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Research: Healthcare
In an encouraging development, Sareum announced that its clinical trial application to commence Phase I studies for its lead asset, SDC-1801 (a TYK2/JAK1 inhibitor), has been approved by Australian authorities. Sareum had filed its application in March 2023 under the Clinical Trial Notification Scheme (CTN) after stalled discussions with the UK Medicines and Healthcare products Regulatory Agency (MHRA) for SDC-1801’s clinical trial authorisation (CTA) application based on the submitted data package. Following the Australian approval, Sareum intends to initiate the Phase Ia clinical trial (safety and dose-finding study in healthy volunteers) in Q223, which if successful will be followed by a Phase Ib study in 2024 in patients with plaque psoriasis. With burn rates likely to rise with trial commencement (c £0.5m/quarter currently), we expect Sareum will need to raise additional funds before end-CY23 (H123 cash balance of £2.9m).
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Sareum Holdings |
SDC-1801 on the way to the clinic
Pharma and biotech |
Spotlight – Flash
9 May 2023 |
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Sareum Holdings is a research client of Edison Investment Research Limited |
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In an encouraging development, Sareum announced that its clinical trial application to commence Phase I studies for its lead asset, SDC-1801 (a TYK2/JAK1 inhibitor), has been approved by Australian authorities. Sareum had filed its application in March 2023 under the Clinical Trial Notification Scheme (CTN) after stalled discussions with the UK Medicines and Healthcare products Regulatory Agency (MHRA) for SDC-1801’s clinical trial authorisation (CTA) application based on the submitted data package. Following the Australian approval, Sareum intends to initiate the Phase Ia clinical trial (safety and dose-finding study in healthy volunteers) in Q223, which if successful will be followed by a Phase Ib study in 2024 in patients with plaque psoriasis. With burn rates likely to rise with trial commencement (c £0.5m/quarter currently), we expect Sareum will need to raise additional funds before end-CY23 (H123 cash balance of £2.9m).
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Historical financials
Source: Company data. Note: *EPS figures have been adjusted retrospectively for the 50:1 share consolidation in March 2022. |
The Phase Ia study for SDC-1801 will investigate the safety and pharmacokinetics of SDC-1801 in ascending doses administered to healthy adults. Patient enrolment is expected to commence in June 2023. If safety is established, Sareum plans to follow up with the Phase Ib part of the study in 2024 in patients with plaque psoriasis. Psoriasis is an autoimmune chronic skin condition affecting over 60 million adults worldwide. The psoriasis treatment market was estimated by Precedence Research to be over $27bn in 2022 and is projected to grow to over $50bn by 2030. The current treatment landscape is dominated by biologics, although oral alternatives, such as SDC-1801, may offer the advantage of easier administration.
As a reminder, SDC-1801 is a novel TYK2/JAK1 inhibitor, targeting autoimmune indications, with an initial focus on psoriasis. In November 2022, the UK MHRA 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. With no visible progress in discussions, Sareum decided to pivot its focus to Australia as an alternate location to conduct the SDC-1801 Phase I trials, and filed an application in March 2023 under the CTN scheme.
We view Sareum’s decision to conduct clinical trials of SDC-1801 in Australia as logical, given the country’s strong infrastructure, conducive regulatory environment and relatively low study costs, along with government tax incentives to early-stage companies (rebates of up to 43.5% of eligible R&D expenditure). We estimate the company may require additional funds to start the Phase Ib study planned for CY24, given our expectation (refer to our previous note) that it will need to raise additional funds before the end of CY23.
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Research: Industrials
The interim H123 results highlight continued growth in adjusted operating profit, management’s solid control of the business and the ongoing annual efficiencies being delivered. Furthermore, development of new profit streams are beginning to create momentum, which we expect should offset the anticipated decline in core revenues and support the payment of the dividend. This follows the signing of numerous long-term publisher contracts recently, which collectively account for 65% of current revenues. Additional contract renewals could be secured this year. These renewals bolster the company’s cash-generative business model, providing a steady stream of revenue up to 2029 or 2030. Our valuation remains unchanged at 89p, representing c 80% upside.