Sareum Holdings — SDC-1801 poised for the clinic

Sareum Holdings (AIM: SAR)

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GBP1.93

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Sareum Holdings — SDC-1801 poised for the clinic

Sareum’s FY22 results (to end-June 2022) provided both a financial and operational update on the company’s progress with its developmental pipeline. Encouraging progress has been made with SDC-1801 and the company has filed an exploratory clinical trial application (CTA) to initiate a UK-based Phase Ia/b study. Subject to regulatory approval, management intends for Phase Ia of the trial to commence in Q4 of CY22. Additionally, the company continues to progress its preclinical pipeline through the development of its immunoncology asset SDC-1802 as well as explore strategic options for its clinical oncology asset SRA737. With a gross cash balance of £4.3m at the end of FY22, Sareum expects to have sufficient funding to take SDC-1801 through the Phase Ia portion of the study. We see regulatory approval to initiate the SDC-1801 Phase Ia trial as the next major catalyst for Sareum.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Sareum Holdings

SDC-1801 poised for the clinic

Pharma and biotech

Spotlight - Update

25 October 2022

Price

£1.5

Market cap

£102m

Share price graph

Share details

Code

SAR

Listing

AIM

Shares in issue

68.07m

Net cash at 30 June 2022

£4.3m

Business description

Sareum is a UK-based drug development company, specialising in small molecule kinase inhibitors. Its lead programmes are its pre-clinical TYK2/JAK1 inhibitors, SDC-1801 for autoimmune diseases and SDC-1802 for cancer. Sareum plans to initiate clinical trials for SDC-1801 in Q422. Other programmes include the CHK1 inhibitor SRA737, the rights of which have recently been returned to Sareum from Sierra Oncology, and the de-prioritised FLT3+Aurora kinase inhibitor.

Bull

SDC-1801’s novel TYK2 selectivity may be attractive to partners, pending clinical validation.

First-in-class opportunity for SDC-1802 in multiple cancer indications.

Approval of Sotyktu provides regulatory feasibility of TYK2 inhibitors.

Bear

Safety profile of combined TYK2/JAK1 inhibitor not certain or proved yet.

Potential funding challenges delaying clinical progress of SDC-1801 and SDC-1802.

Markets sought by SDC-1801 and SDC-1802 are highly competitive.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Adam McCarter

+44 (0)20 3077 5700

Sareum Holdings is a research client of Edison Investment Research Limited

Sareum’s FY22 results (to end-June 2022) provided both a financial and operational update on the company’s progress with its developmental pipeline. Encouraging progress has been made with SDC-1801 and the company has filed an exploratory clinical trial application (CTA) to initiate a UK-based Phase Ia/b study. Subject to regulatory approval, management intends for Phase Ia of the trial to commence in Q4 of CY22. Additionally, the company continues to progress its preclinical pipeline through the development of its immunoncology asset SDC-1802 as well as explore strategic options for its clinical oncology asset SRA737. With a gross cash balance of £4.3m at the end of FY22, Sareum expects to have sufficient funding to take SDC-1801 through the Phase Ia portion of the study. We see regulatory approval to initiate the SDC-1801 Phase Ia trial as the next major catalyst for Sareum.

Historical financials

Year
end

Revenue
(£m)

PBT

(£m)

EPS

(£)

DPS
(p)

P/E

(x)

Yield
(%)

06/19

0.00

(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

0.00

(1.7)

(0.02)

0.0

N/A

N/A

06/22

0.00

(2.6)

(0.03)

0.0

N/A

N/A

Source: Company data

SDC-1801 CTA submitted

The CTA filing of Sareum’s lead TYK2/JAK1 inhibitor marks a significant milestone in the development plan for SDC-1801. The company is awaiting approval from the UK Medicines and Healthcare Products Regulatory Agency before initiating a Phase Ia assessing the safety and tolerability of SDC-1801 in healthy subjects. If successful, the results would provide support to initiate Phase Ib of the study in 2023; however, management has communicated further funding options will need to be explored to support this.

Clarity over SRA737 provides focus

Following GlaxoSmithKline’s (GSK’s) $1.9bn acquisition of Sierra Oncology in July 2022, Sierra has returned the rights to Sareum’s out-licensed CHK1 asset SRA737 (held in partnership with the CRT Pioneer Fund, CPF), which is being investigated for the treatment of solid tumours. While this was a setback for Sareum, SRA737’s development had been in limbo so, in our view, the decision provides clarity for Sareum to now explore other strategic options. The company and partner CPF now have an opportunity to assess future development or licensing plans for SRA737, leveraging the compound’s existing positive clinical data.

Subscriptions bolster FY22 cash position

During FY22 Sareum raised c £3.6m, after expenses, through three equity issues to high-net-worth individuals in July, August and December 2021. The financing is intended to further support the clinical development of SDC-1801.

TKY2 approval provides encouragement

On 9 September 2022 the US FDA approved Bristol Myers Squibb’s first-in-class tyrosine kinase 2 (TYK2) inhibitor Sotyktu (deucravacitinib) for the treatment of moderate-to-severe plaque psoriasis in adults, making it the first selective TYK2 inhibitor to be approved for any indication. Sotyktu’s approval was based on the results from the Phase III POETYK PSO-1 and POETYK PSO-2 trials, with both studies reaching primary endpoints on efficacy and safety. Importantly, the drug showed no material toxicology issues, which have been a particular concern regarding the JAK class of drugs (which includes JAK1, JAK2, JAK3 and TYK2) recently, resulting in black box warnings. We see this development as positive for the progression of SDC-1801, with potential read-across that provides regulatory feasibility for the clinical utility, application and safety of TYK2 inhibitors. Additionally, SDC-1801’s dual mechanism of action may offer differentiation over Sotyktu’s single targeted therapy. The psoriasis market also represents a sizeable opportunity for Sareum, with global sales of psoriasis drugs estimated to reach c $30bn by 2028 (source: EvaluatePharma).

Financials

Sareum’s FY22 operating loss was £2.6m, up from £1.7m in FY21, attributed to higher R&D expenses related to late-stage pre-clinical activities and preparatory activities for the initiation of clinical trials for SDC-1801. The company received an R&D tax credit of £0.2m in December 2021 and expects to receive a further £0.4m in December 2022. We believe R&D and operating expenses will likely continue to increase as the pipeline approaches the clinic.

The company’s cash balance at the end of FY22 was £4.3m, supported by three equity issues in July, August and December 2021, which raised total gross proceeds of £3.9m (£3.6m after expenses). Sareum’s annual cash burn for FY22 was £2.1m and we believe spending in FY23 is likely to be materially higher as assets approach clinical trials, reflected in management’s communication that it has sufficient cash to complete the Phase Ia portion of SDC-1801’s upcoming clinical trial and accelerate preclinical work on SDC-1802; however, further funding will be required to initiate the Phase Ib portion for SDC-1801. Additional funds may be secured either through partnerships and/or equity issues to advance the programmes further. We anticipate that Sareum may evaluate out-licensing opportunities for SDC-1801 following Phase Ia, leveraging the data from the study to potentially secure a partnership deal.


General disclaimer and copyright

This report has been commissioned by Sareum Holdings and prepared and issued by Edison, in consideration of a fee payable by Sareum Holdings. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Sareum Holdings and prepared and issued by Edison, in consideration of a fee payable by Sareum Holdings. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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