Sareum Holdings — Sierra Oncology returns rights to SRA737

Sareum Holdings (AIM: SAR)

Currency in GBP

Last close As at 30/01/2023

GBP1.93

8.00 (4.34%)

Market capitalisation

GBP125m

Sareum Holdings — Sierra Oncology returns rights to SRA737

Sareum has announced that Sierra Oncology has decided to return the rights to the out-licensed CHK1 asset SRA737 (held in partnership with the CRT Pioneer Fund, CPF), following GlaxoSmithKline’s (GSK) $1.9bn acquisition of Sierra in July 2022. SRA737 was in-licensed by Sierra in 2016 and Sareum holds a 27.5% economic stake in the proceeds. Development work on SRA737 had been put on hold (due to funding constraints), but Sierra had recently indicated plans for renewed development as a potential combination therapy. This was before Sierra was picked up by GSK for its lead asset momelotinib (targeting myelofibrosis, a haematological cancer of the bone marrow). We see this latest development as a mild setback for Sareum given that GSK’s support could have accelerated development activity on the drug, triggering a $0.55m payment to Sareum from first patient dosing in a new clinical trial. However, it does provide Sareum and partner CPF with an opportunity to actively assess future development plans for SRA737, leveraging the positive clinical data.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Sareum Holdings

Sierra Oncology returns rights to SRA737

Pipeline update

Pharma and biotech

12 October 2022

Price

197.5p

Market cap

£134m

Net cash (£m) at 30 June 2022

4.3

Shares in issue

68.07m

Free float

94.9%

Code

SAR

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Sareum Holdings is a UK-based drug development company, specialising in small molecule kinase inhibitors. Its lead programmes are its preclinical TYK2/JAK1 inhibitors, SDC-1801 for autoimmune diseases and SDC-1802 for cancer. SDC-1801 filed a CTA application in July 2022, with Phase Ia trial expected in Q4 CY22. Other programmes include the CHK1 inhibitor SRA737 and the de-prioritised FLT3+Aurora kinase. Sareum holds a 27.5% stake in any future income from SRA737.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Sareum Holdings is a research client of Edison Investment Research Limited

Sareum has announced that Sierra Oncology has decided to return the rights to the out-licensed CHK1 asset SRA737 (held in partnership with the CRT Pioneer Fund, CPF), following GlaxoSmithKline’s (GSK) $1.9bn acquisition of Sierra in July 2022. SRA737 was in-licensed by Sierra in 2016 and Sareum holds a 27.5% economic stake in the proceeds. Development work on SRA737 had been put on hold (due to funding constraints), but Sierra had recently indicated plans for renewed development as a potential combination therapy. This was before Sierra was picked up by GSK for its lead asset momelotinib (targeting myelofibrosis, a haematological cancer of the bone marrow). We see this latest development as a mild setback for Sareum given that GSK’s support could have accelerated development activity on the drug, triggering a $0.55m payment to Sareum from first patient dosing in a new clinical trial. However, it does provide Sareum and partner CPF with an opportunity to actively assess future development plans for SRA737, leveraging the positive clinical data.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

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

SRA737 is a clinical-stage (Phase I/II) oral checkpoint kinase 1 (CHK1) inhibitor targeting the DNA damage response network for treatment of solid tumours. Developed in collaboration with the Institute of Cancer Research and the CPF, SRA737 was subsequently out-licensed by the CPF to Sierra Oncology in 2016 for up to $328.5m in milestone payments (subsequently reduced to $290m). Sareum remains a passive partner in the programme with a 27.5% stake in future out-license fees and has received a total of $2.5m in upfront and milestone payments from Sierra for its stake in the deal. SRA737 had completed two Phase I/II trials, as monotherapy and as adjunct to low-dose gemcitabine, with encouraging headline data, before being deprioritised by Sierra. In late 2021, Sierra had indicated revived interest in developing SRA737 as a potential combination therapy (in both haematological malignancies and solid tumours) following its in-licensing of the BET inhibitor AZD5153 (now known as SRA515) from AstraZeneca (August 2021). As per our understanding, Sierra was in the process of finalising trial designs for the three possible studies assessing SRA737 as a combination treatment, before receiving the offer from GSK.

The key driver for GSK’s acquisition of Sierra was its drug momelotinib for the treatment of myelofibrosis, which reported positive Phase III results in January 2022. The fate of the other two pipeline assets, including SRA737, had been uncertain, although we had held on to the possibility of GSK continuing to develop the pipeline given the parallels with GSK’s oncology/haematology focus. Nevertheless, we believe that the development provides Sareum and the CPF with an opportunity to push ahead with the development plans for SRA737, leveraging the positive clinical data from the two clinical trials by Sierra.

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.

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United States of America

Sydney +61 (0)2 8249 8342

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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

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).

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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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