Sareum Holdings — SDC-1801 embarks on clinical journey in FY23

In FY23, Sareum was mainly focused on advancing SDC-1801, its lead asset and a novel TYK2/JAK1 inhibitor targeting a range of autoimmune indications, with an initial emphasis on psoriasis, to the clinical stage. After receiving approval for its CTA from the Australian authorities in May 2023, Sareum started dosing the first subjects in its Phase Ia study for SDC‐1801 in June 2023. Previously, the UK MHRA had informed Sareum that it would not approve the CTA until an additional review of certain preclinical data was completed by the UK Good Laboratory Practice Monitoring Authority (November 2022). To move out of standstill, Sareum decided to turn its focus to Australia as an alternative location to conduct the SDC-1801 Phase I trials and filed an application in March 2023 under the Clinical Trial Notification scheme. We believe Sareum’s decision to conduct clinical trials of SDC-1801 in Australia is logical, given the country’s strong infrastructure, favourable regulatory environment and relatively low study costs, along with government tax incentives for early-stage companies (rebates of up to 43.5% of eligible R&D expenditure).

We view the initiation of dosing as an important step in SDC-1801’s clinical journey and timely progression of the trial represents an important catalyst for the company. Full safety data from Phase Ia trial are anticipated in H1 CY24 which, if favourable, will likely be followed by a Phase Ib study in psoriasis patients. In the Phase Ib study, Sareum intends to recruit up to 24 patients to assess the efficacy of the drug. It expects to complete the study before the end of CY24, subject to regulatory, financing and recruitment factors. Management then plans to explore licensing deals for the drug, provided that results from the Phase I trial are supportive.

In terms of design, the Phase Ia study is a randomised and placebo-controlled trial with single and multiple oral dose components, evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of SDC-1801 in healthy adults. It will be conducted in three parts: a single ascending dose (SAD) study (part 1), followed by a multiple ascending dose (MAD) study (part 2) and a food effects study (part 3). Part 1 will evaluate 48 subjects, categorised into six ascending dose groups with eight subjects in each, for six weeks ranging from a screening visit to a follow-up visit. These groups will be administered either SDC-1801 or placebo in a 3:1 ratio. After a successful review of clinical data from at least the first three cohorts in part 1 by the safety review committee, part 2 will be initiated. Part 2 is designed to assess at least four sequential and ascending doses of SDC-1801 or matched placebo across four groups of eight subjects in each (n=32 for part 2) for eight weeks of total assessment. Concurrently with part 2, the company plans to run part 3 of the study, which will evaluate the effects of food on the absorption of SDC-1801.

In a recent update, Sareum announced that the first participants in the MAD study had been dosed, marking the start of part 2 of the Phase Ia trial. This followed approval of the preliminary data, generated under part 1 (SAD) of the study, by the safety review committee. Management states that safety and pharmacokinetics data from the initial three cohorts in part 1 demonstrate a favourable profile and support oral dosing of patients once a day. We note that the part 2 study will run alongside the continued dose escalation under part 1. Part 3 of the study is scheduled to start in Q4 CY23.

In terms of intellectual property, Sareum received first patent (CN113056456) related to SDC-1801 in China for inflammatory or immune disorders in June 2023. We note that this is the first patent granted to SDC-1801 in any territory. Several patent applications are under review in Europe (EP3864009), the US (US2021387981) and other regions.

Sareum’s lead product, SDC-1801, is a JAK inhibitor engineered to selectively target the TYK2/JAK1 enzymes with the aim of circumventing the safety/toxicity issues related to the JAK2 and JAK3 isoforms. Although SDC-1801 is designed to target a range of autoimmune diseases, the initial focus is on psoriasis. Psoriasis is an autoimmune dermatological condition that affects more than 125 million people globally, ie 2–3% of the world’s population. More than eight million people have psoriasis in the US alone. The global psoriasis market is currently valued at US$24.7bn, a sizeable opportunity for Sareum, and it is expected to grow to US$31.9bn by 2028 (source: EvaluatePharma).

The US FDA approval of Bristol Myers Squibb’s first-in-class, selective TYK2 asset, Sotyktu (deucravacitinib), without the typical class-level black box warnings (increased risk of malignancy, thrombosis and cardiac events) for JAK inhibitors and without restricted usage (limited to patients refractory to biologics and other available treatments), demonstrated the potential of selective TYK2 inhibition in treating autoimmune diseases (moderate-to-severe plaque psoriasis in this case). We note that Sotyktu selectively targets TYK2 compared to the broad action of first-generation JAK inhibitors. Sotyktu is the first selective TYK2 inhibitor to be approved for any indication and is the first innovation in oral treatment for moderate-to-severe plaque psoriasis in approximately 10 years. In addition, the acquisition of Nimbus Therapeutics’ Phase III-ready TYK2 programme NDI-034858 (now TAK-279) by Takeda in February 2023 for up to US$6bn (US$4bn upfront and up to US$2bn related to sales milestones) provided additional validation of the commercial potential for this class of drug.

Sareum claims that SDC-1801 offers differentiation in its dual TYK2 and JAK1 inhibition, which could result in better efficacy (without safety trade-offs) in psoriasis compared to agents that target only one of the two kinases. The TYK2/JAK1 inhibition mechanism targeted by SDC-1801 is designed to address the deregulated signalling pathways in multiple autoimmune diseases including psoriasis, lupus, psoriatic arthritis and inflammatory bowel disease, thereby broadening the addressable market potential.

SDC-1802: Sareum’s other asset in development is SDC-1802, a TYK2/JAK1 inhibitor, which is being developed for multiple oncology indications in both haematological (blood-related) malignancies and solid tumours. The company continues to work on translational studies to identify an optimal cancer indication and patient population before undertaking further toxicology and manufacturing studies. SDC-1802’s TYK2/JAK1 selectivity accords it first-in-class potential for therapeutic treatment in cancer, although it comes with particular development risks given past failures in this space. We believe the clinical progression for SDC-1802 is contingent on the headway made with SDC-1801. In June 2023, Sareum was granted a patent for SDC-1802 in the US for autoimmune disorders, potentially extending its scope beyond immunoncology. This follows the initial patent for the compound in April 2022, protecting the molecular and pharmaceutical preparations of SDC‐1802 as a therapeutic to treat T‐cell acute lymphoblastic leukaemia and other cancers, dependent on TYK2 kinase for survival.

SRA737: CRT Pioneer Fund (Sareum's co‐development partner) is actively exploring potential development opportunities for the asset. SRA737 is a clinical-stage (Phase I/II) oral checkpoint kinase 1 (CHK1) inhibitor targeting the DNA damage response network in the treatment of solid tumours, which was previously out-licensed to Sierra Oncology. In November 2022, Sierra Oncology returned its rights to SRA737 (held in partnership with the CPF; Sareum has a 27.5% economic interest) following GlaxoSmithKline’s US$1.9bn acquisition of Sierra Oncology in July 2022 (primarily for its lead asset momelotinib targeting myelofibrosis, a haematological cancer of the bone marrow).

Sareum’s operating loss stood at £4.1m in FY23, higher than £2.6m in FY22, mainly driven by increased R&D expenses related to preparatory activities and the commencement of clinical studies for SDC-1801 in Australia. FY23 net loss was £3.2m, which included an R&D tax credit of £0.8m versus £0.4m in FY22. With the recent initiation of the SDC-1801 clinical trial at the end of FY23, operating expenses are likely to increase further in FY24. Reflecting higher operating expenses during the period, net cash outflow from operating activities was £3.3m compared to £2.1m in FY22.

The cash balance at end FY23 stood at £1.0m versus £2.9m at end H123 and £4.3m at end FY22. This was further supported by an equity prepayment facility of up to £5m from RiverFort Global Opportunities (a UK-based investment company) in August 2023. Sareum received the first deposit of £2m (net of associated costs) against the issue of c 1.95m shares at a reference price of 102.4p each. According to management, the second and third deposits of £0.3m each are likely to be received after three and six months of the first deposit, along with a fourth deposit (of up to £1.4m) due in six months (subject to pre-agreed conditions). The balance and final deposit (of up to £1m) will be mutually agreed between the parties at a later date. The equity prepayment facility will be similar to an at-the-market equity arrangement, whereby the company will issue new shares at the time of each deposit. The number of shares to be issued at each deposit will be determined based on the volume-weighted average price for the five days preceding the date of the relevant deposit, but at the same nominal value of 1.25p each. As an additional benefit, RiverFort will be issued warrants equal to 45% of each deposit and exercisable at a 40% premium to the relevant reference price and with a 48‐month term. At the issue of the first deposit, RiverFort was granted 879k warrants, exercisable at 143.3p each. Management estimates that, along with expected tax credits of £1.6m, the £5m equity prepayment facility, if fully drawn, could provide for a cash runway to Q4 CY24.