Sareum Holdings — SRA737 – new partnership to kick off the year

Sareum Holdings (AIM: SAR)

Last close As at 12/07/2024

GBP0.35

1.75 (5.26%)

Market capitalisation

GBP38m

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Research: Healthcare

Sareum Holdings — SRA737 – new partnership to kick off the year

Sareum Holdings’ co-development partner CRT Pioneer Fund (CPF) has signed a new licensing agreement with an unnamed US-based private biopharma company for SRA737, its Phase II stage CHK1 inhibitor targeting the DDR network for the treatment of solid tumours. Deal terms include an upfront payment of $0.5m, additional fees of up to $1m in cash and 500,000 shares of the partner and potential milestone payments of up to $289m (comparable to the $290m allocated under its revised deal with Sierra Oncology in 2020, that has since been terminated). CPF will also be entitled to tiered high single-digit royalties on net sales. Sareum remains a passive partner in the programme with a 27.5% economic stake in SRA737, translating to $137.5k in upfront and a proportionate share of future payments. Given Sareum’s focus on progressing its lead clinical candidate SDC-1801 (Phase Ia trials ongoing), we expect any additional funds to be deployed in the asset’s development. We expect full safety data from the Phase Ia trial (expected H1 CY24) to be the next catalyst for the company.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Sareum Holdings_resized

Healthcare

Sareum Holdings

SRA737 – new partnership to kick off the year

Pharma and biotech

Spotlight - Flash

3 January 2024

Price

67.5p

Market cap

£47m

Share price graph

Share details

Code

SAR

Listing

AIM

Shares in issue

70.26m

Net cash (£m) at 30 June 2023 (excluding the total £2.3m utilised to date from the August 2023 equity prepayment facility)

1.0

Business description

Sareum Holdings is a UK-based drug development company, specialising in small molecule kinase inhibitors. Its lead programmes are TYK2/JAK1 inhibitors, SDC-1801 for autoimmune diseases and SDC-1802 for cancer. Sareum initiated clinical trials for SDC-1801 in Australia in May 2023 (Phase Ia), with safety data expected in H124. Other programmes include the CHK1 inhibitor SRA737, which was outlicensed to an unnamed private US-based pharma company by co-development partner CRT Pioneer Fund LP in January 2024.

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 Holdings’ co-development partner CRT Pioneer Fund (CPF) has signed a new licensing agreement with an unnamed US-based private biopharma company for SRA737, its Phase II stage CHK1 inhibitor targeting the DDR network for the treatment of solid tumours. Deal terms include an upfront payment of $0.5m, additional fees of up to $1m in cash and 500,000 shares of the partner and potential milestone payments of up to $289m (comparable to the $290m allocated under its revised deal with Sierra Oncology in 2020, that has since been terminated). CPF will also be entitled to tiered high single-digit royalties on net sales. Sareum remains a passive partner in the programme with a 27.5% economic stake in SRA737, translating to $137.5k in upfront and a proportionate share of future payments. Given Sareum’s focus on progressing its lead clinical candidate SDC-1801 (Phase Ia trials ongoing), we expect any additional funds to be deployed in the asset’s development. We expect full safety data from the Phase Ia trial (expected H1 CY24) to be the next catalyst for the company.

Historical financials

Year
end

Revenue
(£m)

PBT
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/20

0.04

(1.1)

(1.6)

0.0

N/A

N/A

06/21

0.00

(1.7)

(2.3)

0.0

N/A

N/A

06/22

0.00

(2.6)

(3.2)

0.0

N/A

N/A

06/23

0.00

(4.0)

(4.7)

0.0

N/A

N/A

Source: Company data. Note: *EPS figures have been adjusted retrospectively for the 50:1 share consolidation in March 2022.

SRA737 is a highly selective checkpoint kinase 1 (CHK1) inhibitor targeting the DNA damage response (DDR) network for the treatment of solid tumours. Checkpoint kinases are key regulators of DNA damage (such as that caused by chemotherapy) and find broad applicability across tumour types, particularly tumours with specific defects. The best known programme in this category is Eli Lilly/Esperas Pharma’s Phase II asset, ESP-001 (LY2880070) being developed for solid cancers, including ovarian, breast, pancreatic and colorectal cancer.

SRA737’s development journey had been hit by roadblocks, despite early efficacy signals. Initially out-licensed to Sierra Oncology in September 2016 (which completed two Phase I/II trials, as monotherapy and as an adjunct to low-dose gemcitabine, with encouraging headline data), development was subsequently deprioritised. Following GSK’s acquisition of Sierra in July 2022, SRA737’s rights were returned to CPF in January 2023. This new deal aims to revive development work on the asset and we note that the financial specifications remain comparable to the earlier deal dynamics with Sierra (revised in November 2020) indicating continued confidence in the asset. Sareum will be entitled to 27.5% of the deal economics, translating to $137.5k in upfront payment, which we expect to support continued development of the lead asset, the TYK2/JAK1 inhibitor, SDC-1801. Full safety data from the ongoing Phase Ia study are expected in H124 which, if positive, will be followed by a Phase Ib study in psoriasis patients (target completion end-CY24). Sareum expects to be funded to this milestone given the £5m equity prepayment facility and its expected upcoming tax credit of £1.6m.

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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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 2024 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.

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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