Scottish drug developer absorbs Xcyte

Xcyte Therapies is little more than an empty jacket — albeit one with $20 million in the pockets — and now the Seattle biotechnology company has a warm body to wear it.

The only local biotech to go public since 2002 will combine with Cyclacel, a Scottish cancer-drug developer in need of cash and a shortcut to the U.S. public markets.

The two companies announced a reverse acquisition Thursday that would leave Xcyte shareholders with a 20 percent stake in a new, publicly traded company, Cyclacel Pharmaceuticals.

The deal comes more than six months after Xcyte's board went looking for "strategic alternatives."

"The goal was clearly to find an opportunity to put the remaining cash at Xcyte to work in a company that had the potential to provide some upside to our investors," said Dr. Bob Kirkman, appointed acting chief executive in July.

With some of the uncertainty about Xcyte's future removed, its stock jumped 19 cents, more than 59 percent, on very heavy volume of 4.4 million shares, to close at 51 cents Thursday.

Xcyte will acquire Cyclacel and then issue about 78.8 million new shares in the resulting public company to Cyclacel's current owners. Cyclacel Pharmaceuticals will be headquartered in Short Hills, N.J., and trade on the Nasdaq National Market.

The company tried to go public on both sides of the Atlantic in mid-2004, but pulled back as markets soured.

"This merger will allow us to become competitive with many of our peer companies in terms of attracting capital," said Spiro Rombotis, who will head the new company.

Cyclacel will have about $30 million to work with, assuming the deal closes in March, about two-thirds of which would come from Xcyte's existing cash plus $5 million from the sale of its remaining technology, also announced Thursday.

Less than a year ago, Xcyte's technology, designed to invigorate immune system cells to attack diseases, showed enough promise to prompt a major clinical trial.

But it became clear in February — only after Xcyte had built out a manufacturing plant and increased its head-count to 100 — that a disagreement with regulators over the trial's design would cause a substantial delay.

The added time to renegotiate the trial plan cost the company $20 million as its assets were idled. Layoffs ensued and Xcyte's stock continued the downward course it had followed since the company went public at $8 a share in March 2004.

The board of directors, led by biotech star Christopher Henney, saw pursuing the therapy would take more money than Xcyte could raise. Seeking to cut their losses, they abandoned development of the treatment in May.

The board reviewed some 50 companies before choosing Cyclacel as a partner, said Kirkman.

Neither Xcyte's technologies nor its five remaining employees will be put to use at Cyclacel, which has two drugs in human trials against cancer and several others in pre-clinical studies.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com