acquisition or share acquisition shall
provide for this right in its organizational document. This organizational document shall also
provide for adjustments so that the organizational document shall be as nearly practicably
equivalent to adjustments in this section for events occurring after the effective date of the
organizational document.
The following types of transactions, among others, would be covered by this adjustment:
(1)
we recapitalize or reclassify our common stock, except for:
•
a change in par value,
•
a change from par value to no par value,
•
a change from no par value to par value, or
•
a subdivision or combination of our common stock.
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(2)
we consolidate or merge into any other person, or any merger of another person
into us, except for a merger that does not result in a reclassification, conversion,
exchange or cancellation of common stock,
(3)
we sell, transfer or lease all or substantially all of our assets and holders
of our common stock become entitled to receive other securities, cash or other
property, or
(4)
we undertake any compulsory share exchange.
Fundamental Change Conversion Price Adjustments
If a fundamental change occurs, the conversion price will be adjusted as follows:
(1)
in the case of a common stock fundamental change, the conversion price shall be
the conversion price after giving effect to any other prior adjustments effected
pursuant to the preceding paragraphs, multiplied by a fraction, the numerator of which
is the purchaser stock price, as defined below, and the denominator of which is the
applicable price, as defined below. However, in the event of a common stock fundamental
change in which:
•
100% of the value of the consideration received by a holder of our common
stock is common stock of the successor, acquirer or other third party, and
cash, if any, paid with respect to any fractional interests in such common
stock resulting from such common stock fundamental change, and
•
All of our common stock shall have been exchanged for, converted into or
acquired for, common stock of the successor, acquirer or other third party, and
any cash with respect to fractional interests,
•
the conversion price shall be the conversion price in effect immediately
prior to such common stock fundamental change multiplied by a fraction, the
numerator of which is one (1) and the denominator of which is the number of
 shares of common stock of the successor, acquirer or other third party received
by a holder of one share of our common stock as a result of the common stock
fundamental change; and
(2)
in the case of a non-stock fundamental change, the conversion price shall be the lower of:
•
the conversion price after giving effect to any other prior adjustments
effected pursuant to the preceding paragraph and
•
the product of
A. the applicable price, and
B. a fraction, the numerator of which is $10 and the denominator of which is (x) the
amount of the redemption price for one share of convertible preferred stock if the
redemption date were the date of the non-stock fundamental change (or if the date of
such non-stock fundamental change falls within the period beginning on the first
issue date of the convertible preferred stock through October 31, 2005, the
twelve-month period commencing November 1, 2005 and the twelve-month period
commencing November 1,
2006, the product of 106.0%, 105.4% or 104.8%, respectively, and $10) plus (y) any
then-accrued and unpaid distributions on one share of convertible preferred stock.
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Holders of convertible preferred stock may receive significantly different consideration upon
conversion depending upon whether a fundamental change is a non-stock fundamental change or a
common stock fundamental change. In the event of a non-stock fundamental change, the shares of
convertible preferred stock will convert into stock and other securities or property or assets,
including cash, determined by the number of shares of common stock receivable upon conversion at
the conversion price as adjusted in accordance with (2) above. In the event of a common stock
fundamental change, under certain circumstances, the holder of convertible preferred stock will
receive different consideration depending on whether the holder converts his or her shares of
convertible preferred stock on or after the common stock fundamental change.
Definitions for the Fundamental Change Adjustment Provision
"
applicable price
" means:
•
in a non-stock fundamental change in which the holders of common stock receive only
cash, the amount of cash received by a holder of one share of common stock, and
•
in the event of any other fundamental change, the average of the daily closing price
for one share of common stock during the 10 trading days immediately prior to the
record date for the determination of the holders of common stock entitled to receive
cash, securities, property or other assets in connection with the fundamental change
or, if there is no such record date, prior to the date upon which the holders of common
stock shall have the right to receive such cash, securities, property or other assets.
"
common stock fundamental change
" means any fundamental change in which more than 50% of the
value, as determined in good faith by our board of directors, of the consideration received by
holders of our common stock consists of common stock that, for the 10 trading days immediately
prior to such fundamental change, has been admitted for listing or admitted for listing subject to
notice of issuance on a national securities exchange or quoted on The NASDAQ National Market,
except that a fundamental change shall not be a common stock fundamental change unless either:
•
we continue to exist after the occurrence of the fundamental change and the
outstanding convertible preferred stock continues to exist as outstanding convertible
preferred stock, or
•
not later than the occurrence of the fundamental change, the outstanding convertible
preferred stock is converted into or exchanged for shares of preferred stock, which
preferred stock has rights, preferences and limitations substantially similar, but no
less favorable, to those of the convertible preferred stock.
"
fundamental change
" means the occurrence of any transaction or event or series of
transactions or events pursuant to which all or substantially all of our common stock shall be
exchanged for, converted into, acquired for or shall constitute solely the right to receive cash,
securities, property or other assets, whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification, recapitalization or otherwise.
However, for purposes of adjustment of the conversion price, in the case of any series of
transactions or events, the fundamental change shall be deemed to have occurred when substantially
all of the common stock shall have been exchanged for,
converted into or acquired for, or shall constitute solely the right to receive, such cash,
securities, property or other assets, but the adjustment shall be based upon the consideration that
the holders of our common stock received in the transaction or event as a result of which more than
50% of our common stock shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other assets.
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"
non-stock fundamental change
" means any fundamental change other than a common stock
fundamental change.
"
purchaser stock price
" means the average of the daily closing price for one share of the
common stock received by holders of the common stock in the common stock fundamental change during
the 10 trading days immediately prior to the date fixed for the determination of the holders of the
common stock entitled to receive such common stock or, if there is no such date, prior to the date
upon which the holders of the common stock shall have the right to receive such common stock.
Dividend Make-Whole Payment
If we elect to automatically convert, or the holder voluntarily converts, some or all of the
convertible preferred stock into shares of our common stock prior to November 3, 2007, we will make
an additional payment equal to the total value of the aggregate amount of cumulative dividends that
would have accrued and become payable on the convertible preferred stock from the date of original
issue through and including November 3, 2007, less any dividends already paid on the convertible
preferred stock. This additional payment is payable by us, in cash, or, at our option, in shares of
our common stock or a combination of cash and shares of our common stock. In the event of an
automatic conversion or any voluntary conversion undertaken after we provide notice of an automatic
conversion, the shares of common stock issued in payment of the dividend make-whole payment will be
valued at 150% of the conversion price on the effective date of the conversion. In all other
circumstances, any shares of our common stock issued in payment of the dividend make-whole payment
will be valued at the greater of (i) 95% of the average closing price of our common stock for the
two trading days prior to the effective date of conversion or (ii) $2.00, which was the last
reported sale price of our common stock on October 28, 2004. In the event of an automatic
conversion, the notice of automatic conversion will specify whether we will make the dividend
make-whole payment in cash, shares of our common stock or a combination of cash and shares of our
common stock. We will not issue fractional shares for any additional payment upon conversion but
will instead make a cash adjustment for any fractional share payment.
However, given that the date referenced has passed, these provisions
are no longer applicable.
Liquidation Rights
In the event of our voluntary or involuntary dissolution, liquidation, or winding up, the
holders of the convertible preferred stock shall receive a liquidation preference of $10 per share
and all accrued and unpaid dividends through the distribution date. Holders of any class or series
of preferred stock ranking on the same basis as your convertible preferred stock as to liquidation
shall also be entitled to receive the full respective liquidation preferences and any accrued and
unpaid dividends through the distribution date. Only after the preferred stock holders have
received their liquidation preference and any accrued and unpaid dividends will we distribute
assets to common stock holders or any of our other stock ranking junior to the shares of
convertible preferred stock upon liquidation. If upon such dissolution, liquidation or winding up,
we do not have enough assets to pay in full the amounts due on the convertible preferred stock and
any other preferred stock ranking on the same basis with the convertible preferred stock as to
liquidation, the holders of the convertible preferred stock and such other preferred stock will
share ratably in any such distributions of our assets:
•
first in proportion to the liquidation preferences until the preferences are paid in
full, and
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•
then in proportion to the amounts of accrued but unpaid dividends.
After we pay any liquidation preference and accrued dividends, holders of the convertible
preferred stock will not be entitled to participate any further in the distribution of our assets.
The following events will not be deemed to be a dissolution, liquidation or winding up of Cyclacel:
•
the sale of all or substantially all of the assets;
•
our merger or consolidation into or with any other corporation; or
•
our liquidation, dissolution, winding up or reorganization immediately followed by a
reincorporation as another corporation.
Optional Redemption
On or after November 6, 2007 we may redeem the convertible preferred stock, out of legally
available funds, in whole or in part, at our option, at the redemption prices listed below. The
redemption price is as follows for the 12-month period beginning November 1 of the following years,
beginning November 6, 2007 and ending on October 31, 2008 in the case of the first period:
Redemption
Year
Price
2007
$
10.42
2008
10.36
2009
10.30
2010
10.24
2011
10.18
2012
10.12
2013
10.06
and $10.00 at November 1, 2014 and thereafter. In each case we will pay accrued and unpaid
dividends to, but excluding, the redemption date. We are required to give notice of redemption not
more than 60 and not less than 20 days before the redemption date.
If we redeem less than all of the shares of convertible preferred stock, we shall select the
shares to be redeemed by lot or pro rata or in some other equitable manner in our sole discretion.
Exchange Provisions
We may exchange the convertible preferred stock in whole, but not in part, for debentures on
any dividend payment date on or after November 1, 2005 at the rate of $10 principal amount of
debentures for each outstanding share of convertible preferred stock. Debentures will be issuable
in denominations of $1,000 and integral multiples of $1,000, as discussed in the section entitled
"Description of Debentures" below. If the exchange results in an amount of debentures that is not
an integral multiple of $1,000, we will pay in cash an amount in excess of the closest integral
multiple of $1,000. We will mail written notice of our intention to exchange the convertible
preferred stock to each record holder not less than 30 nor more than 60 days prior to the exchange
date.
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We refer to the date fixed for exchange of the convertible preferred stock for debentures as
the "exchange date." On the exchange date, the holder's rights as a stockholder of Cyclacel shall
cease, the shares of convertible preferred stock will no longer be outstanding, and will only
represent the right to receive the debentures and any accrued and unpaid dividends, without
interest. We may not exercise our option to exchange the convertible preferred stock for the
debentures if:
•
full cumulative dividends on the convertible preferred stock to the exchange date
have not been paid or set aside for payment, or
•
an event of default under the indenture would occur on conversion, or has occurred
and is continuing.
Voting Rights
Holders of our convertible preferred stock have no voting rights except as described below or
as required by law. Shares of our convertible preferred stock held by us or any entity controlled
by us will not have any voting rights.
If we have not paid dividends on the convertible preferred stock or on any outstanding shares
of preferred stock ranking on the same basis as to dividends with the convertible preferred stock
in an aggregate amount equal to at least six quarterly dividends whether or not consecutive, we
will increase the size of our board of directors by two additional directors. So long as dividends
remain due and unpaid, holders of the convertible preferred stock, voting separately as a class
with holders of preferred stock ranking on the same basis as to dividends having like voting
rights, will be entitled to elect two additional directors at any meeting of stockholders at which
directors are to be elected. These directors will be appointed to classes on the board as
determined by our board of directors. These voting rights will terminate when we have declared and
either paid or set aside for payment all accrued and unpaid dividends. The terms of office of all
directors so elected will terminate immediately upon the termination of these voting rights. On
April 6, 2009, June 22, 2009, October 19, 2009, January 7, 2010, and March 29, 2010, our board
of directors resolved, pursuant to the Certificate of Designations, not to declare payment of the quarterly cash dividend on our convertible
preferred stock scheduled for May 1, 2009, August 1, 2009, November 1, 2009, February 1, 2010 and
May 1, 2010, respectively.
Without the vote or consent of the holders of at least a majority of the shares of convertible
preferred stock, we may not:
•
adversely change the rights, preferences and limitations of the convertible
preferred stock by modifying our certificate of incorporation or bylaws, or
•
authorize, issue, reclassify any of our authorized stock into, increase the
authorized amount of, or authorize or issue any convertible obligation or security or
right to purchase, any class of stock that ranks senior to the convertible preferred
stock as to dividends or distributions of assets upon liquidation, dissolution or
winding up of the stock.
No class vote on the part of convertible preferred stock shall be required (except as
otherwise required by law or resolution of our board of directors) in connection with the
authorization, issuance or increase in the authorized amount of any shares of capital stock ranking
junior to or on parity with the convertible preferred stock both as to the payment of dividends and
as to distribution of assets upon our liquidation, dissolution or winding up, whether voluntary or
involuntary, including our common stock and the convertible preferred stock.
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In addition, without the vote or consent of the holders of at least a majority of the shares
of convertible preferred stock we may not:
•
enter into a share exchange that affects the convertible preferred stock,
•
consolidate with or merge into another entity, or
•
permit another entity to consolidate with or merge into us,
unless the convertible preferred stock remains outstanding and its rights, privileges and
preferences are unaffected or it is converted into or exchanged for convertible preferred stock of
the surviving entity having rights, preferences and limitations substantially similar, but no less
favorable, to the convertible preferred stock.
In determining a majority under these voting provisions, holders of convertible preferred
stock will vote together with holders of any other preferred stock that rank on parity as to
dividends and that have like voting rights.
Warrants
On November 24, 2009, we issued to Kingsbridge Capital Limited, or Kingsbridge, an amended and
restated warrant to purchase 175,000 shares of common stock at an exercise price of $1.40 per
share, such warrant expiring on June 10, 2013. Under the terms of the warrant, the warrant may not
be exercised to the extent that such exercise would cause the warrant holder to beneficially own
(or be deemed to beneficially own) a number of shares of our common stock that would exceed 9.9% of
our then outstanding shares of common stock following such exercise.
As of June 9, 2010, there were
100,000 shares available for purchase under Kingsbridge's warrant.
Listing
Our common stock is listed on the NASDAQ Global Market under the symbol "CYCC." Our preferred
stock is listed on the NASDAQ Capital Market under the symbol "CYCCP."
Transfer Agent and Registrar
American Stock Transfer & Trust Company is the transfer agent and registrar for our common
stock. Their address is 59 Maiden Lane, Plaza Level, New York, NY 10038, and their telephone number
is (800) 937-5449.
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DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law (the "Delaware Law") authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Our
amended and restated certificate of incorporation, as amended, provides for indemnification of
officers, directors and other employees of our company to the fullest extent permitted by Delaware
Law and that directors shall not be personally liable to our company or our stockholders for
monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a
director's duty of loyalty to our company or our stockholders, (ii) acts and omissions that are not
in good faith or that involve intentional misconduct or knowing violation of law, (iii) under
Section 174 of the Delaware Law, or (iv) for any transaction from which the director derived any
improper benefit.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been information that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on The NASDAQ Global Market, or NASDAQ, under the symbol "CYCC."
Our preferred stock currently trades on NASDAQ under the symbol "CYCCP." The following table
summarizes, for the periods indicated, the high and low sales prices for the common stock as
reported by NASDAQ:
High
Low
2010
Quarter
ended March 31, 2010
$
4.08
$
1.00
2009
Quarter ended March 31, 2009
$
0.54
$
0.26
Quarter ended June 30, 2009
$
1.66
$
0.30
Quarter ended September 30, 2009
$
1.24
$
0.79
Quarter ended December 31, 2009
$
1.69
$
0.75
2008
Quarter ended March 31, 2008
$
5.51
$
2.40
Quarter ended June 30, 2008
$
3.67
$
1.66
Quarter ended September 30, 2008
$
2.00
$
0.84
Quarter ended December 31, 2008
$
1.16
$
0.23
On
June 9, 2010, we had approximately 55 registered holders of record of our common stock.
On June 9, 2010, the closing sale price of our common stock as
reported by NASDAQ was $1.42 per
share.
Dividends
We have never declared any cash dividends with respect to our common stock. Future payment of
dividends is within the discretion of our board of directors and will depend on our earnings,
capital requirements, financial condition and other relevant factors. Although there are no
material restrictions limiting, or that are likely to limit, our ability to pay dividends on our
common stock, we presently intend to retain future earnings, if any, for use in our business and
have no present intention to pay cash dividends on our common stock.
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LEGAL MATTERS
Certain legal matters in connection with the offering and the validity of the common stock
offered by this prospectus will be passed upon for us by Mintz, Levin, Cohen, Ferris, Glovsky &
Popeo, P.C.
EXPERTS
The financial statements as of December 31, 2009, 2008 and 2007 incorporated by reference into
this prospectus have been so included in reliance on the report of Ernst & Young LLP, independent
registered public accounting firm, given on the authority of said firm as experts in auditing and
accounting.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by reference" information we
file with it. This means that we can disclose important information to you by referring you to
those documents. Any information we reference in this manner is considered part of this prospectus.
Information contained in this prospectus supersedes information incorporated by reference that we
have filed with the Securities and Exchange Commission prior to the date of this prospectus. We
incorporate by reference the documents listed below, except to the extent that any information
contained in any such document is deemed "furnished" in accordance with the rules of the Securities
and Exchange Commission:
•
Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed on May 19,
2010;
•
Our Annual Report on Form 10-K for the year ended December 31, 2009 filed on March 29,
2010, as amended by Amendment No. 1 to Annual Report on Form 10-K/A for the year ended
December 31, 2009 filed on May 17, 2010 and as further amended by Amendment No. 2 to Annual
Report on Form 10-K/A for the year ended December 31, 2010 filed on May 19, 2010;
•
Our Current Reports on Form 8-K filed on January 8, 2010,
January 11, 2010, January 13, 2010, January 21, 2010, January 25,
2010, January 27, 2010, March 16, 2010, March 31, 2010,
April 20, 2010, May 13,
2010 and May 27, 2010;
•
The description of our common stock contained in our Registration Statement on Form
8-A, filed on March 8, 2004 (File No. 000-50626), which incorporates by reference the
description of the shares of our common stock contained in our Registration Statement
on Form S-1 (File No. 333-109653) filed on December 22, 2003 and declared effective by
the SEC on March 17, 2004, and any amendment or reports filed with the SEC for purposes
of updating such description; and
•
The description of our preferred stock contained in our Registration Statement on
Form 8-A, filed on October 27, 2004 (File No. 000-50626), which incorporates by
reference the description of the shares of our preferred stock contained in our
Registration Statement on Form S-1 (File No. 333-119585) filed on October 7, 2004 and
declared effective by the SEC on November 1, 2004, and any amendment or reports filed
with the SEC for purposes of updating such description.
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We will provide to each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the reports or documents that we incorporate by reference in
this prospectus contained in the registration statement but not delivered with this prospectus at
no cost to you, by writing or calling us at: 200 Connell Drive, Suite 1500, Berkeley Heights, NJ
07922, telephone (908) 517-7330. Information about us is also available at our website at
http://www.cyclacel.com.
However, the
information in our website is not a part of this prospectus and is not incorporated by reference
into this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the SEC. These
filings contain important information that does not appear in this prospectus. For further
information about us, you may read and copy any reports, statements and other information filed by
us at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549-0102. You may obtain further information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available on the SEC Internet site at
http://www.sec.gov, which contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
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PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distributions
Securities and Exchange Commission Registration Fee*
$
0
Legal Fees and Expenses
40,000
Accounting Fees and Expenses
15,000
Miscellaneous Expenses
5,000
Total
$
60,000
*
Previously paid. All expenses are estimates.
Item 14. Indemnification of Directors and Officers
Our amended and restated certificate of incorporation, as amended, and amended and restated
bylaws, as amended, provide that each person who was or is made a party or is threatened to be made
a party to or is otherwise involved (including, without limitation, as a witness) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or an officer of Cyclacel Pharmaceuticals, Inc. or is or was
serving at our request as a director, officer, or trustee of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or trustee or in any other capacity while serving as a director,
officer or trustee, shall be indemnified and held harmless by us to the fullest extent authorized
by the Delaware General Corporation Law against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such.
Section 145 of the Delaware General Corporation Law permits a corporation to indemnify any
director or officer of the corporation against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred in connection with any
action, suit or proceeding brought by reason of the fact that such person is or was a director or
officer of the corporation, if such person acted in good faith and in a manner that he reasonably
believed to be in, or not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, if he or she had no reason to believe his or her conduct was
unlawful. In a derivative action, (
i.e
., one brought by or on behalf of the corporation),
indemnification may be provided only for expenses actually and reasonably incurred by any director
or officer in connection with the defense or settlement of such an action or suit if such person
acted in good faith and in a manner that he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification shall be provided if such
person shall have been adjudged to be liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law, our amended and
restated certificate of incorporation eliminates the liability of a director to us or our
stockholders for monetary damages for such a breach of fiduciary duty as a director, except for
liabilities arising:
•
from any breach of the director's duty of loyalty to us or our stockholders;
•
from acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law;
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•
under Section 174 of the Delaware General Corporation Law; and
•
from any transaction from which the director derived an improper personal benefit.
We carry insurance policies insuring our directors and officers against certain liabilities
that they may incur in their capacity as directors and officers. In addition, we expect to enter
into indemnification agreements with each of our directors and executive officers prior to
completion of the offering.
The Company has entered into indemnification agreements with each of its directors and
executive officers. Pursuant to the indemnification agreements, the Company agrees to hold harmless
and indemnify its directors and executive officers to the fullest extent authorized or permitted by
the provisions of the Company's amended and restated certificate of incorporation, amended and
restated by-laws and the DGCL, including for any amounts that such director or officer becomes
obligated to pay because of any claim to which such director or officer is made or threatened to be
made a party, witness or participant, by reason of such director's or officer's service as a
director, officer, employee or other agent of the Company.
There are certain exceptions from the Company's obligation to indemnify its directors and
executive officers pursuant to the indemnification agreements, including for "short-swing" profit
claims under Section 16(b) of the Securities Exchange Act of 1934, as amended, losses that are as a
result of conduct that is established by a final judgment as knowingly fraudulent or deliberately
dishonest or that constituted willful misconduct, or that constituted a breach of the duty of
loyalty to the Company or resulted in any improper personal profit or advantage, where payment is
actually made to a director or officer under an insurance policy, indemnity clause, bylaw or
agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or
agreement, for indemnification which is not lawful, or in connection with any proceeding initiated
by such director or officer, or any proceeding against the Company or its directors, officers,
employees or other agents, unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the board of directors of the Company, (iii) such
indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested
in the Company under the DGCL, or (iv) the proceeding is initiated to enforce a claim for
indemnification pursuant to the indemnification agreement.
All agreements and obligations of the Company contained in the indemnification agreements
shall continue during the period when the director or officer who is a party to an indemnification
agreement is a director, officer, employee or other agent of the Company (or is or is serving at
the request of the Company as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as such director or officer shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative. In addition, the indemnification agreements provide
for partial indemnification and advance of expenses.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as expressed in the Securities
Act of 1933, as amended, and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities
On April 19, 2010, the Company issued upon settlement, an aggregate of 1,416,203 shares of its
common stock to several of its stockholders in exchange for such stockholders' delivery to the
Company of an aggregate of 710,271 shares of the Company's preferred stock. The shares of common
stock were issued in reliance on the exemption from registration contained in Section 3(a)(9) of
the Securities Act for securities exchanged by an issuer and an existing stockholder where no
commission or other remuneration is paid or given directly or indirectly by the issuer for
soliciting such exchange. These transactions settled on or before April 23, 2010, after which time,
a total of 1,213,142 shares of preferred stock remain outstanding.
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Item 16. Exhibits
EXHIBIT
NUMBER
DESCRIPTION
1.1
Placement Agent Agreement, dated July 23, 2009, by and between the Company and Lazard
Capital Markets LLC (previously filed as Exhibit 1.1 to the Registrant's Current Report
on Form 8-K, originally filed with the SEC on July 24, 2009, and incorporated herein by
reference).
1.2
Placement Agent Agreement, dated January 11, 2010, by and between the Company and ROTH
Capital Partners, LLC (previously filed as Exhibit 1.1 to the Registrant's Current Report
on Form 8-K, originally filed with the SEC on January 11, 2010, and incorporated herein
by reference).
1.3
Placement Agent Agreement, dated January 21, 2010, by and between the Company and ROTH
Capital Partners, LLC (previously filed as Exhibit 1.1 to the Registrant's Current Report
on Form 8-K, originally filed with the SEC on January 21, 2010, and incorporated herein
by reference).
3.1
Amended and Restated Certificate of Incorporation of Xcyte Therapies, Inc. (previously
filed as Exhibit 3.1 to the Registrant's Registration Statement on Form S-1, File No.
333-109653, originally filed with the SEC on October 10, 2003, as subsequently amended,
and incorporated herein by reference).
3.1.1
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of
Xcyte Therapies, Inc. (previously filed as Exhibit 3.3.1 to the Registrant's Quarterly
Report on Form 10-Q, for the quarterly period ended March 31, 2006, originally filed with
the SEC on May 16, 2006, and incorporated herein by reference).
3.2
Amended and Restated Bylaws of Xcyte Therapies, Inc. (Previously filed as Exhibit 3.3 to
Registrant's Registration Statement on Form S-1, File No. 333-109653, originally filed
with the SEC on October 10, 2003, as subsequently amended, and incorporated herein by
reference).
3.2.1
Amendment No. 1 to the Amended and Restated Bylaws of Xcyte Therapies, Inc. (previously
filed as Exhibit 3.01 to the Registrant's Current Report on Form 8-K, originally filed
with the SEC on September 8, 2008, and incorporated herein by reference).
3.3
Preferred Stock Certificate of Designations (previously filed as Exhibit 3.2 to the
Registrant's Current Report on Form 8-K, originally filed with the SEC on November 5,
2004, and incorporated herein by reference).
4.1
Specimen of Common Stock Certificate (previously filed as Exhibit 4.1 to Registrant's
Registration Statement on Form S-1, File No. 333-109653, originally filed with the SEC on
October 10, 2003, as subsequently amended, and incorporated herein by reference).
4.2
Specimen of Preferred Stock Certificate of Designation (previously filed as Exhibit 3.2
to Registrant's Registration Statement on Form S-1, File No. 333-119585, originally filed
with the SEC on October 7, 2004, as subsequently amended, and incorporated herein by
reference).
4.3
Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit 99.3 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on April 28, 2006, and incorporated herein by reference).
4.4
Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on February 15, 2007, and incorporated herein by
reference).
4.5
Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock, dated
December 10, 2007, issued to Kingsbridge Capital Limited (previously filed as Exhibit 4.1
to the Registrant's Current Report on Form 8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).
4.6
Registration Rights Agreement, dated December 10, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit 4.2 to
the Registrant's Current Report on Form 8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).
4.7
Amended and Restated Warrant to purchase Common Stock, dated as of November 24, 2009,
issued by the Company to Kingsbridge Capital Limited. (previously filed as Exhibit 4.1 to
the Registrant's Current Report on Form 8-K, originally filed with the SEC on November
25, 2009, and incorporated herein by reference).
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EXHIBIT
NUMBER
DESCRIPTION
4.8
Form of Series I Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common
Stock (previously filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on July 24, 2009, and incorporated herein by reference).
4.9
Form of Series II Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common
Stock (previously filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on July 24, 2009, and incorporated herein by reference).
4.10
Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on January 11, 2010, and incorporated herein by reference).
4.11
Form of Warrant to purchase shares of Cyclacel Pharmaceuticals, Inc. Common Stock
(previously filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K,
originally filed with the SEC on January 21, 2010, and incorporated herein by reference).
5.1
Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding legality of
securities being registered (previously filed as Exhibit 5.1 to the Registrant's
Registration Statement on Form S-3, originally filed with the SEC on December 11,2007),
and incorporated herein by reference).
10.1
Stock Purchase Agreement, dated December 15, 2005, between Xcyte Therapies, Inc., and
Cyclacel Group plc (previously filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, originally filed with the SEC on December 20, 2005, and incorporated herein by
reference).
10.2
Amendment No. 1 to the Stock Purchase Agreement, dated January 13, 2006, between Xcyte
Therapies Inc., and Cyclacel Group plc (previously filed as exhibit 2.1 to the
Registrant's current report on Form 8-K filed with the Commission on January 19, 2006,
and incorporated herein by reference).
10.3
Form of Securities Purchase Agreement, dated April 26, 2006 (previously filed as Exhibit
99.2 to the Registrant's Current Report on Form 8-K, originally filed with the SEC on
April 28, 2006, and incorporated herein by reference).
10.4
Form of Subscription Agreement, dated February 13, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and certain purchasers (previously filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, originally filed with the SEC on February 15,
2007, and incorporated herein by reference).
10.5
Form of Placement Agent Agreement, dated February 13, 2007, by and among Cyclacel
Pharmaceuticals, Inc., Lazard Capital Markets LLC, Needham & Company, LLC and ThinkEquity
Partners LLC (previously filed as Exhibit 10.3 to the Registrant's Current Report on Form
8-K, originally filed with the SEC on February 15, 2007, and incorporated herein by
reference).
10.6
Asset Purchase Agreement by and among ALIGN Pharmaceuticals, LLC, ALIGN Holdings, LLC and
Achilles Acquisition, LLC, dated October 5, 2007 (previously filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q, for the quarterly period ended September 30,
2007, originally filed with the SEC on November 7, 2007, and incorporated herein by
reference).
10.7
Common Stock Purchase Agreement, dated December 10, 2007, by and between Cyclacel
Pharmaceuticals, Inc. and Kingsbridge Capital Limited (previously filed as Exhibit 10.1
to the Registrant's Current Report on Form 8-K, originally filed with the SEC on December
11, 2007, and incorporated herein by reference).
10.8
†
Employment Offer Letter by and between Achilles Acquisition, LLC and William C. Collins,
dated October 3, 2007 (previously filed as Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q, for the quarterly period ended September 30, 2007, originally filed
with the SEC on November 7, 2007, and incorporated herein by reference).
10.9
†
Amended and Restated 2006 Equity Incentive Plan (previously filed as Exhibit 10.1 to the
Registrant's Current Report on Form 8-K, originally filed with the SEC on June 19, 2007,
and incorporated herein by reference).
10.10
†
Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis,
dated as of January 1, 2008 (previously filed as Exhibit 10.1 to the Registrant's Current
Report on Form 8-K, originally filed with the SEC on March 24, 2008, and incorporated
herein by reference).
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EXHIBIT
NUMBER
DESCRIPTION
10.11
†
Employment Agreement by and between Cyclacel Pharmaceuticals, Inc. and Paul McBarron,
dated as of January 1, 2008 (previously filed as Exhibit 10.1 to the Registrant's Current
Report on Form 8-K, originally filed with the SEC on April 2, 2008, and incorporated
herein by reference).
10.12
†
Amendment No. 1, dated as of December 31, 2008, to Employment Agreement by and between
Cyclacel Pharmaceuticals, Inc. and Spiro Rombotis, dated as of January 1, 2008
(previously filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, for
the quarterly period ended March 31, 2009, originally filed with the SEC on May 15, 2009,
and incorporated herein by reference).
10.13
Amendment No. 1 to Common Stock Purchase Agreement, dated as of November 24, 2009, by and
between the Company and Kingsbridge Capital Limited (previously filed as Exhibit 10.1 to
the Registrant's Current Report on Form 8-K, originally filed with the SEC on November
25, 2009, and incorporated herein by reference).
10.14
Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, originally filed
with the SEC on July 24, 2009, and incorporated herein by reference).
10.15
Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, originally filed
with the SEC on January 11, 2010, and incorporated herein by reference).
10.16
Form of Subscription Agreement between the Company and certain investors (previously
filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, originally filed
with the SEC on January 21, 2010, and incorporated herein by reference).
10.17
Agreement between the Company and Scottish Enterprise dated March 27, 2006 (previously
filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, for the
quarterly period ended June 30, 2009, originally filed with the SEC on August 13, 2009,
and incorporated herein by reference).
10.18
Addendum to Agreement between the Company and Scottish Enterprise dated June 22, 2009
(previously filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q, for
the quarterly period ended June 30, 2009, originally filed with the SEC on August 13,
2009, and incorporated herein by reference).
21
Subsidiaries of Cyclacel Pharmaceuticals, Inc. (previously filed as Exhibit 21 to the
Registrant's Annual Report on Form 10-K, as amended, originally filed with the SEC on March 29, 2010,
and incorporated herein by reference).
23.1
*
Consent of Independent Registered Public Accounting Firm.
23.2
Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (included in Exhibit 5.1).
24.1
*
Power of Attorney (included on signature page).
†
Indicates management compensatory plan, contract or arrangement.
*
Filed herewith.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales of securities are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such information in
the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser,
(A) Each prospectus filed by a registrant pursuant to Rule 424(b)(3) shall be deemed to be
part of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
(5) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to
be part of and included in the registration statement as of the date it is first used after
effectiveness.
Provided, however
, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such
date of first use.
(b) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934;
and, where interim financial information required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom
the prospectus is sent or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the claim has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized in the city of Berkley Heights, State of New Jersey,
on June 11, 2010.
CYCLACEL PHARMACEUTICALS, INC.
By:
/s/ Paul McBarron
Paul McBarron
Chief Operating Officer,
Chief Financial Officer,
and Executive Vice President, Finance
Power of Attorney
Each person whose signature appears below constitutes and appoints each of Spiro Rombotis and
Paul McBarron his attorney-in-fact and agent, with the full power of substitution and
resubstitution and full power to act without the other, for them in any and all capacities, to sign
any and all amendments, including post-effective amendments, and any registration statement
relating to the same offering as this registration that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, to this registration statement, and to
file the same, with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature
Title
Date
/s/ Spiro Rombotis
Spiro Rombotis
President & Chief Executive Officer
(Principal Executive Officer)
and Director
June 11, 2010
/s/ Paul McBarron
Paul McBarron
Chief Operating Officer, Chief
Financial Officer, and Executive Vice
President, Finance (Principal
Financial and Accounting Officer) and
Director
June 11, 2010
*
Dr. David U'Prichard
Chairman
June 11, 2010
*
Dr. Christopher Henney
Vice Chairman
June 11, 2010
/s/ Dr. Nicholas Bacopoulos
Dr. Nicholas Bacopoulos
Director
June 11, 2010
*
Director
June 11, 2010
Sir John Banham
*
Director
June 11, 2010
Daniel Spiegelman
*
By executing his name hereto, Spiro Rombotis is signing this document on behalf of the persons
indicated above pursuant to the powers of attorney executed by such persons and filed with the
Securities and Exchange Commission.
72