Stocks in Focus: Sareum Holdings

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Stocks in Focus: Sareum Holdings

A developer of best-in-class targeted therapeutics has had its near- clinic ready TYK2/JAK 1 inhibitor programme earmarked as a potential therapy for severe Covid-19. Meanwhile a powerful body of evidence is accruing suggesting that these pathways may offer significant treatment advantages in multiple autoimmune conditions, as well as showing promise as a new form of cancer immunotherapy.

In December last year Sareum Holdings (LON:SAR) confirmed the award of a grant from UK Research & Innovation (UKRI) to investigate the therapeutic potential of SDC-1801, its selective, small molecule TYK2/JAK1 kinase inhibitor, in severe-phase Covid-19. Recently, researchers have observed the similarity between severe Covid-19 and the acute flares of lupus, an autoimmune disease characterised by overproduction of Type I IFN (Interferon). As Sareum reported in July 2020, SDC-1802, a close analogue of SDC-1801, demonstrated encouraging results in a disease model of lupus. The Company believes that SDC-1801 could potentially benefit severe-phase Covid-19 patients by blocking signalling along this inflammatory pathway and therefore reducing the ‘cytokine storm’. Furthermore, disease model studies have reported that specifically inhibiting TYK2 activity restores the body’s ability to protect against bacterial pneumonia following influenza infection, suggesting that a TYK2 inhibitor, such as SDC-1801, may have the same effect in Covid-19 patients.

The TYK2 pathway has also been implicated in a real-world multi-centre analysis of DNA samples from patients with severe forms of Covid-19 as per as an Accelerated Article Preview by Nature on 11 December 2020 (* Pairo-Castineira, E. et. al. ).

SDC 1801 is part of an established family of targeted therapies known as JAK inhibitors. Pfizer’s Xeljanz for example grossed over $2.2bn in 2019 and looks set to have beaten that in 2020 despite an FDA black box warning to alert physicians and patients to an increased risk for pulmonary embolism and death associated with the 10mg twice daily dose. There is notable interest in the pharmaceutical industry for novel molecules that can selectively target TYK2 and JAK1, and particularly for those that can avoid side-effects from activity via JAK2 or JAK3. Sareum’s SDC-1801 is also designed to enable oral delivery.

A study from the Indiana Biosciences Research Institute Diabetes Center found that many of the changes related to interferon signalling, including mutations to the TYK2 Gene, were found to be common between four autoimmune diseases (Type 1 Diabetes, systemic lupus erythematosus (SLE), multiple sclerosis (MS) and rheumatoid arthritis (RA)).

In further experiments, the team was able to show that TYK2 inhibitors were able to protect β cells against immune-mediated damage. β cells are the type destroyed in T1D; preventing this damage could potentially prevent the onset or progression of the disease.

Outside of the UKRI backed project, Sareum is making significant progress in progressing the TYK2/JAK1 programmes towards first in human studies. For SDC-1801 initial toxicology studies in rodents have demonstrated excellent tolerability. Sareum has also established its manufacturing process. In recent months, the Company developed a new formulation, specifically designed to deliver higher exposure levels of the molecule, now being tested in additional toxicology studies, which are expected to complete in the next few months. Data from these studies will form part of the planned Clinical Trial Application (CTA), which Sareum aims to submit once the toxicology studies have completed and been analysed.

In 2020, formulation work for oral dosing for SDC-1802, Sareum’s second TYK2/JAK1 inhibitor was completed. Toxicology studies and further manufacturing work continue. In October 2019, Sareum also presented new findings showing that SDC-1802, dosed orally as a monotherapy and in combination with chemotherapy, significantly reduced tumour growth in models of solid tumours and blood cancers. We are not aware of any other TYK2 candidates being progressed in the oncology space. Previous studies have shown that SDC-1802 induces anti-cancer activity through a novel immunotherapeutic mechanism of action that stimulates the local immune system to attack cancer cells. Whilst immunotherapy has transformed outcomes for many patients over recent years, more often than not, only a small subset of the patients within a large cohort respond favourably to the treatment. The market remains open for new approaches. In September 2020, Gilead in-licensed Jounce Therapeutics’ pre-clinical drug immunotherapy candidate JTX-1811. The deal included an upfront payment of $85m from Gilead and an equity investment of $35m. Gilead could also pay up to $685m in milestone payments, along with high-single-digit to mid-teen royalties on sales.

The autoimmune space has generated some high value deals of late. Horizon Therapeutics announced the $3bn acquisition of Viela Bio on xxx February 2021. Viela Bio develops treatments for severe inflammatory diseases. Viela Bio’s pipeline consists of nine development programmes, involving four therapeutic candidates with a clinical trial programme ranging from late pre-clinical through to Phase III.

In January this year, Amgen signed a license and collaboration agreement with Evoq Therapeutics (preclinical) with a headline value of $240m, with the aim of developing novel drugs for autoimmune disorders.

There have been several transactions specifically in the JAK Inhibitor space including the below:

  • TD-1473 (a pan-JAK inhibitor) – licensed by Janssen from Theravance (2018) at the end of Phase 1 studies for $100m cash up-front, up to $900m in milestone payments, plus royalties.
  • Preclinical programme for skin-targeted, locally-acting pan-Janus kinase (JAK) inhibitors licensed by Pfizer from Theravance (2019) for a $10m up-front payment and up to $240m milestones plus royalties.
  • Filgotinib (JAK1 inhibitor) – licensed by Gilead from Galapagos (2015) at the end of Phase 2 trials for $300m cash and $425m equity investment up-front, up to $1,350m in milestone payments plus 20%+ royalties.

As SDC-1801 transitions from a pre-clinical to a clinical programme, it promises to bolster Sareum’s negotiating position with would be partners. Over the next two years or so SDC-1801 (and not far behind it SDC-1802) is poised to move from pre-clinical, to CTA ready, to CTA submitted and accepted, then Phase 1 culminating with first in-human data read outs. Subject to a successful transition through these steps, each one should enable an improvement in the terms that Sareum is able to negotiate.

Sareum is an infrastructure light Company and as such is not seeking to shoulder the entire risk and cost of getting a drug authorised and then marketed. Its strategy is to identify commercially attractive targets that already have some clinical validation, and then using its medicinal chemistry expertise formulate molecules that are safer, and more effective than the earlier pace setters in a particular class of drug.

As such it is no surprise that there are a handful of big names looking at the same targets. There has been good clinical validation for TYK2 and TYK2/JAK1 inhibitors from BMS and Pfizer in psoriasis and psoriatic arthritis, but Sareum feels there is room for improvement. These companies are running further Phase 2 trials in several other autoimmune diseases, including lupus, ulcerative colitis, and Crohn’s disease, with readouts expected this year and next.

The wider JAK inhibitor class also includes others targeting Covid 19. Novartis, Pfizer, and Lilly have recently announced plans to trial their JAK1/2 or JAK1/3 inhibitors ruxolitinib, tofacitinib and baricitinib in Covid-19 patients, and reduced mortality and time to recovery was reported in the baricitinib trial. Again, there is potential for Sareum’s molecule to offer an optimised balance of safety and efficacy. The below illustration suggests that TYK2/JAK1 inhibition targets several therapeutically relevant cytokines in autoimmune diseases such as psoriasis and rheumatoid arthritis, whilst avoiding the JAK2 and JAK3 inhibition associated with the FDA “black box” warnings given to some of the currently marketed first generation JAK inhibitors.

Sareum’s approach has already resulted in one material licensing deal. SRA737, A Chk 1 inhibitor targeting cancers via a DNA Damage Repair pathway, is licensed to NASDAQ listed Sierra Oncology. Sareum developed the compound in conjunction with the CRT Pioneer Fund and stands to receive 27.5% of the economics of the license agreement which comprise aggregate outstanding milestones of up to $290.0m, including a milestone payment of $2.0m upon the dosing of the first patient in the next clinical trial of SRA737. Following extremely promising Phase 1 data, Sierra had put further SRA737 development on hold while it explored options to fund this development. Sareum is confident that the recently renegotiated license deal will expedite the SRA737 programme advancing in a more timely manner.

As the lead developer, Sareum is likely to receive a much higher proportion of any licensing deal it secures for its TYK2/JAK1 inhibitors. The Company continues to actively engage with potential partners with a view to securing commercial licences for this programme. Optimising the time to strike a deal is a delicate balance of funding and risk management. The further Sareum takes its programme the higher the potential rewards, but also the higher the risk of clinical failure. This is mitigated to some extent by Sareum having two molecules in development. The completion of SDC-1801’s pre-clinical work in the coming months is the next milestone to look out for. A solid pre-clinical package will give Sareum optionality. It does not have to divest all of the crown jewels now particularly if a deal is not front end loaded. Having a second candidate also gives Sareum room for flexibility.

However, should Sareum successfully take one or both candidates into, or to the end of Phase 1, the returns promise to generate a significant multiple of the current market capitalisation of £60.5m as at the close of business on 2 February. The programme has the potential to generate one or more blockbusters, and positive news flow from the Covid-19 project will do no harm in focussing partner and investor attention on these exciting molecules.

Sareum Holdings is a corporate client of Hybridan LLP.

Comments (1)

  • Naresh Trivedi says:

    Another excellent well researched editorial by the Master Investor team. To highlight the Sareum’s wonderful future world beating research can only be good for not only Covid 19 but for future cancer cures as well and to be produced in a Pill form must be every persons dream all over the world.

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