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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934B   Commission file number
    00-50626
  CYCLACEL PHARMACEUTICALS,
    INC.
 (Exact name of Registrant as
    Specified in Its Charter)
  Delaware

91-1707622(State or Other Jurisdiction
    of Incorporation or Organization)

(I.R.S. Employer
    Identification No.)200 Connell Drive
    Suite 1500, Berkeley Heights,
    New Jersey

07922(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (908) 517-7330
  Securities registered under Section 12(b) of the
    Exchange Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.001 par value

The NASDAQ Stock Market LLCPreferred Stock, $0.001 par value

The NASDAQ Stock Market LLC   Securities registered under Section 12(b) of the
    Exchange Act:
 None.
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o[Do not check if a smaller reporting company]

Smaller reporting company þ   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K Form 10-K




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##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


3Item 1A.


Risk Factors


23Item 1B.


Unresolved Staff Comments


44Item 2.


Properties


44Item 3.


Legal Proceedings


45Item 4.


Submission of Matters to a Vote of Security
    Holders


45PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


45Item 6.


Selected Financial Data


47Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


49Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


67Item 8.


Financial Statements and Supplementary Data


69Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


110Item 9A.


Controls and Procedures


110Item 9B.


Other Information


111PART IIIItem 10.


Directors; Executive Officers and Corporate
    Governance


112Item 11.


Executive Compensation


112Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


112Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


112Item 14.


Principal Accountant Fees and Services


112PART IVItem 15.


Exhibits and Financial Statement Schedules


112EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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PART I  Item 1.
    Business    General
    Recent
    Developments
          Corporate
    information
  908-517-7330.
  Overview
   3




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® ® ®
    
    Sapacitabine in AML in the elderly;
    Sapacitabine in MDS;
    Sapacitabine in cutaneous T-cell lymphoma or CTCL; and
    Sapacitabine in NSCLC.    
    Seliciclib in nasopharyngeal cancer or NPC;
    Seliciclib in NSCLC; and
    CYC116 in patients with solid tumors.        Advancing
    our research and development programs
  
    Sapacitabine received orphan designation for AML & MDS
    from EU regulators;
    Seliciclib APPRAISE Phase 2b NSCLC independent data review
    committee review of the first interim analysis data;
    Sapacitabine expands Phase 2 trial in elderly AML patients to
    include patients with MDS;
    Sapacitabine Phase 2 elderly AML trail completed
    enrollment;
    Sapacitabine Phase 2 NSCLC trial commenced; and
    Announced progress with a pivotal trial plan for sapacitabine in
    AML or MDS following a meeting with the FDA.  Managing
    our resources
  
    Revised operating plan which resulted in an approximate 30%
    reduction in workforce, closure of our Cambridge research
    facility and a decrease in operating cost base of approximately
    $9.0 million.
    Ended 2008 with approximately $25.7 million of cash and
    cash equivalents and short-term investments. 4




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Enhancing
    our skills base
  
    Appointed Robert Sosnowski as Vice President, Sales and
    Marketing.
    Named Nicholas Bacopoulos, Ph.D., to the Board of Directors.  Commercial
    products
  ® ® ®
  Xclair®

    Cream
  ®
  Numoisyn®

    Liquid
  ® ® ® ®
  Numoisyn®

    Lozenges
  ® ® ® ®
 5




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Research
    and Development Pipeline
    Development



Cell CycleProgram

Indication

Status

Target

MechanismOncologySapacitabine, CYC682

Elderly AML

Phase 2 randomized trial on-going

DNA polymerase

G2 and S phaseSapacitabine, CYC682

MDS

Phase 2 randomized trial on-going

DNA polymerase

G2 and S phaseSapacitabine, CYC682

CTCL

Phase 2 randomized trial on-going

DNA polymerase

G2 and S phaseSapacitabine, CYC682

NSCLC

Phase 2 trial 
    on-going

DNA polymerase

G2 and S phaseSapacitabine, CYC682

Advanced leukemias and MDS

Phase 1 trial closed to accrual

DNA polymerase

G2 and S phaseSeliciclib, CYC202

NSCLC

Phase 2b randomized trial closed to accrual

CDK2/A,  
    2/E, 7, 9

G1/S checkpoint and othersSeliciclib, CYC202

NPC

Phase 2 randomized trial. Lead-in phase only on-going

CDK2/A, 
    2/E, 7, 9

G1/S checkpoint and othersCYC116

Cancer

Phase 1 trial 
    on-going

Aurora kinase & VEGFR2

MitosisCDK Inhibitors, Second Generation

Cancer

Preclinical

CDK

G1/S checkpoint and othersPlk1 Inhibitors

Cancer

Preclinical

Plk

G2/M checkpointHdm2 Inhibitors

Cancer

On hold, Not a company priority

Hdm2

G1/2 phaseCyclin Binding Groove Inhibitors

Cancer

On hold. Not a company priority

Cyclin binding groove

S phaseOther therapeutic areasCell Cycle Inhibitors

Inflammatory Kidney Diseases

Phase 1 trial completed On hold. Not a company priority

CDK

G1/S checkpoint and othersCell Cycle Inhibitors

HIV/AIDS

On hold. Not a company priority

CDK

SeveralGSK-3 Inhibitors

Type 2 Diabetes

On hold. Not a company priority

GSK-3

N/A   Market
    opportunity in oncology
   6




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Oncology
    Development Programs
  and/or
     7




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Sapacitabine
  ®
    Hematologic
    cancers
  Phase 1
    clinical trial in patients with advanced leukemias and
    myelodysplastic syndromes
  seven-day three-day seven-day
  Randomized
    Phase 2 clinical trial in elderly patients with AML who are
    previously untreated or in first relapse.
  1-year
   8




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Randomized
    Phase 2 clinical trial as a second-line treatment for
    MDS
    Pivotal
    trial plan for sapacitabine for the treatment of hematological
    malignancies.
    Solid
    tumors
  Phase 1
    studies
    Phase 2
    clinical trial in patients with advanced CTCL
   9




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Phase 2
    clinical trial in patients with advanced non-small cell lung
    cancer or NSCLC
        Seliciclib
  first-in-class,
  Phase 1
    studies
      Phase 2
    studies
   10




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Phase 2b
    APPRAISE study as a treatment for patients with advanced
    NSCLC
        
    There were no safety concerns that would warrant stopping the
    study;
    The study would probably not demonstrate an improvement in
    progression-free survival as there was no trend favoring the
    seliciclib treatment arm;
    As a definitive conclusion could not be reached because of the
    low number of events, it was recommended that the study be
    continued.  follow-up.
  Phase 2
    multicenter, international, blinded randomized study as a single
    agent in patients with NPC
  6-month 6-month
 11




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CYC116
    Other
    programs
      Hdm2
    Inhibitors
    Cyclin
    Binding Groove Inhibitors
    Clotrimazole
    Analogs
   12




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Non-oncology
    Programs
  Cell
    Cycle Inhibitors in Inflammatory Kidney Disease
      CDK
    Inhibitors in Virology
    GSK-3
    Inhibitors in Type 2 Diabetes
    Business
    Strategy
    Focus on
    the cell cycle and cancer
   13




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
    The novel, mechanism-targeted cell cycle drugs we are developing
    are designed to be highly selective in comparison to
    conventional chemotherapies, potentially inducing death in
    cancer cells while sparing most normal cells which may give rise
    to fewer side-effects.
    We believe that our sapacitabine is the only orally available
    nucleoside analogue presently being tested in Phase 2 trials in
    AML, seliciclib is the only orally available CDK inhibitor
    currently in Phase 2 trials and CYC116 is the only AK inhibitor
    in clinical trials that also interacts with VEGFR2. We believe
    that we are well positioned to realize some of the market
    potential of such drugs.  Develop
    anticancer drug candidates in all phases of the cell cycle and
    multiple compounds for particular cell cycle
    targets
    Enter
    into partnering arrangements selectively, while developing our
    own sales and marketing capability
    Patents,
    Proprietary Technology and Collaborations
    
    Ownership and enforcement of patent rights;
    Patent applications covering our own inventions in fields that
    we consider important to its business strategy;
    License agreements with third parties granting us rights to
    patents in fields that are important to its business strategy;
    Invention assignment agreements with our employees and
    consultants;
    Non-compete agreements with our key employees and consultants;
    Confidentiality agreements with our employees, consultants, and
    others having access to its proprietary information;
    Standard policies for the maintenance of laboratory notebooks to
    establish priority of our inventions;
    Freedom to use studies from patent counsel;
    Material transfer agreements; and
    Trademark protection   14




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15




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Licenses
    Sapacitabine
    country-by-country and/or
 16




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Seliciclib
    country-by-country
     17




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Clotrimazole
    Analogs and CYC381
    Sinclair
    Pharma plc
  ® ® ®
  Manufacturing
    ® ® ®
  Sales and
    Marketing
    Government
    Regulation
      
    completion of extensive preclinical laboratory tests,
    preclinical animal studies and formulation studies, all
    performed in accordance with the FDAs good laboratory
    practice, or GLP, regulations; 18




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
    submission to the FDA of an IND application which must become
    effective before clinical trials may begin;
    performance of adequate and well-controlled clinical trials to
    establish the safety and efficacy of the drug candidate for each
    proposed indication;
    submission of a NDA, to the FDA;
    satisfactory completion of an FDA pre-approval inspection of the
    manufacturing facilities at which the product is produced to
    assess compliance with current good manufacturing practice GMP,
    or cGMP, regulations;
    FDA review and approval of the NDA prior to any commercial
    marketing, sale or shipment of the drug; and
    Regulation of commercial marketing and sale of drugs.  30-day
  Clinical Trials:
  
    Phase 1:  The clinical trials are initially
    conducted in a limited population to test the drug candidate for
    safety, dose tolerance, absorption, metabolism, distribution and
    excretion in healthy humans or, on occasion, in patients, such
    as cancer patients. Phase 1 clinical trial typically designed to
    evaluate the impact of the drug candidate in combination with
    currently approved drugs.
    Phase 2:  These clinical trials are generally
    conducted in a limited patient population to identify possible
    adverse effects and safety risks, to determine the efficacy of
    the drug candidate for specific targeted indications and to
    determine dose tolerance and optimal dosage. Multiple Phase 2
    clinical trials may be conducted by the sponsor to obtain
    information prior to beginning larger and more expensive Phase 3
    clinical trial.
    Phase 3:  These clinical trials are commonly
    referred to as pivotal clinical trials. If the Phase 2 clinical
    trials demonstrate that a dose range of the drug candidate is
    effective and has an acceptable safety profile, Phase 3 clinical
    trials are then undertaken in large patient populations to
    further evaluate dosage, to provide substantial evidence of
    clinical efficacy and to further test for safety in an expanded
    and diverse patient population at multiple, geographically
    dispersed clinical trial sites.    New Drug Application.
 19




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Fast Track Designation.
      
    Priority Review.  Under FDA policies, a drug
    candidate is eligible for priority review, or review within a
    six-month time frame from the time a complete NDA is accepted
    for filing, if the drug candidate provides a significant
    improvement compared to marketed drugs in the treatment,
    diagnosis or prevention of a disease. We cannot suggest or in
    any way guarantee that any of our drug candidates will receive a
    priority review designation, or if a priority designation is
    received, that review or approval will be faster than
    conventional FDA procedures, or that FDA will ultimately grant
    drug approval.
    Accelerated Approval.  Under the FDAs
    accelerated approval regulations, the FDA is authorized to
    approve drug candidates that have been studied for their safety
    and effectiveness in treating serious or life-threatening
    illnesses, and that provide meaningful therapeutic benefit to
    patients over existing treatments based upon either a surrogate
    endpoint that is reasonably likely to predict clinical benefit
    or on the basis of an effect on a clinical endpoint other than
    patient survival. In clinical trials, surrogate endpoints are
    alternative measurements of the symptoms of a disease or
    condition that are substituted for measurements of observable
    clinical symptoms. A drug candidate approved on this basis is
    subject to rigorous post-marketing compliance requirements,
    including the completion of Phase 4 or post-approval clinical
    trials to validate the surrogate endpoint or confirm the effect
    on the clinical endpoint. Failure to conduct required
    post-approval studies, or to validate a surrogate endpoint or
    confirm a clinical benefit during post-marketing studies, will
    allow the FDA to withdraw the drug from the market on an
    expedited basis. All promotional materials for drug candidates
    approved under accelerated regulations are subject to prior
    review by the FDA. In rare instances FDA may grant accelerated
    approval of an NDA based on Phase 2 data and require
    confirmatory Phase 3 studies to be conducted after approval
    and/or as a
    condition of maintaining approval. We can give no assurance that
    any of our drugs will be reviewed under such procedures. 20




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510(k).
  Other regulatory requirements.
   21




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Competition
      Employees
    Available
    information
  1-800-SEC-0330.
 22




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http://www.sec.gov Forms 8-K, 10-K, 10-Q,
  Item 1A.
    Risk
    Factors  In analyzing our company, you should consider carefully the
    following risk factors, together with all of the other
    information included in this annual report on
    Form 10-K.
    Factors that could cause or contribute to differences in our
    actual results include those discussed in the following
    subsection, as well as those discussed in
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations and elsewhere
    throughout this annual report on
    Form 10-K.
    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.
  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
    current economic conditions and financial market turmoil could
    adversely affect our business and results of
    operations.
    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.
   23




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We
    have a history of operating losses and we may never become
    profitable. Our stock is a highly speculative
    investment.
  ® ® ®
  We
    will need to raise substantial additional capital to fund our
    operations and if we fail to obtain additional funding, we may
    be unable to complete the development and commercialization of
    our drug candidates or continue to fund our research and
    development programs.
     24




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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, may require us
    to make additional blackout or other payments to
    Kingsbridge, and may result in dilution to our
    stockholders.
            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.
    
    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; 25




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
    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.    
    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 costs of acquiring or investing in businesses, products and
    technologies;
    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
    do not realize the expected benefits from the restructuring that
    we announced in September 2008, our operating results and
    financial conditions could be negatively impacted.
    Any
    future workforce and expense reductions may have an adverse
    impact on our internal programs, strategic plans, our ability to
    hire and retain key personnel and may be distracting to our
    management.
    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.
   26




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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.
      We are
    exposed to risks related to foreign currency exchange
    rates.
    We are
    exposed to risk related to the marketable securities we
    purchase.
    Clinical
    trials are expensive, time consuming, subject to delay and may
    be required to continue beyond our available
    funding.
    
    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; 27




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
    uncertain dosing issues;
    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.    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.
    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.
   28




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We are
    making extensive use of biomarkers, which are not scientifically
    validated, and our reliance on biomarker data may thus lead us
    to direct our resources inefficiently.
      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.
    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.
      
    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; 29




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
    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.
    scale-up
  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.
    The
    failure to attract and retain skilled personnel and key
    relationships could impair our drug development and
    commercialization efforts.
   30




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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.
        
    those discussed in the risk factor which immediately follows;
    the fact that 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 adopt new
    regulations requiring new or different evidence of safety and
    efficacy for the intended use of a drug candidate.  If
    regulatory agencies do not accept our proposed registration
    pathways based on Phase 2 data, then we will likely need to
    conduct large pivotal studies, which are time-consuming and
    expensive.
   31




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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.
  follow-up
    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.
   32




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We
    face intense competition and our competitors may develop drugs
    that are less expensive, safer, or more effective than our drug
    candidates.
      
    developing drug candidates;
    conducting preclinical and clinical trials;
    obtaining regulatory approvals; and
    commercializing product candidates.    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.
  ® ® ®
  
    timing of market introduction, number and clinical profile of
    competitive drugs;
    our ability to provide acceptable evidence of safety and
    efficacy; 33




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
    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 we
    are unable to compete successfully in our market place, it will
    harm our business.
    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.
     34




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We may
    be exposed to product liability claims that may damage our
    reputation and we may not be able to obtain adequate
    insurance.
      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.
    Defending
    against claims relating to improper handling, storage or
    disposal of hazardous chemical, radioactive or biological
    materials could be time consuming and expensive.
    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.
   35




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and/or
  and/or and/or
  If we
    fail to enforce adequately or defend our intellectual property
    rights our business may be harmed.
      and/or
 36




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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.
  and/or
    
    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; 37




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
    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
    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.
      Our
    common stock may have a volatile public trading
    price.
   38




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
    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;
    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.
    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.
    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.
     39




---



##### Table of Contents



Certain
    severance-related agreements in our executive employment
    agreements may make an acquisition more difficult and could
    result in the entrenchment of management.
    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.
    
    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.      We may
    have limited ability to pay cash dividends on the convertible
    preferred stock.
   40




---



##### Table of Contents



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.
    
    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;
    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
    future sale of our common and convertible preferred stock, and
    future issuances of our common stock upon conversion of our
    convertible preferred stock could negatively affect our stock
    price.
   41




---



##### Table of Contents



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.
    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 do
    not intend to pay cash dividends on our common stock in the
    foreseeable future.
    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.
    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.
    Our
    distribution rights to the ALIGN products are licensed from
    others, and any termination of that license could harm our
    business.
   42




---



##### Table of Contents



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
    customer base is highly concentrated.
  ® ® ® ® ® ®
  We may
    be unable to accurately estimate demand and monitor wholesaler
    inventory of
    Xclair®,

    Numoisyn®

    Liquid or
    Numoisyn®

    Lozenges. Although we attempt to monitor wholesaler inventory of
    Xclair®,

    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.
  ® ® ®
 43




---



##### Table of Contents



® ® ® ® ® ®
  The
    commercialization of our products is substantially dependent on
    our ability to develop effective sales and marketing
    capabilities.
  ® ® ® ® ® ®
    We may
    not be able to obtain approval in Canada to market
    Numoisyn®

    Liquid.
  ® ®
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    25-year
   44




---



##### Table of Contents



Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
    High

Low2008Quarter ended March 31, 2008

$
5.51


$
2.40Quarter ended June 30, 2008

$
3.67


$
1.66Quarter ended September 30, 2008

$
2.00


$
0.84Quarter ended December 31, 2008

$
1.16


$
0.232007Quarter ended March 31, 2007

$
8.64


$
6.70Quarter ended June 30, 2007

$
9.50


$
6.00Quarter ended September 30, 2007

$
6.50


$
4.33Quarter ended December 31, 2007

$
5.93


$
4.90   Holders
    of Common Stock
   45




---



##### Table of Contents



Performance
    Graph
    COMPARISON
    OF 33 MONTH CUMULATIVE TOTAL RETURN*
    
    *
    
    $100 invested on 3/27/06 in stock & 2/28/06 in
    index-including reinvestment of dividends.    Name


March 27, 2006


December 31, 2006


December 31, 2007


December 31, 2008Cyclacel



100.00




85.86




68.59




5.26Nasdaq Composite



100.00




107.56




117.24




68.71NASDAQ Biotechnology



100.00




93.30




94.18




88.44     Dividends
   46




---



##### Table of Contents



Unregistered
    Sales of Securities
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    (c)Number ofSecurities Remaining(b)

Available for Future(a)

Weighted-Average

Issuance underNo. of Securities to

Exercise Price

Equity Compensationbe Issued upon Exercise

of Outstanding

Plans (Excludingof Outstanding Options,

Options, Warrants

Securities Reflected inPlan Category

Warrants and Rights

and Rights

Column (a))Total equity compensation plans approved by security holders(1)


3,674,899


$
4.36



1,499,593Equity compensation plans not approved by security holders










     (1)
    
    Consists of our Amended and Restated 2006 Stock Option Plan (the
    2006 Plan). The 2006 Plan provides for the grant of
    incentive stock options, nonqualified stock options, stock
    appreciation rights, restricted stock and performance units. The
    number of shares available for issuance, as of March 30,
    2009, under the 2006 Plan is 5,200,000.  Item 6.
    Selected
    Financial Data  Form 10-K. Form 10-K.
 47




---



##### Table of Contents



Form 10-K.
  Period fromAugust 13,1996(Inception) toYears Ended December 31,


December 31,2004


2005


2006


2007


2008


2008(In thousands)Consolidated Statements of Operations:Revenues:Collaboration and research and development income

$
102


$
245


$
231


$
10


$



$
3,000Product revenue


















838



838Grant income


823



111



156



119



39



3,635925



356



387



129



877



7,473Operating expenses:Cost of goods sold


















429



429Research and development


20,332



15,841



21,205



19,569



18,869



160,413Selling, general and administrative


3,543



5,264



12,598



12,033



15,354



63,308Goodwill and intangibles impairment


















7,934



7,934Other restructuring costs










225



1,554



489



2,268Total operating expenses


23,886



21,131



34,028



33,156



43,075



234,352Operating loss


(22,961
)


(20,775
)


(33,641
)


(33,027
)


(42,198
)


(226,879
)Total other (expense) income


(2,248
)


801



2,138



6,933



63



7,890Loss before taxes


(25,198
)


(19,948
)


(31,503
)


(26,094
)


(42,135
)


(218,989
)Income tax benefit


2,456



1,900



2,245



2,041



1,749



16,274Net loss


(22,742
)


(18,048
)


(29,258
)


(24,053
)


(40,386
)


(202,715
)Dividends on preferred shares


(11,053
)


(11,876
)


(2,827
)










(38,123
)Net loss applicable to common shareholders

$
(33,795
)

$
(29,924
)

$
(32,085
)

$
(24,053
)

$
(40,386
)

$
(240,838
)Net loss per share  basic and diluted

$
(5.10
)

$
(4.50
)

$
(2.40
)

$
(1.21
)

$
(1.98
)Shares used in computing basic and diluted net loss per share


6,627,831



6,656,732



13,390,933



19,873,911



20,433,129   As of December 31,2004

2005

2006

2007

2008(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
7,766


$
3,117


$
44,238


$
30,987


$
24,220Short-term investments


15,152



10,690



9,764



27,766



1,502Working capital


20,909



2,152



50,244



49,065



20,386Total assets


31,176



19,071



63,276



75,912



30,957Long-term debt, net of current portion


(368
)


(78
)


(1,436
)


(3,231
)


(1,688
)Total stockholders equity


23,953



4,119



53,919



57,969



20,642  48




---



##### Table of Contents



Form 10-K
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Cautionary
    Statement Regarding Forward-Looking Statements
  This report contains certain statements that may be deemed
    forward-looking statements within the meaning of
    United States securities laws. All statements, other than
    statements of historical fact, that address activities, events
    or developments that we intend, expect, project, believe or
    anticipate will or may occur in the future are forward-looking
    statements. Such statements are based upon certain assumptions
    and assessments made by our management in light of their
    experience and their perception of historical trends, current
    conditions, expected future developments and other factors they
    believe to be appropriate. Certain factors that could cause
    results to differ materially from those projected or implied in
    the forward looking statements are set forth in this Annual
    Report on
    Form 10-K
    for the year ended December 31, 2008 under the caption
    Item 1A  Risk factors.
  We encourage you to read those descriptions carefully. We
    caution you not to place undue reliance on the forward-looking
    statements contained in this report. These statements, like all
    statements in this report, speak only as of the date of this
    report (unless an earlier date is indicated) and we undertake no
    obligation to update or revise the statements except as required
    by law. Such forward-looking statements are not guarantees of
    future performance and actual results will likely differ,
    perhaps materially, from those suggested by such forward-looking
    statements.
  Overview
  ® ® ®
    
    Sapacitabine in acute myeloid leukemia or AML in the elderly;
    Sapacitabine in myelodysplastic syndromes or MDS;
    Sapacitabine in cutaneous T-cell lymphoma or CTCL; and
    Sapacitabine in non small-cell lung cancer or NSCLC.    
    Seliciclib in nasopharyngeal cancer or NPC;
    Seliciclib in non small-cell lung cancer; and
    CYC116 in patients with solid tumors. 49




---



##### Table of Contents



Recent
    Events
  Restructuring
    expense
    Goodwill
    and intangible asset impairment
  Goodwill and
    Other Intangible
 50




---



##### Table of Contents



Assets
  Accounting for the Impairment or
    Disposal of Long-Lived Assets,
    Acquisition
    of ALIGN Pharmaceuticals, LLC and ALIGN Holdings, LLC
    ® ® ®
     51




---



##### Table of Contents



Acquisition
    Final Purchase Price
    Cash

$
3,331Acquisition costs


432Total purchase price

$
3,763   Acquisition
    Final Purchase Price Allocation
    Current assets

$
199Property, plant and equipment


10Intangible assets


4,495Current liabilities


(1,409
)Non-current liabilities


(1,122
)Goodwill


1,590$
3,763   Results
    of Operations
  Form 10-K
    Years ended December 31, 2007 and 2008 compared to years
    ended December 31, 2006 and 2007, respectively.
  Revenues
    Years Ended December 31,


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Collaboration and research and development revenue

$
231


$
10


$



$
(221
)

$
(10
)


(96
)%


(100
)%Product Revenue










838







838







100
%Grant revenue


156



119



39



(37
)


(80
)


(24
)%


(67
)%Total revenue

$
387


$
129


$
877


$
(258
)

$
748



(67
)%


580
%    52




---



##### Table of Contents



® ® ®
    The
    future
    Cost of
    goods sold
  Years Ended December 31,

$ Differences

% Differences2006

2007

2008

2006 to 2007

2007 to 2008

2006 to 2007

2007 to 2008(In thousands)Cost of goods sold

$



$



$
429


$



$
429




%


100
%     Research
    and development expenses
    
    clinical trial and regulatory-related costs;
    payroll and personnel-related expenses, including consultants
    and contract research;
    preclinical studies and laboratory supplies and materials;
    technology license costs; and
    rent and facility expenses for our laboratories. 53




---



##### Table of Contents



Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Sapacitabine

$
1,841


$
3,326


$
6,601


$
1,485


$
3,275



81
%


98
%Seliciclib


3,126



3,270



2,906



144



(364
)


5
%


(11
)%CYC116


6,712



2,626



1,695



(4,086
)


(931
)


(61
)%


(35
)%Other costs related to research and development programs,
    management and exploratory research


9,526



10,347



7,667



821



(2,680
)


9
%


(26
)%Total research and development expenses

$
21,205


$
19,569


$
18,869


$
(1,636
)

$
(700
)


(8
)%


(4
)%     Fiscal 2008 as compared to fiscal
    2007. scale-up.
  Fiscal 2007 as compared to fiscal
    2006.
  The
    future
   54




---



##### Table of Contents



Selling,
    general and administrative expenses
    Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008Total selling, general and administrative expenses

$
12,598


$
12,033


$
15,354


$
(565
)

$
3,321



(4
)%


28
%     Fiscal 2008 as compared to fiscal
    2007.
  Fiscal 2007 as compared to fiscal
    2006.
  The
    future
    Goodwill
    and intangible asset impairment
    Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Goodwill and intangibles impairment









$
7,934






$
7,934







100
%      55




---



##### Table of Contents



The
    future
    Restructuring
    charge
    Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Total restructuring charge

$
225


$
1,554


$
546


$
1,329


$
(1,008
)


591
%


(65
)%   Fiscal 2008 as compared to fiscal 2007.
      Fiscal 2007 as compared to fiscal 2006.
    The
    future
   56




---



##### Table of Contents



Other
    income
    Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Change in valuation of derivative

$
(215
)

$
(93
)

$



$
122


$
93



(57
)%


(100
)%Change in valuation of warrants liability






3,205



3,502



3,205


$
297







9
%Foreign Exchange gain/(loss)


279



490



(4,501
)


211



(4,991
)


76
%


(1019
)%Interest income


2,328



3,554



1,380



1,226



(2,174
)


53
%


(61
)%Interest expense


(254
)


(223
)


(318
)


31



(95
)


(12
)%


42
%Total other income, net

$
2,138


$
6,933


$
63


$
4,795


$
(6,870
)


224
%


(99
)%   Fiscal 2008 as compared to fiscal 2007.
    EITF 00-19 Accounting for Derivative Financial Instruments Indexed
    to, and Potentially Settled in, a Companys Own
    Stock. EITF 00-19.
     57




---



##### Table of Contents



Fiscal 2007 as compared to fiscal 2006.
          The
    future
     58




---



##### Table of Contents



Income
    tax benefit
      Years Ended


$ Differences


% Differences2006


2007


2008


2006 to 2007


2007 to 2008


2006 to 2007


2007 to 2008(In thousands)Total income tax benefit

$
2,245


$
2,041


$
1,749


$
(204
)

$
(292
)


(9
)%


(14
)%   Fiscal 2008 as compared to fiscal
    2007.
  Fiscal 2007 as compared to fiscal
    2006.
  The
    future
    Liquidity
    and Capital Resources
    December 31,


December 31,2007


2008


$ Difference


% Difference(In thousands)Cash and cash equivalents

$
30,987


$
24,220


$
(6,767
)


(22
)%Short-term investments, available for sale


27,766



1,502



(26,264
)


(95
)%Total cash and cash equivalents and short-term investments

$
58,753


$
25,722


$
(33,031
)


(56
)%Current assets

$
63,777


$
29,014


$
(34,763
)


(55
)%Current liabilities


14,712



8,624



(6,088
)


(41
)%Working capital

$
49,065


$
20,390


$
(28,675
)


(58
)%  59




---



##### Table of Contents



Cash
    provided by (used in) operating, investing and financing
    activities
    Year Ended December 31,2006


2007


2008(In thousands)Net cash used in operating activities

$
(20,172
)

$
(23,140
)

$
(29,905
)Net cash provided by (used by) investing activities

$
3,911


$
(22,693
)

$
27,342Net cash provided by (used by) financing activities

$
57,400


$
32,208


$
(1,238
)   Fiscal
    2008 as compared to fiscal 2007.
  Operating
    activities
     60




---



##### Table of Contents



Investing
    activities
      Financing
    activities
        EITF 00-19.
  eight-day
 61




---



##### Table of Contents



eight-day eight-day
    30-day
  EITF 00-19.
  Operating
    Capital and Capital Expenditure Requirements
        
    the rate of progress and cost of our clinical trials,
    preclinical studies and other discovery and research and
    development activities;
    the costs associated with establishing manufacturing and
    commercialization capabilities;
    the costs of acquiring or investing in businesses, product
    candidates and technologies;
    the costs of filing, prosecuting, defending and enforcing any
    patent claims and other intellectual property rights;
    the costs and timing of seeking and obtaining FDA and other
    regulatory approvals;
    the effect of competing technological and market
    developments; and
    the economic and other terms and timing of any collaboration,
    licensing or other arrangements into which we may enter.   62




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Critical
    Accounting Policies
    Revenue
    Recognition
  Product
    sales
  ® ® ®
  Revenue Recognition When Right of Return Exists
    ( Revenue
    Recognition
  Trade
    Accounts Receivable and Allowance for Doubtful
    Accounts
   63




---



##### Table of Contents



Stock-based
    Compensation
  Stock-Based Compensation
    Arrangements
      Warrants
    liability
  February
    2007 Financing
  EITF 00-19 EITF 00-19, EITF 00-19,
  Goodwill
    and Intangible Assets
   64




---



##### Table of Contents



Business
    Combinations
        Impairment
    of Long-Lived Assets
       65




---



##### Table of Contents



Recent
    Accounting Pronouncements
    Fair Value Measurements, FAS 157-1, Application of FASB Statement No. 157 to FASB
    Statement No. 13 and Other Accounting Pronouncements That
    Address Fair Value Measurements for Purposes of Lease
    Classification or Measurement under Statement 13 FAS 157-1) FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2). FAS 157-1 FAS 157-2
  The Fair Value Option for Financial Assets and
    Financial Liabilities
  No. 07-3, Accounting for Nonrefundable Advance Payments for Goods
    or Services to Be Used in Future Research and Development
    Activities (EITF 07-3). EITF 07-3 EITF 07-3, EITF 07-3 EITF 07-3
  No. FAS 157-3, Determining the Fair Value of a Financial Asset When
    the Market for that Asset Is Not Active FAS 157-3), FAS 157-3 FAS 157-3
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  07-1, (EITF 07-1). EITF 07-1
 66




---



##### Table of Contents



EITF 07-1 EITF 01-9, EITF 07-1 EITF 07-1
  14-1 14-1). 14-1 14-1 14-1
  No. 07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entitys Own Stoc (EITF 07-5). EITF 07-5 EITF 07-5 EITF 07-5
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Investment
    and Interest Rate Risk
       67




---



##### Table of Contents



Foreign
    Currency Risk
          Common
    Stock Price Risk
  EITF 00-19,
  eight-day eight-day eight-day
   68




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    CYCLACEL PHARMACEUTICALS, INC. FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


70Consolidated Balance Sheets as of
    December 31, 2007 and 2008


71Consolidated Statements of Operations for the
    years ended December 31, 2006, 2007 and 2008 and the period
    from August 13, 1996 (inception) to December 31,
    2008


72Consolidated Statements of Stockholders
    Equity (Deficit) for the period from August 13, 1996
    (inception) to December 31, 2008


73Consolidated Statements of Cash Flows for the
    years ended December 31, 2006, 2007 and 2008 and the period
    from August 13, 1996 (inception) to December 31,
    2008


77Notes to Consolidated Financial Statements


79   69




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
 REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of
    Directors and Shareholders Cyclacel Pharmaceuticals, Inc.
          Ernst Young
    70




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
 CONSOLIDATED
    BALANCE SHEETS  December 31,2007


2008(In $000s, except share amounts)ASSETSCurrent assets:Cash and cash equivalents


30,987



24,220Short-term investments


27,766



1,502Inventory


213



508Prepaid expenses and other current assets


4,811



2,784Total current assets


63,777



29,014Property, plant and equipment (net)


3,016



1,748Deposits and other assets


196



195Intangible assets (net)


4,305



Goodwill


4,618



Total assets


75,912



30,957LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable


4,958



754Accrued liabilities


3,979



5,186Other current liabilities


1,315



1,615Warrants liability


3,545



43Current portion of other accrued restructuring charges


905



1,029Current portion of equipment financing


10



Total current liabilities


14,712



8,627Other accrued restructuring charges, net of current


2,090



1,062Other long term payables


1,141



626Total liabilities


17,943



10,315Commitments and contingencies (Note 12)Stockholders equity:Preferred stock, $0.001 par value; 5,000,000 shares
    authorized at December 31, 2007 and 2008, respectively;
    2,046,813 shares issued and outstanding at
    December 31, 2007 and 2008, respectively. Aggregate
    preference in liquidation of $20,673,000 at December 31,
    2007 and December 31, 2008


2



2Common stock, $0.001 par value; 100,000,000 shares
    authorized at December 31, 2007 and 2008, respectively;
    20,433,129 shares issued and outstanding at
    December 31, 2007 and 2008, respectively


20



20Additional paid-in capital


222,906



223,377Accumulated other comprehensive loss


(2,630
)


(42
)Deficit accumulated during the development stage


(162,329
)


(202,715
)Total stockholders equity


57,969



20,642Total liabilities and stockholders equity


75,912



30,957    71




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Period fromAugust 13,1996Year Ended


Year Ended


Year Ended


(Inception) toDecember 31,


December 31,


December 31,


December 31,2006


2007


2008


2008(In $000s, except share and per share amounts)Revenues:Collaboration and research and development revenue


231



10







3,000Product Revenue










838



838Grant revenue


156



119



39



3,635387



129



877



7,473Operating expenses:Cost of goods sold










429



429Research and development


21,205



19,569



18,869



160,413Selling, general and administrative


12,598



12,033



15,354



63,308Goodwill and intangibles impairment










7,934



7,934Other restructuring costs


225



1,554



489



2,268Total operating expenses


34,028



33,156



43,075



234,352Operating loss


(33,641
)


(33,027
)


(42,198
)


(226,879
)Other income (expense):Costs associated with aborted 2004 IPO














(3,550
)Change in valuation of derivative


(215
)


(93
)






(308
)Change in valuation of warrants liability






3,205



3,502



6,707Foreign exchange gains / (losses)


279



490



(4,501
)


(4,043
)Interest income


2,328



3,554



1,380



13,541Interest expense


(254
)


(223
)


(318
)


(4,457
)Total other income, net


2,138



6,933



63



7,890Loss before taxes


(31,503
)


(26,094
)


(42,135
)


(218,989
)Income tax benefit


2,245



2,041



1,749



16,274Net loss


(29,258
)


(24,053
)


(40,386
)


(202,715
)Dividends on Preferred Ordinary shares


(2,827
)










(38,123
)Net loss applicable to common shareholders


(32,085
)


(24,053
)


(40,386
)


(240,838
)Net loss per share  basic and diluted

$
(2.40
)

$
(1.21
)

$
(1.98
)Weighted average common shares outstanding


13,390,933



19,873,911



20,433,129    72




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY (DEFICIT)
  DeficitAccumulated



AccumulatedAdditional

Other



DuringPreferred





Paid-in

Comprehensive

Deferred

DevelopmentStock

Common Stock

Capital

Income/(Loss)

Compensation

Stage

TotalNo.

$000

No.

$000

$000

$000

$000

$000

$000(In $000s, except share and per share amounts)On incorporation,


































Issue of shares for cash


















1















1Translation adjustment






















(4
)










(4
)Loss for the period






























(290
)


(290
)Comprehensive loss for the period


































(294
)Balance at March 31, 1997


















1



(4
)






(290
)


(293
)Issue of shares for cash, net of issuance costs










266,778







4,217















4,217Issue of shares for IP rights agreement


















262















262Deferred stock-based compensation


















2,002







(2,002
)






Amortization of deferred stock-based compensation


























302







302Translation adjustment






















55











55Loss for the year






























(2,534
)


(2,534
)Comprehensive loss for the year


































(2,479
)Balance at March 31, 1998










266,778







6,482



51



(1,700
)


(2,824
)


2,009Amortization of deferred stock-based compensation


























406







406Translation adjustment






















11











11Loss for the year






























(3,964
)


(3,964
)Comprehensive loss for the year


































(3,953
)  73




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
  DeficitAccumulated



AccumulatedAdditional

Other



DuringPreferred





Paid-in

Comprehensive

Deferred

DevelopmentStock

Common Stock

Capital

Income/(Loss)

Compensation

Stage

TotalNo.

$000

No.

$000

$000

$000

$000

$000

$000(In $000s, except share and per share amounts)Balance at March 31, 1999










266,778







6,482



62



(1,294
)


(6,788
)


(1,538
)Issue of shares for cash, net of issuance costs










538,889



1



12,716















12,717Issue of shares on conversion of bridging loan










90,602







1,638















1,638Issue of shares in lieu of cash bonus










9,060







164















164Issue of shares for research & development agreement


















409















409Exercise of share options










2,265







40















40Deferred stock-based compensation


















167







(167
)






Amortization of deferred stock-based compensation


























433







433Translation adjustment






















(194
)










(194
)Loss for the year






























(5,686
)


(5,686
)Comprehensive loss for the year


































(5,880
)Balance at March 31, 2000










907,594



1



21,616



(132
)


(1,028
)


(12,474
)


7,983Deferred stock-based compensation


















294







(294
)






Amortization of deferred stock-based compensation


























275







275Translation adjustment






















(466
)










(466
)Loss for the year






























(10,382
)


(10,382
)Comprehensive loss for the year


































(10,848
)Balance at March 31, 2001










907,594



1



21,910



(598
)


(1,047
)


(22,856
)


(2,590
)Issue of shares for cash, net of issuance costs










5,451























Exercise of share options for cash


















106















106Issue of shares for license agreement










4,510







183















183Fair value of warrants issued to shareholders


















1,215















1,215Deferred stock-based compensation


















363







(363
)






Amortization of deferred stock-based compensation


























672







672Translation adjustment






















191











191Loss for the year






























(14,853
)


(14,853
)Comprehensive loss for the year


































(14,662
)  74




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
  DeficitAccumulated



AccumulatedAdditional

Other



DuringPreferred





Paid-in

Comprehensive

Deferred

DevelopmentStock

Common Stock

Capital

Income/(Loss)

Compensation

Stage

TotalNo.

$000

No.

$000

$000

$000

$000

$000

$000(In $000s, except share and per share amounts)Balance at March 31, 2002










917,555



1



23,777



(407
)


(738
)


(37,709
)


(15,076
)Exercise of share options for cash


















12















12Deferred stock-based compensation


















(84
)






84







Amortization of deferred stock-based compensation


























305







305Translation adjustment






















(1,846
)










(1,846
)Loss for the year






























(15,542
)


(15,542
)Comprehensive loss for the year


































(17,388
)Balance at March 31, 2003










917,555



1



23,705



(2,253
)


(349
)


(53,251
)


(32,147
)Issue of shares for cash, net of issuance costs










1,510,288



1



27,634















27,635Exercise of share options for cash










6,549







115















115Conversion of Preferred C Ordinary shares










3,769,139



4



58,144















58,148Amortization of deferred stock-based compensation


























217







217Translation adjustment






















(1,343
)










(1,343
)Loss for the period






























(14,977
)


(14,977
)Comprehensive loss for the period


































(16,320
)Balance at December 31, 2003










6,203,531



6



109,598



(3,596
)


(132
)


(68,228
)


37,648Issues of shares for cash , net of issuance costs










430,571



1



8,540















8,541Exercise of warrants for cash










22,630























Deferred stock-based compensation


















(2,050
)






132







(1,918
)Translation adjustment






















2,424











2,424Loss for the year






























(22,742
)


(22,742
)Comprehensive loss for the year


































(20,318
)Balance at December 31, 2004










6,656,732



7



116,088



(1,172
)






(90,970
)


23,953Translation adjustment






















(1,786
)










(1,786
)Loss for the year






























(18,048
)


(18,048
)Comprehensive loss for the year


































(19,834
)Balance at December 31, 2005










6,656,732



7



116,088



(2,958
)






(109,018
)


4,119  75




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
  DeficitAccumulated



AccumulatedAdditional

Other



DuringPreferred





Paid-in

Comprehensive

Deferred

DevelopmentStock

Common Stock

Capital

Income/(Loss)

Compensation

Stage

TotalNo.

$000

No.

$000

$000

$000

$000

$000

$000(In $000s, except share and per share amounts)Issue of shares to certain directors and officers










648,413



1



(1
)














Issue of shares on conversion of Loan Note Instrument










456,308























Reverse Acquisition


2,046,813



2



1,967,928



2



16,251















16,255Loan from Cyclacel Group plc waived


















10,420















10,420Issue of common stock and warrants for cash










6,428,572



6



42,356















42,362Stock-based compensation


















9,600















9,600Change in unrealized loss on investment






















5











5Translation adjustment






















416











416Loss for the year






























(29,258
)


(29,258
)Comprehensive loss for the year


































(28,842
)Balance at December 31, 2006


2,046,813



2



16,157,953



16



194,714



(2,537
)






(138,276
)


53,919Loss for the year






























(24,053
)


(24,053
)Translation adjustment






















(93
)










(93
)Comprehensive loss for the year


































(24,146
)Stock-based compensation


















1,733















1,733Issue of common stock upon exercise of stock options










25,508







163















163Issue of common stock for cash on registered direct offering,
    net of expenses










4,249,668



4



33,353















33,357Preferred stock dividends declared


















(307
)














(307
)Issue of warrants in connection with registered direct offering


















(6,750
)














(6,750
)Balance at December 31, 2007


2,046,813



2



20,433,129



20



222,906



(2,630
)






(162,329
)


57,969Loss for the year






























(40,386
)


(40,386
)Unrealized foreign exchange on intercompany loans






















(12,330
)










(12,330
)Translation adjustment






















14,918











14,918Comprehensive loss for the year


































(37,790
)Stock-based compensation


















1,698















1,698Preferred stock dividends declared


















(1,227
)














(1,227
)Balance at December 31, 2008


2,046,813



2



20,433,129



20



223,377



(42
)






(202,715
)


20,642    76




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS
  Period fromAugust 13,1996Year Ended

Year Ended

Year Ended

(Inception) toDecember 31,

December 31,

December 31,

December 31,2006

2007

2008

2008$000

$000

$000

$000Operating activities:Net loss


(29,258
)


(24,053
)


(40,382
)


(202,711
)Adjustments to reconcile net loss to net cash used in operating
    activities:Accretion of guaranteed stock






10



(10
)


Amortization of interest payable on notes payable






19



79



98Amortization of investment premiums, net


(29
)


(844
)


(1,444
)


(2,317
)Change in valuation of derivative


215



93







308Change in valuation of warrants






(3,205
)


(3,502
)


(6,707
)Depreciation


1,124



946



1,154



11,189Amortization of intangible assets






178



708



886Unrealized foreign exchange (gains) losses


3,369



(449
)


4,827



7,747Deferred revenue














(98
)Compensation for warrants issued to non employees














1,215Shares issued for IP rights














446Loss on disposal of property, plant and equipment


2







2



29Goodwill and intangibles impairment










7,934



7,934Stock-based compensation


9,600



1,733



1,698



15,585Provision for restructuring


225



1,554







1,779Amortization of issuance costs of Preferred Ordinary
    C shares














2,517Changes in operating assets and liabilities:Prepaid expenses and other current assets


(826
)


(653
)


1,732



(2,468
)Accounts payable and other current liabilities


(4,594
)


1,531



(2,701
)


(1,500
)Net cash used in operating activities


(20,172
)


(23,140
)


(29,905
)


(166,068
)Investing activities:Purchase of ALIGN






(3,763
)






(3,763
)Purchase of property, plant and equipment


(667
)


(1,773
)


(366
)


(8,808
)Proceeds from sale of property, plant and equipment


26











26Purchase of short-term investments on deposit, net of maturities






(153,597
)


(3,057
)


(156,657
)Cash proceeds from redemption of short term securities


4,552



136,440



30,765



161,247Net cash provided by (used in) investing activities


3,911



(22,693
)


27,342



(7,952
) 77




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
    CONSOLIDATED STATEMENTS OF CASH
    FLOWS  (Continued)
  Period fromAugust 13,1996Year Ended

Year Ended

Year Ended

(Inception) toDecember 31,

December 31,

December 31,

December 31,2006

2007

2008

2008$000

$000

$000

$000Financing activities:Payments of capital lease obligations


(269
)


(89
)


(11
)


(3,719
)Proceeds from issuance of ordinary and preferred ordinary
    shares, net of issuance costs














90,858Proceeds from issuance of common stock and warrants, net of
    issuance costs


42,626



33,357







75,983Proceeds from the exercise of stock options and issue of
    warrants, net of issuance costs






163







163Payment of preferred stock dividend


(921
)


(1,223
)


(1,227
)


(3,372
)Repayment of government loan














(455
)Government loan received














414Loan received from Cyclacel Group plc














9,103Proceeds of committable loan notes issued from shareholders














8,883Loans received from shareholders














1,645Cash and cash equivalents assumed on stock purchase of Xcyte


17,915











17,915Costs associated with stock purchase


(1,951
)










(1,951
)Net cash provided by (used in) financing activities


57,400



32,208



(1,238
)


195,467Effect of exchange rate changes on cash and cash equivalents


(18
)


374



(2,966
)


2,654Net (decrease) increase in cash and cash equivalents


41,121



(13,251
)


(6,765
)


24,220Cash and cash equivalents, beginning of period


3,117



44,238



30,987



Cash and cash equivalents, end of period


44,238



30,987



24,220



24,220Supplemental cash flow information:Cash received during the period for:Interest


2,377



2,437



723



11,645Taxes


1,906



2,045



2,033



14,917Cash paid during the period for:Interest


(80
)


(858
)






(1,681
)Schedule of non-cash transactionsAcquisitions of equipment purchased through capital leases














3,470Issuance of common shares in connection with license agreements














592Issuance of Ordinary shares on conversion of bridging loan














1,638Issuance of Preferred Ordinary C shares on
    conversion of secured convertible loan notes and accrued interest














8,893Issuance of Ordinary shares in lieu of cash bonus














164Issuance of other long term on ALIGN acquisition






1,122







1,122    78




---



##### Table of Contents



CYCLACEL
    PHARMACEUTICALS, INC.
    (A Development Stage Company)
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1
    ORGANIZATION
    OF THE COMPANY      
    Sapacitabine in acute myeloid leukemia or AML in the elderly;
    Sapacitabine in myelodysplastic syndromes or MDS;
    Sapacitabine in cutaneous T-cell lymphoma or CTCL; and
    Sapacitabine in patients with non-small cell lung cancer or
    NSCLC.    
    Seliciclib in nasopharyngeal cancer or NPC;
    Seliciclib in NSCLC; and
    CYC116 in patients with solid tumors.    Acquisition
    of ALIGN Pharmaceuticals, LLC and ALIGN Holdings,
    LLC
    ® ® ®
  Acquisition
    of Xcyte Therapies Inc.
  Form 10-K
 79




---



##### Table of Contents



Basis
    of Presentation
      2
    Summary
    of Significant Accounting Policies  Use of
    Estimates
    Concentration
    of Credit Risk and Other Risks and Uncertainties
        Foreign
    currency and currency translation
   80




---



##### Table of Contents



Segments
  Disclosure about Segments of an
    Enterprise and Related Information
  Cash
    and Cash Equivalents
    Short-term
    Investments
  Accounting for Certain
    Investments in Debt and Equity Securities
      Trade
    Accounts Receivable and Allowance for Doubtful
    Accounts
   81




---



##### Table of Contents



Inventory
  first-in,
  Fair
    Value of Financial Instruments
    Property,
    Plant and Equipment
    Goodwill
    and intangible assets
  Goodwill and Other Intangible
    Assets
  Business Combinations
  Impairment
    of Long-lived Assets
  Accounting for the Impairment or Disposal of Long-Lived
    Assets
   82




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##### Table of Contents



Revenue
    Recognition
  Product
    sales
    Revenue Recognition When Right of Return
    Exists Revenue
    Recognition
  Collaboration,
    research and development, and grant revenue
        Clinical
    Trial Accounting
   83




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##### Table of Contents



Research
    and Development Expenditures
    Patent
    Costs
    Leased
    Assets
      Income
    Taxes
    Accounting for Uncertainty in
    Income Taxes Accounting for income taxes
    Net
    Loss Per Common Share
  Earnings Per Share
  84




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##### Table of Contents



Years Ended December 31,2006

2007

2008Stock options


1,335,841



2,592,246



3,674,899Restricted Stock and Restricted Stock Units










141,700Convertible preferred stock


870,980



870,980



870,980Make-whole dividend payments of common stock on convertible
    preferred stock


190,608







Cyclacel stock to be issued on October 5, 2008






46,044



Common stock warrants


2,572,653



3,809,703



3,809,272Total shares excluded from calculation


4,970,082



7,318,973



8,496,851   Derivative
    Instruments
  EITF 00-19. Black-Scholes
      Stock-based
    Compensation
  Share-Based Payment
 85




---



##### Table of Contents



Accounting for Certain
    Transactions Involving Stock Compensation-An Interpretation of
    APB Opinion No. 25 ccounting for
    Stock-Based Compensation  Transition and
    Disclosure
    Comprehensive
    Income (Loss)
  Reporting
    Comprehensive Income
  Restructuring
    Expense
     86




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Fair Value Measurements, FAS 157-1, Application of FASB Statement No. 157 to FASB
    Statement No. 13 and Other Accounting Pronouncements That
    Address Fair Value Measurements for Purposes of Lease
    Classification or Measurement under Statement 13 FAS 157-1) FAS 157-2, Effective Date of FASB Statement No. 157 FAS 157-2). FAS 157-1 FAS 157-2 non-financial
  The Fair Value Option for Financial Assets and
    Financial Liabilities
  No. 07-3, Accounting for Nonrefundable Advance Payments for Goods
    or Services to Be Used in Future Research and Development
    Activities (EITF 07-3). EITF 07-3 non-refundable EITF 07-3, EITF 07-3 EITF 07-3
  No. FAS 157-3, Determining the Fair Value of a Financial Asset When
    the Market for that Asset Is Not Active FAS 157-3), FAS 157-3 FAS 157-3
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  07-1, (EITF 07-1). EITF 07-1 EITF 07-1
 87




---



##### Table of Contents



EITF 01-9, EITF 07-1 EITF 07-1
  14-1 14-1). 14-1 14-1 14-1
  No. 07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entitys Own Stoc (EITF 07-5). EITF 07-5 EITF 07-5 EITF 07-5
  3
    Significant
    Contracts  Distribution,
    Licensing and Research Agreements
        4
    Acquisitions  ALIGN
    ® ® ®
 88




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##### Table of Contents



Acquisition
    Purchase Price
    Cash

$
3,331Acquisition costs


432Total purchase price

$
3,763   Acquisition
    Final Purchase Price Allocation
    Current assets

$
199Property, plant and equipment


10Intangible assets


4,495Current liabilities


(1,409
)Non-current liabilities


(1,122
)Goodwill


1,590$
3,763   Pro Forma
    Results of Operations
   89




---



##### Table of Contents



Year Ended December 31,2006


2007$000


$000Revenues


1,398



911Loss before taxes


(35,983
)


(27,143
)Net loss applicable to common stockholders


(36,565
)


(25,102
)Net loss per share  basic and diluted

$
(2.73
)

$
(1.26
)Weighted average shares


13,390,933



19,873,911   Xcyte
      Merger
    Purchase Price
      Fair value of Xcyte outstanding common stock

$
8,620Fair value of Xcyte outstanding preferred stock


7,618Fair value of Xcyte outstanding stock options


17Merger costs


1,951Total purchase price

$
18,206  90




---



##### Table of Contents



Merger
    Purchase Price Allocation
    Current assets

$
21,267Property, plant and equipment


108Other assets


259Current liabilities


(4,400
)Non-current liabilities


(1,777
)Goodwill


2,749$
18,206   Pro Forma
    Results of Operations
    Year EndedDecember 31,2006$000Revenues


5,387Loss before taxes


(30,660
)Net loss applicable to common stockholders


(31,242
)Net loss per share  basic and diluted

$
(2.33
)   5
    Cash and
    Cash Equivalents    December 31,2007

2008$000

$000Cash


5,408



4,580Deposits with original maturity of less than three months


25,579



19,64030,987



24,220   6
    Short-term
    Investments    December 31, 2007Gross

GrossAmortized

Unrealized

UnrealizedCost

Gains

Losses

Fair Value$000

$000

$000

$000Federal agency obligations & municipal bonds


9,354











9,354Corporate bonds & commercial paper


18,390



24



(2
)


18,41227,744



24



(2
)


27,766   91




---



##### Table of Contents



December 31, 2008Gross

GrossAmortized

Unrealized

UnrealizedCost

Gains

Losses

Fair Value$000

$000

$000

$000Corporate bonds & commercial paper


1,501



1







1,502         Fair
    value measurements
  Fair Value
    Measurements No. 157-2,
  
    Level 1: Quoted prices (unadjusted) in active markets that
    are accessible at the measurement date for assets or
    liabilities. The fair value hierarchy gives the highest priority
    to Level 1 inputs.
    Level 2: Inputs other than quoted prices within
    Level 1 that are observable for the asset or liability,
    either directly or indirectly
    Level 3: Unobservable inputs that are used when little or
    no market data is available. The fair value hierarchy gives the
    lowest priority to Level 3 inputs.      Level 1

Level 2

Level 3

Total$000

$000

$000

$000U.S. Government Agency Securities














Commercial Paper














Municipal Notes














Corporate Bonds






1,502







1,502Total assets at fair value






1,502







1,502Warrants






43







43  92




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##### Table of Contents



7
    Prepaid
    Expenses and Other Current Assets    December 31,2007

2008$000

$000Research and development tax credit receivable


2,467



1,530Prepayments


1,741



1,017Other current assets


603



2374,811



2,784   8
    Property,
    Plant and Equipment    Useful Lives in Years from

December 31,Date of Acquisition

2007

2008$000

$000Leasehold improvements

Life of lease (15 yrs)


996



811Research and laboratory equipment

3 to 5 yrs


9,956



7,170Office equipment and furniture

3 to 5 yrs


2,159



1,85913,111



9,840Less: accumulated depreciation and amortization




(10,095
)


(8,003
)impairment








(89
)3,016



1,748        93




---



##### Table of Contents



9
    Intangible
    Assets and Goodwill    BeneficialContractLicense

Customer

ALIGN Trade

Non-Compete

PricingAgreements

Relationships

Name

Agreements

Arrangement

Total$000

$000

$000

$000

$000

$000Intangible AssetsUseful lives in years from date of acquisition


7 yrs



7 yrs



2 yrs



2 yrs



2 yrs



Fair value on acquisition on October 5, 2007


3,043



533



100



392



427



4,495Less: amortization


(98
)


(17
)


(12
)


(49
)


(14
)


(190
)Balance as of December 31, 2007


2,945



516



88



343



413



4,305Less: amortization


(295
)


(51
)


(38
)


(147
)


(177
)


(708
)Less: impairment charge


(2,650
)


(465
)


(50
)


(196
)


(236
)


(3,597
)Balance as of December 31, 2008






















   Intangibles
  ® ® ®
    Goodwill
  Business
    Combinations
 94




---



##### Table of Contents



10
    Accrued
    and Other Current Liabilities    December 31,2007

2008$000

$000Accrued research and development


3,681



3,653Amount payable under license agreement






594Other liabilities


298



9353,979



5,182     December 31,2007

2008$000

$000Accrued Compensation


344



707Proposed preference dividend


307



307Deferred consideration payable in common stock


250



Other current liabilities


414



6011,315



1,615  95




---



##### Table of Contents



11
    Related
    Party Transactions  Fees
    Paid to Shareholders
    Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2006

2007

2008$000

$000

$000Merlin Venture Limited


6







Invesco


6







   12
    Commitments
    and contingencies  General
    Leases
    OperatingLeaseObligations$0002009


1,9452010


1,7852011


5212012


3782013


370Thereafter


4,375     25-year
   96




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##### Table of Contents



Accounting for Costs Associated
    with Exit or Disposal Activities
    Guarantee
    Purchase
    Obligations
    Legal
    proceedings
    13
    Stockholders
    Equity  Preferred
    stock
     97




---



##### Table of Contents



30-day
    Accounting for Derivative Instruments
    Year from November 1, 2008 to October 31, 2009

$
10.36Year from November 1, 2009 to October 31, 2010

$
10.30Year from November 1, 2010 to October 31, 2011

$
10.24Year from November 1, 2011 to October 31, 2012

$
10.18Year from November 1, 2012 to October 31, 2013

$
10.12Year from November 1, 2013 to October 31, 2014

$
10.06November 1, 2014 and thereafter

$
10.00      98




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##### Table of Contents



Common
    Stock
  March
    2006 Stock Purchase Agreement
    April
    2006 Securities Purchase Agreement
    February
    2007 Registered Direct Offering
    EITF 00-19.
  December
    2007 Committed Equity Financing Facility
  30-day eight-day eight-day
 99




---



##### Table of Contents



eight-day
    EITF 00-19.
  Common
    Stock Warrants
    WeightedExpiration


Common Shares


AverageIssued in Connection With

Date


Issuable


Exercise PriceAcquisition of Xcyte March 2006


2009



431



15.29March 2006 stock issuance


2013



2,571,429



7.00February 2007 stock issuance


2014



1,062,412



8.44December 2007 CEFF


2012



175,000



7.17Total






3,809,272


$
7.41   Exercise
    of Stock Options
    14
    Stock-Based
    Compensation Arrangements  Share
    Based Payment
  1 4 1 48
   100




---



##### Table of Contents



Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2006


2007


2008($000s)Research and development


6,230



837



736Selling, general and administrative


3,370



896



962Stock-based compensation costs before income taxes

$
9,600


$
1,733


$
1,698   2006
    Plans
            Acceleration
    of Options
        Cyclacel
    Plans
   101




---



##### Table of Contents



Xcyte
    Plans
       102




---



##### Table of Contents



WeightedWeighted

AverageNumber of

Average

Remaining

AggregateOptions

Exercise

Contractual

IntrinsicCyclacel Pharmaceuticals, Inc.

Outstanding

Price

Term (Years)

ValueBalance as of December 31, 2006


1,335,841


$
6.72



9.44



Granted


1,317,546


$
6.07Exercised


(25,508
)

$
6.40Cancelled/forfeited


(35,633
)

$
6.02Options outstanding at December 31, 2007


2,592,246


$
6.39



9.14



53,580Granted


1,469,575


$
1.18Exercised






Cancelled/forfeited


(387,022
)

$
5.92Options outstanding at December 31, 2008


3,674,899


$
4.36



8.74



2Unvested at December 31, 2008


2,381,836


$
3.12



9.25



2Vested and exercisable at December 31, 2008


1,293,063


$
6.64



7.79



     Weighted AverageExercise

Number

Remaining

NumberPrice

Outstanding

Contractual Life

Exercisable$0.31  1.98


1,179,575



9.87



02.15  4.95


293,770



9.07



13,5975.26  5.81


763,532



8.78



207,1576.30  8.30


1,416,022



7.74



1,050,30915.00  45.30


22,000



5.61



22,0003,674,899







1,293,063     Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2006

2007

2008Expected term (years)


4.65


4.25  6.00

4.25  6.00Risk free interest rate


4.9
%

3.28  5.07%

1.54  3.76%Volatility


92
%

65  80%

45  75%Dividends


0.00
%

0.00%

0.00%Resulting weighted average grant date fair value

$
4.46


$3.68

$0.68     catch-up
 103




---



##### Table of Contents



Restricted
    Stock
  1 48
  Restricted Common

Weighted Average GrantStock

Date Value Per ShareNon-vested at December 31, 2007






Granted


50,000


$
0.44Non-vested at December 31, 2008


50,000


$
0.44   Restricted
    Stock Units
    Restricted Stock

Weighted Average GrantUnits

Date Value Per ShareNon-vested at December 31, 2007






Granted


91,700


$
0.44Non-vested at December 31, 2008


91,700


$
0.44     15
    Restructuring   104




---



##### Table of Contents



Lease Restructuring

Sales TaxCharges

Assessment

Total$000

$000

$000Balance at December 31, 2006


2,334



270



2,614Cash payments


(903
)






(903
)Adjustments for lease-related deferred expenses and liabilities


1,554







1,554Balance at December 31, 2007


2,995



270



3,265Cash payments


(1,106
)






(1,106
)Adjustments for lease-related deferred expenses and liabilities


202







202Balance at December 31, 2008


2,091



270



2,361Current


1,029



270



1,299Long term liabilities


1,062







1,062   Lease
    restructuring charges
  Accounting
    for Costs Associated with Exit or Disposal Activities.
    Sales tax
    assessment
   105




---



##### Table of Contents



16
    Pension
    Plans    401(k)
    Plan
    17
    Taxes    Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2006

2007

2008$000

$000

$000Domestic


(1,919
)


(5,448
)


(11,337
)Foreign


(29,584
)


(20,646
)


(30,798
)Total loss before taxes


(31,503
)


(26,094
)


(42,135
)     Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2006

2007

2008$000

$000

$000Current  domestic






(2
)


(4
)Current  foreign


2,245



2,043



1,753Current  total


2,245



2,041



1,749    106




---



##### Table of Contents



Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2006

2007

2008$000

$000

$000Loss before income taxes


(31,503
)


(26,094
)


(42,135
)Income tax expense computed at statutory federal tax rate


(10,710
)


(8,872
)


(14,361
)State income tax (net of federal benefit)






1



3Disallowed expenses and non-taxable income


4,655



(3,005
)


(1,939
)Tax losses


4,863



4,349



3,584Research and development tax relief


(2,796
)


(2,551
)


(2,191
)Valuation allowance






7,272



11,161Change in state tax rate






(268
)Research and development tax credit rate difference


559



510



438Foreign tax rate differential


1,184



525



1,556(2,245
)


(2,039
)


(1,749
)     2007

2008$000

$000Net operating loss carryforwards


36,256



35,140Depreciation, amortization and impairment of property and
    equipment


(447
)


2,178Lease restructuring charges


1,203



817Tax Credits


61



61Stock Options


322



582Accrued Expenses


1,450



1,563Other


140



110Translation adjustment






(2,814
)Deferred Tax Assets


38,985



37,637Valuation allowance for deferred tax assets


(38,985
)


(37,637
)Net deferred taxes






       2007

2008$000

$000Accumulated tax losses


110,128



110,478    107




---



##### Table of Contents



18
    Segment
    and Geographic Information   108




---



##### Table of Contents



2006


2007


2008$000


$000


$000RevenueUnited States










838United Kingdom


387



129



39387



129



877Net lossUnited States


(1,142
)


(1,783
)


(11,341
)United Kingdom


(30,943
)


(22,270
)


(29,045
)(32,085
)


(24,053
)


(40,386
)Total AssetsUnited States

$
17,636



66,947



22,842United Kingdom


45,640



8,965



8,115$
63,276


$
75,912


$
30,957Long Lived Assets, netUnited States

$
453



532



516United Kingdom


1,668



2,484



1,2322,121



3,016



1,748   19
    Selected
    Quarterly Information (unaudited)    For the Three Months EndedMarch 31,


June 30,


September 30,


December 31,2008


2008


2008


2008$000, except per share amountsRevenues


177



180



269



251Loss before taxes


(6,927
)


(8,969
)


(18,058
)


(8,181
)Net loss applicable to common shareholders


(6,252
)


(8,544
)


(17,647
)


(7,943
)Net loss per share  basic and diluted(1)

$
(0.31
)

$
(0.42
)

$
(0.86
)

$
(0.39
)   For the Three Months EndedMarch 31,


June 30,


September 30,


December 31,2007


2007


2007


2007$000, except per share amountsRevenues


52



31



33



13Loss before taxes


(5,442
)


(4,158
)


(4,647
)


(11,847
)Net loss applicable to common shareholders


(4,890
)


(3,595
)


(4,214
)


(11,354
)Net loss per share  basic and diluted(1)

$
(0.27
)

$
(0.18
)

$
(0.21
)

$
(0.57
)     (1)
    
    The addition of loss per common share by quarter may not equal
    the total loss per common share for the year or year to date due
    to rounding. 109




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Managements Annual Report on Internal Control
    Over Financial Reporting
            Rules 13a-15(f) 15d-15(f). Internal Control  Integrated Framework
      (b) Report of the Independent Registered Public
    Accounting Firm:
    Internal Control 
    Integrated Framework
 110




---



##### Table of Contents



Ernst &
    Young LLP
     Changes in Internal Control Over Financial
    Reporting
    Item 9B.
    Other
    information   111




---



##### Table of Contents



PART III    Item 10.
    Directors
    and Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholders matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules            EXHIBITNUMBER

DESCRIPTION3
.1

Amended and Restated Certificate of Incorporation of Xcyte
    Therapies, Inc. (previously filed as Exhibit 3.1 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). 112




---



##### Table of Contents



EXHIBITNUMBER

DESCRIPTION3
.1.1

Certificate of Amendment of the Amended and Restated Certificate
    of Incorporation of Xcyte Therapies, Inc. (previously filed as
    Exhibit 10.1 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 3.1 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. 333-19585,
    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).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). 113




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##### Table of Contents



EXHIBITNUMBER

DESCRIPTION10
.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 February 15, 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 February 15, 2007, and
    incorporated herein by reference).10
.9

Description of Dr. John Womelsdorfs compensatory
    arrangement (previously filed as Exhibit 10.1 to the
    Registrants Quarterly Report on
    Form 10-Q,
    for the quarterly period ended September 30, 2006,
    originally filed with the SEC on November 13, 2006, and
    incorporated herein by reference).10
.10

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 18, 2007, and
    incorporated herein by reference).10
.11

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).10
.12

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
.13*

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, 2008.21
*

Subsidiaries of Cyclacel Pharmaceuticals, Inc.23
.1*

Consent of Independent Registered Public Accounting Firm.31
.1*

Certificate of Spiro Rombotis, pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.31
.2*

Certification of Paul McBarron, pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.32
.1**

Certification of Spiro Rombotis, pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 (Subsections (a) and
    (b) of Section 1350, Chapter 63 of Title 18,
    United States Code).32
.2**

Certification of Paul McBarron, pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 (Subsections (a) and
    (b) of Section 1350, Chapter 63 of Title 18,
    United States Code).     
    
    Indicates management compensatory plan, contract or arrangement.*
    
    Filed herewith.**
    
    Furnished herewith. 114




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##### Table of Contents



SIGNATURES
    CYCLACEL PHARMACEUTICALS, INC.
  By:
    /s/  Paul
    McBarron        Signature

Title

Date/s/  Spiro
    RombotisSpiro
    Rombotis

President & Chief Executive Officer
    (Principal Executive Officer) and Director

March 31, 2009/s/  Paul
    McBarronPaul
    McBarron

Chief Operating Officer & Executive Vice President,
    Finance
    (Principal Financial and Accounting Officer) and Director

March 31, 2009/s/  Dr. David
    UPrichardDr. David
    UPrichard

Chairman

March 31, 2009/s/  Dr. Christopher
    HenneyDr. Christopher
    Henney

Vice Chairman

March 31, 2009/s/  Dr. Nicholas
    BacopoulosDr. Nicholas
    Bacopoulos

Director

March 31, 2009/s/  Sir
    John BanhamSir
    John Banham

Director

March 31, 2009/s/  Pierre
    LegaultPierre
    Legault

Director

March 31, 2009/s/  Daniel
    SpiegelmanDaniel
    Spiegelman

Director

March 31, 2009  115