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Research: Healthcare
GlaxoSmithKline (GSK) has announced the acquisition of Sierra Oncology, Sareum’s licensing partner for its CHK1 asset SRA737 (held in partnership with CRT Pioneer Fund) targeting solid tumours. The deal values Sierra at $55/share (a 39% premium to the closing price on 12 April) for a total consideration of $1.9bn. As a reminder, SRA737 was in-licensed by Sierra in 2016 and Sareum holds a 27.5% stake in the proceeds of the licence agreement. Development work on SRA737 had been deprioritised (due to funding constraints) until recently, when Sierra indicated a revival in development work on a potential combination therapy. Sareum’s share price has responded favourably following news on the acquisition, suggesting that the market is expecting progress on the asset to accelerate given the significantly heftier resources at GSK’s disposal. We note that first patient dosing in any studies involving SRA737 will trigger a milestone payment of $2m (translating to $0.55m to Sareum).
Sareum Holdings |
GSK’s Sierra acquisition, read-across for Sareum |
News update |
Pharma & Biotech |
14 April 2022 |
Share price performance
Business description
Analyst
Sareum Holdings is a research client of Edison Investment Research Limited |
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GlaxoSmithKline (GSK) has announced the acquisition of Sierra Oncology, Sareum’s licensing partner for its CHK1 asset SRA737 (held in partnership with CRT Pioneer Fund) targeting solid tumours. The deal values Sierra at $55/share (a 39% premium to the closing price on 12 April) for a total consideration of $1.9bn. As a reminder, SRA737 was in-licensed by Sierra in 2016 and Sareum holds a 27.5% stake in the proceeds of the licence agreement. Development work on SRA737 had been deprioritised (due to funding constraints) until recently, when Sierra indicated a revival in development work on a potential combination therapy. Sareum’s share price has responded favourably following news on the acquisition, suggesting that the market is expecting progress on the asset to accelerate given the significantly heftier resources at GSK’s disposal. We note that first patient dosing in any studies involving SRA737 will trigger a milestone payment of $2m (translating to $0.55m to Sareum).
Year end |
Revenue (£m) |
PBT |
EPS |
DPS |
P/E |
Yield |
06/18 |
0.0 |
(1.5) |
(0.06) |
0.0 |
N/A |
N/A |
06/19 |
0.0 |
(1.5) |
(0.05) |
0.0 |
N/A |
N/A |
06/20 |
0.04 |
(1.0) |
(0.03) |
0.0 |
N/A |
N/A |
06/21 |
0.0 |
(1.5) |
(0.05) |
0.0 |
N/A |
N/A |
Source: Company data
On 13 April, GSK announced its intention to acquire Sierra Oncology for $1.9bn (a 39% premium to the closing price on 12 April). The deal is part of GSK’s efforts to bolster its oncology franchise as it looks to move away from its consumer health business. Sierra’s lead asset, momelotinib (targeting myelofibrosis, a haematological cancer of the bone marrow), has recently completed Phase III studies, with plans for US and EU regulatory submissions before end 2022. We note that in late 2021, Sierra had indicated revived interest in developing SRA737 as a potential combination therapy (both haematological malignancies and solid tumours) following its in-licensing of the BET inhibitor AZD5153 (now known as SRA515) from AstraZeneca (August 2021). According to the latest available information, Sierra was in the process of finalising trial designs for the three possible studies assessing SRA737 as a combination treatment.
While we await more information from the companies involved on their future plans for the pipeline assets, we believe that GSK will also explore the possibility of continuing to develop Sierra’s remaining pipeline given that momelotinib is ready to transition to the market and the fact that Sierra’s developmental pipeline aligns with GSK’s oncology/haematology focus. If GSK decides to retain the pipeline, we expect development work on SRA737 to accelerate given the greater financial resources at hand. This should work in Sareum’s favour as it holds a 27.5% economic interest in SRA737. The favourable response of Sareum’s share price following the announcement suggests renewed optimism in the market on SRA737’s prospects, pending further details from the companies involved.
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Research: TMT
XP’s Q122 trading update confirms demand has remained strong across the board, with order intake up 39% y-o-y. Ongoing supply chain issues limited the amount of product that could be shipped in the quarter, with revenue up 8% y-o-y. We have revised our forecasts to take account of supply chain headwinds and the recent US legal case, reducing our normalised diluted EPS forecast by 7.1% for FY22 and 4.2% for FY23.
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