Sareum Holdings plc (SAR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Sareum Holdings plc Annual General Meeting. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via our Investor Meet Company dashboard and we'll notify you by e-mail when they are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And I'm sure the company will be most grateful for your participation. And I'd now like to hand over to Chairman, Stephen Parker. Good morning, sir.

Good morning, ladies and gentlemen, and welcome to the Annual General Meeting of Sareum Holdings plc. I am Stephen Parker, Chairman of the Board. A quorum, being 2 members is present, and therefore, we will now proceed with the business of the meeting. Because of the extraordinary times that we continue to live in, we are experimenting with opening a link through the Investor Meet Company site in addition to welcoming some of you today in person. We will take questions from the floor in the usual manner of our Annual General Meetings, and to try to answer all or some of the questions posted via the IMC site. We will, I'm afraid, be unable to have the period after the formal business is concluded, and which the Board speaks individually to attendees. I will, therefore, read through the resolutions together with the votes received and then provide the opportunity to shareholders to post questions, which directors will endeavor to answer during the meeting. Any answers which we have been unable to provide immediately will be posted on the company's website within the next few days. I would now like to introduce the Board: Tim Mitchell, Chief Executive Officer; Dr. John Reader, Chief Scientific Officer. Our nonexecutive directors are: Clive Birch and Dr. Michael Owen. We're also joined by our Finance Manager, [ Chris Neil ]. I'd now like to start the formal proceedings to this Annual General Meeting. The notice on the Annual General Meeting was posted to shareholders on the 19th of November. Accordingly, the requisite notice of the Annual General Meeting has been given. I propose, therefore, with your consent, the notice on Annual General Meeting should be taken as read. Before proceeding with the formal business of the meeting, I will now read a statement, which was issued to the market this morning. The Board is pleased with the progress Sareum has made in the past 12 months despite this being a challenging period for business during the ongoing impact of COVID-19. SDC-1801 continues to advance towards first clinical trials and we believe the company to be in a robust position financially, following several share subscriptions by high net worth individuals during 2021. In addition, the Board is highly optimistic about the future of out-licensed asset SRA737, which is expected to enter new clinical trials in 2022 under the guidance of Sierra Oncology, the license holder for this exciting candidate. SDC-1801 is a selective dual tyrosine kinase inhibitor, TYK2, and Janus kinase 1 inhibitor, JAK1, discovered by Sareum. We have been advancing SDC-1801 through preclinical development and preparing for clinical trials to investigate its potential for treated autoimmune diseases such as psoriasis, lupus, inflammatory bowel diseases, rheumatoid arthritis as well as severe respiratory symptoms of COVID-19. We are pleased to report that the final toxicology and safety studies required to file an exploratory Clinical Trial Authorization, CTA, have been completed, and we expect to finalize reports in the first quarter of 2022. These data from the study -- the data from these studies will be crucial to the progression of the CTA, which we -- remains on track to submit in mid-2022. While data analysis is still in progress, we are confident that the studies have met their objectives of identifying any organs or tissues that might be susceptible to high dose toxicity and determining the appropriate first in-human dose. Results received to date fully support our plan to submit this CTA for SDC-1801. As we reported in the company's full year results in 25 October 2021, we have appointed consultants to advise on the design of these first clinical trials, which would investigate the safety of SDC-1801 in healthy volunteers during which time the company will continue to assess the initial indication for further study. The synthesis of SDC-1801 drug substance on the GMP conditions intended for use of the planned Phase I clinical trial continues to progress to plan with delivery expected during the first half of 2022. We have also initiated the process to develop drug products for these trials as an oral capsule formulation rather than orally dose solutions or suspension as previously planned. This step will require additional time, but the Board believes it to be a good use of resources that will add value to the program by improving the quality of the data generated in the Phase I trial and remove the need to develop capsules at a later stage. Importantly, this first clinical trial could also support the clinical development of SDC-1801 as a potential treatment for severe respiratory symptoms of COVID-19. As a reminder, during 2021, we completed a 6-month project funded in part of our U.K. government grant, demonstrating that SDC-1801 in infected lung cells and in vivo disease models reduces levels of key inflammatory agents known to play a role in serious and potentially life-threatening hyper-inflammatory response, the cytokine storm, that affects some COVID-19 patients. We are now considering how we might make use of the U.K. government's AGILE clinical trial platform or other equivalent programs to provide additional funding and support for clinical trials with SDC-1801 for COVID-19 applications and potentially accelerate its development. It is evident that there are -- there is still a clear need for new therapies to treat severe respiratory inflammation arising from viral infections, such as COVID-19 despite the success of vaccination programs and the availability of the first new mainly antiviral therapies. With TYK2, acknowledged as a key therapeutic target for severe COVID-19 in an article published in December 2020 in the leading scientific journal, Nature. We believe that SDC-1801 could have a role to play in this area, in the future, and we look forward to updating shareholders on further progress. With regards to our second TYK2/JAK1 inhibitor candidates, SDC-1802, we continue to advance preclinical development of an oral formulation and have designed and initiated translational studies to define the optimal cancer application prior to completing toxicology and manufacturing studies. Turning now to our out-licensed asset, SRA737, we have been highly encouraged by recent disclosures from Sierra Oncology for license holder of this promising clinical-stage Checkpoint Kinase inhibitor 1, relating to its possible advancement. In August 2021, Sierra in-licensed, the BET inhibitor AZD5153, now known as SRA515 from AstraZeneca. I noted how it might combine SRA515 with SRA737 as a potential pipeline expansion opportunity. Sierra has subsequently referred to its plans to initiate additional clinical studies in the first half of 2022 with pipeline agents, including SRA737 in other hematologic and solid tumor indications. Specifically, reference was made to a potential role for SRA737 in combination studies with novel agents in solid tumors, including pancreatic cancer, where patients have become resistant to class of drugs for PARP inhibitors. The dosing in the first patient with SRA737 in any clinical trial would trigger a $2 million payment from Sierra under the amended $290 million licensing deal on SRA737 between Sierra and CRT Pioneer Fund signed in November 2020. Under the amended agreement, Sareum is eligible to receive 27.5% share of this on any future milestone payments. Sareum continues to believe that based on preclinical and early clinical data, SRA737 holds great promise for the treatment of cancer, particularly in combination settings, and look forward to Sierra providing further updates on its progress. Looking at the company's financial position. Sareum ended the fiscal year to 30th of June 2021, with a robust cash position, having released GBP 2.37 million before expenses from 2 subscriptions by a high-net-worth individual in June 2021. A further GBP 2.18 billion before expenses was raised in July and August 2021, with 2 further share subscriptions by new high-net-worth individuals, plus an exercise of warrants, bringing the total raise to approximately GBP 4.6 million to fund the further development of SDC-1801 and SDC-1802. Sareum's cash position as of the 30th of September 2021, was approximately GBP 4.4 million. The company reported a loss after tax during the fiscal year ended 30th of June 2021, of GBP 1.5 million reflecting the increased R&D expenditure required for preclinical development versus a loss of GBP 0.99 million in 2020. Sareum continues to deploy its funds to advance SDC-1801 and SDC-1802 and build a robust data package and patent portfolio to support ongoing partnering activities for these differentiated assets. For both TYK2 and JAK1 -- both TYK2/JAK1 inhibitor programs, the directors will continue to review the potential higher value of a later-stage licensing deal versus the requirement for any additional funding. The Board and management continue to employ rigorous capital allocation and the development of internal assets and the overall business with a clear focus on generating value for shareholders. Finally, the Board would like to take the opportunity to inform shareholders, that it is considering undertaking a share consolidation in the new year. The Board is of the opinion that the high number of shares outstanding, now over 3.3 billion, and the low absolute share price negatively affects investors' perception of the company, and considers a share consolidation to be in the best interests of the company and its shareholders. The consolidation would reduce the number of shares outstanding and increase to relative price, which could be more attractive to a broader range of institutional investors and other members of the investing public. A proposal regarding the terms of the share consolidation will be put to shareholders for approval at an Extraordinary General Meeting which will be convened early in 2022. So overall, we are looking forward with optimism to 2022, during which time we expect to report our continued progress, both with our proprietary programs, in particular, the advance of SDC-1801 into clinical trials, and with our partnered asset, SRA737 should Sierra advance its development. We would like to thank our shareholders, suppliers, contractors and other stakeholders for their continued support and look forward to providing further updates on progress as we move forward into 2022. Before we turn to the resolutions, I would like to say a few words about the procedure as this will necessarily differ from previous years in that only physical attendees are able to vote today. Any shareholder listening to the IMC platform can only vote or can already have only voted through the submission of proxies and I hope that you've already done so. I will propose each resolution in turn, having briefly summarized its concepts. I will then read the results when the votes received. The directors will not answer questions relating to the individual rights of shareholders. Any shareholder wishes to raise such question, we will communicate separately with myself or Dr. Mitchell by e-mail following the meeting. I shall move on to the formal business of the meeting, and we'll now recite the resolutions. The full text of each of the resolutions is set out in the Notice of Annual General Meeting, a copy of which is on the company's website. Resolutions 1 to 6 are proposed as ordinary resolutions, each requiring a simple majority of the votes cast to be in favor in order to be passed. Resolution 7 was proposed as a special resolution requiring a majority of 75% of the votes cast to be in favor in order to be passed. Each resolution received a total of 242,158,498 votes, which represents [ 7.18 ] of the total shares outstanding. I propose Resolution 1 in the Notice of Annual General Meeting as an ordinary resolution. To receive and adopt the Report of the Directors and financial statements for the financial year ended 30th June 2021. Proxy results have been received as follows: in favor, 139,633,376; against, 240,000; withheld, 314,311. I thus declare the resolution declared by the necessary majority. I propose Resolution 2 in the Notice of Annual General Meeting as an ordinary resolution. To receive and adopt the Remuneration Commission report for the year ending 30th of June 2021. Proxy results have been received as follows: 139,046,887; against, 724,500; withheld, 416,300. And I declare the resolution carried by the necessary majority. Resolution 3 on Notice of Annual General Meeting is for the reelection of Mr. Clive Birch who retires by rotation on to Section 76 and 77 of the Articles of Association and who, being eligible, offers himself for reelection as a director. Votes have been received as follows: in favor, 138,886,944; against, 825,424; withheld 475,319. And I declare the resolution carried by the necessary majority. Resolution 4 of the Notice of Annual General Meeting is for the reelection of Dr. Michael Owen who retires by rotation under Section 76 and 77 of the Articles of Association and who, being eligible, offers himself for reelection as a Director. Proxy votes have been received as follows: in favor, 138,886,944; against, 825,434; withheld, 475,319. And I declare the resolution carried by the necessary majority. Resolution 5 Notice of Annual General Meeting is to confirm the appointment of Shipleys LLP as auditor of the company to hold office until the conclusion of the next AGM, of which accounts -- at which accounts are laid before the company and to authorize the directors to fix its remuneration. Proxy votes have been received as follows: in favor, 139,141,640; against, 320,015; withheld, 726,032. I declare the resolution carried by the necessary majority. I propose Resolution 6 of the latest Annual General Meeting as an ordinary resolution. That the directors be, and they are generally and unconditionally authorized for the purposes of Section 551 of the Companies Act 2006, the act to exercise all the powers of the company to allot shares in the company and to grant rights to subscribe for or convert any security into shares in the capital of the company up to an aggregate nominal amount of GBP 842,708 provided that this authority is for a period expiring at the conclusion of the company's next Annual General Meeting. But the company may before such expiry make an offer or agreement, which would or might require shares to be allotted or such rights to be granted after such expiry and the directors may allot shares and grant such rights in pursuance of such offer or agreements. Notwithstanding that the authority conferred by this resolution has expired. This authority is in substitution for all earlier authorities to the extent unused. Proxy votes have been received as follows: in favor, 134,116,471; against 1,414,362; withheld, 4,656,854. And I declare the resolution carried by the necessary majority. Given the passing of resolution 6, I propose Resolution 7 in the Notice of Annual General Meeting as a special resolution. The directors be and they are empowered in accordance with Section 570 of the Act to allot equity securities, as defined in Section 560 of the Act, wholly for cash pursuant to the authority conferred by the previous resolution as if Section 561 of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities: a, in connection with an offer of such securities by way of rights, open offer or preemptive offer to holders of ordinary shares in proportion, as nearly as may be practical, to their respective holdings of such shares. But subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange. And, b, otherwise than pursuant to sub-paragraph (a) above up to an aggregate nominal amount of GBP 842,708 and shall expire on the conclusion of the next Annual General Meeting of the company after the passing of this resolution, save that the company may, before such expiry, make an offer or agreement, which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities of any such offer or agreement notwithstanding that the power conferred by this resolution has expired. Proxy votes have been received as follows: in favor, 138,495,068; against, 1,326,587; withheld 366,032. I therefore declare the resolution carried by the necessary majority. Ladies and gentlemen, that concludes all of today's formal business. On behalf of the Board, I would again like to thank you for your attendance and through IMC, and to declare the formal business of the Annual General Meeting closed. In closing, may I thank you all of you for your ongoing support during this extraordinary year and express the hope that next year's Annual General Meeting will be held under more traditional circumstances. The Board will now be happy to try to answer questions from the IMC platform, and I will hand over to Tim Mitchell to lead that section of the meeting.

Thank you very much, Stephen. So we've had a number of questions submitted prior to the meeting, which I'll take first. Although I see some questions submitted this morning. And actually, I think we have covered the most of those as I go through the preprepared ones. So some of the questions are very related to each other. So it's on the same topic, and I'll have to group those together. So if I can start from the top and obviously, feel free to ask further questions as I go through these preprepared ones. So we have a question regarding SDC-1801. So are we looking to out-license to 1 company? Or is it possible to out-license to multiple companies each [ part through ] different areas? So an answer to that, generally, pharmaceutical partners require out-license for all indications of product, and we see this is the best way to maximize the value of an asset and then the out-license [indiscernible] . Moving on then there's a question about deadlines and news flow. So in answer to that then, so drug development is a risky and challenging undertaking. There are many experiments and stages that need to be completed to ensure that a compound is safe and available in an appropriate dosing formulation for clinical trials. The duration of each step of this process is only a best estimate that research is not always predictable and unforeseen problems can arise, which delayed progress for any drug development company, COVID-19 being one of them. We've completed the toxicology studies for SDC-1801 and expect the final report in Q1 next year. And in the meantime, we're completing the trial design work, and work needing to reduce drug capital format. If all this is positive, and on time, then we'd expect to submit our CTA in mid-2022, which we believe would be a significant milestone for the company. There's a question about rights issues and share consolidation now that Peel Hunt through on board, and this overlaps also with a question submitted this morning then. So the question actually if I read it out from fold-in, so will there be a rights issue or consolidation of shares now that Peel Hunt are on board. So like all companies, we don't comment on where the rights issues or share placing being considered. However, as is normal for any responsible biotech company, we continue to assess the financing requirements to deliver milestones in our [indiscernible] and the options available to us to fulfill these. Regarding share consolidation, as Stephen mentioned during the AGM statement, this is something that the Board is considering, given the high number of shares outstanding, that's over 3 billion now, and the low absolute share price. Consolidation would reduce number of shares outstanding and increase the relative price, which could be more attractive to a broad rate -- a broader range of institutional investors and other members of the investment pay. Regarding Peel Hunt, their appointment as co-broker gives us the opportunity to gain specialist life science analyst coverage as well as an additional route to access institutional investors. There's a question about the road map beyond our 2 development compounds, SDC-1801 and SDC-1802. So would it be accurate that beyond any licensing deals for these 2 candidates Sareum would merge with another entity to continue work on the skill platform? So our strategy is to advance SDC-1801 and SDC-1802 to a state where we can secure licensing agreements with well-capitalized partners to take their development forward towards market and patients. This could generate income for us to see new opportunities either from our skilled platform or from external sources, where we can use our experience to expand our pipeline. The Board's strategy would not rule out the possibility of a trade [ sell ] or merger of the company, and the Board mindful of its [indiscernible] would evaluate any approaches at the appropriate time seeking to ensure shareholder value is maximized. I have a question on the licensing deal on SRA737 with Sierra. So we're aware of the license payment detail with Sierra and the value of the milestone payments. Can you provide what the royalty value in percentages for 737? So along with the milestone payments, this was announced in September 16 when the deal was struck. So high single to low double-digit royalties are payable on SRA737 sales, of which Sareum would receive 25% of that -- sorry, 27.5%, yes. Well, there's a number of questions about our plans for COVID trials. And so in answer to those, as noted in our results statement in October 2021, and the AGM statement today, we're considering how we might make use of the U.K. government's AGILE technical trial platform or other equivalent programs to provide funding and support Phase I trials with SDC-1801 for COVID-19 applications and potentially fast track its development. The timing and design of these clinical trials will be determined following consultations with experts in the field. As a reminder, the first Phase I trial with SDC-1801 would be in healthy volunteers. And depending on its design, we'd expect that this trial will be applicable to our development plans targeted in both autoimmune diseases and [ hyperinflammatory ] response in COVID-19 patients. We need to complete this study to demonstrate SDC-1801 in safe and healthy volunteers before we can progress the studies in patients. We will continue to explore opportunities within the AGILE platform and others in parallel so that following our studies on appropriate patient populations. We can comment as soon as possible after. There's a question about the capsule formulation. So are we facing similar challenges of solubility with capsule formulation for 1801? And is this the reason for repeated delays of CTA? And what's the decision? So the Sareum is influenced by any other partners. So our decision to develop a fixed-dose capsule formulation rather than orally dosed solutions or suspensions as previously planned, has been influenced by the outcomes of ongoing preclinical development and formulation and manufacturing work to [ repair ] SDC-1801 for clinical trials. These data, along with the additional funding we received during the year, give us an opportunity to look at ways to add value for our programs earlier in development process, including development of a capsule formulation. While this has extended the development time in the near term, we expect this to enhance the program in the longer term. There's a question on our burn rate. And yes, so from your current burn rate, would you get 1801 ready for Phase I, and 1802 through toxicology? Does this mean a part you will have to end by midyear 2022 or further funding would have to be raised by then? So as noted in our final results statements and the AGM statement today, we expect the new funds raised over the June, August period over GBP 4.5 million to allow us to execute our near-term strategy of [indiscernible] advancing SDC-1801 into preclinical trials and completing preclinical work on SDC-1802. We require additional funding to advance these programs further, and we're exploring all options, including partners and financings. As previously stated, we have no plans to take our compounds all the way to market. We would seek to outlast at the appropriate stage to a well-capitalized company with capabilities needed to advance these programs effectively, which in turn will generate value for shareholders. We have a forward-looking question here. Can you briefly outline what 2022 will hold for Sareum investors? And do you see 2022 as a pivotal year? So yes, we do see 2022 as an important year for Sareum, subject to successful progress on CTA approval. we're expecting to initiate our first clinical trials on SDC-1801 in 2022, and this will be a key milestone for the company. We are also optimistic about the prospects of SRA737 based on the encouraging statements from Sierra Oncology [ earlier in the year ] about possible new trials with the compound. As a reminder, if a new trial with SRA737 has started, Sierra will pay up GBP 2 million milestone to the Sareum Pioneer Fund partnership, which Sareum would be eligible to receive 27.5% of that. It equates to GBP 0.55 million. Sareum would also be eligible to receive 27.5% future milestones, should clinical development with SRA737 advance successfully. We also expect to progress our preclinical work on SDC-1802, advancing it towards its first-in-human studies. There's a question about patents and our patent status. So the intellectual property of a biotech company, so it's patents and [ partnering ] know-how is a core asset and central to its potential to generate value. Any patents that may have been filed by Sareum, but not yet published by the company are confidential. Patents that have been published, including those that have been granted are listed on our website, in our Patent Publications page. There's a question on the toxicology results for SDC-1801. So as noted in today's AGM statement, we completed the final toxicology and safety studies required to file an exploratory clinical trial application for SDC-1801. We expect to receive the finalized report of these studies in the first quarter of 2022. The data from these studies will be crucial to progression of our CTA as SDC-1801. While the data analysis is still in progress, we're confident that the studies have met the objectives of identifying any organs or tissues that might be susceptible to high dose toxicity, and determine the appropriate first-in-human dose. These results received to date or our plan to submit the CTA for SDC-1801, and we remain on track to submit during mid-2022. There's a question about the high net worth investors. So can you identify them? Have they sold any of their shares? Are we seeking further high net worth individuals? So we cannot disclose details on any investors holdings unless they're about 3% or they are company directors or the close associates. As noted in our final results in October, we expect the new funds raised over the June to August period of GBP 4.5 million to allow us to execute on our near-term strategy of advancing SDC-1801 into clinical trials, and completing the preclinical work on SDC-1802. We'll require additional funding through advance these programs further, and we are exploring all options, including partnering and financing. And then finally, from the presubmitted questions, questions about Peel Hunt recently appointed as co-broker. So Peel Hunt is an experienced broker and has significant experience working with emerging life science companies such as Sareum. Appointing Peel Hunt as co-broker gives us the opportunity to gain specialist life sciences analyst coverage as well as an additional route to institutional investors. There's a particular question about [ James Steel ], who is our representative at Peel Hunt. So James Steel has over 10 years of experience to advising mid and small cap health care companies on a wide range of corporate matters and through the financing, and mergers and acquisitions, and he is highly qualified to advise the company. So that concludes the presubmitted questions. I see a few questions on the platform here. So there's a question about share consolidation, which I've covered. There's a question from [ Paul D ]. Can you confirm that our skill platform was the building block for our TYK2 compound? And does that now provide proof that we have some [ in total ] with regards to skill to enable this, and able to use this further to generate different kinase inhibitors? The short answer is yes. John, do you want to embellish that any further?

No. Short answer is, yes. And it does have the potential to find individuals against different times [indiscernible] .

Yes. So thank you for that. Moving on then, so I'm reading, speaking at the same time. So there's a further question on patents, which I hope I've already answered. So the published patents are all listed on our website. And I think it will -- if you follow the links, then the latest update on the various patent websites can be found from those. Okay. There's a number of questions, which I believe we've already answered. So if I moved through those. Yes, so a question to Stephen then, why the recent open market share purchase?

You'll remember that in recent times, there was a significant and extended attrition on the share price, which I considered amount the shares was significantly undervalued. And I felt the opportunity having got the necessary permissions from both -- from the company, our brokers and Nomad to make an investment into my pension fund. Happily, I call it right.

There's a question about funding in the CTA. So does the CTA need to see a specific level of funds available before we make the application. Do we need to be fully funded through the whole trial before we apply for the trial? I don't believe we do, not to that application. No. There's a question on who is actually writing or producing the toxicology report? John?

So while the toxicology report is generated by the toxicologist, a CRO and we are carrying out work. And then it's incorporated into what is called a investigators [indiscernible], which goes to the people who will run the clinical trial. And that's been prepared by ourselves and the consultants who are advising us on the clinical trial design.

Thank you, John. So there are a number of questions posted, which I think we will give a written answer to if that's okay. They're quite a little bit more tough than we can think of the who are there, but we will submit our answers to everything that we are available to answer. So I think if there are no further questions, I will conclude the meeting.

That's great. Thank you very much, indeed, Tim, and to the Board of Sareum for broadcasting the AGM to the investors' online. And of course, thank you to all the investors also and attendees who have submitted questions. And as Tim said, we'll make these all available for the company for their review. And we'll notify you by e-mail when they are also available for your review. Gentlemen, thank you very much indeed for your time today. Could I please ask you not to close the session as we'll now automatically redirect you. So the opportunity to provide your feedback in order of the Board can better understand your views and expectations. Just want to take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the Board of Sareum Holdings plc, we'd like to thank you for attending today's Annual General Meeting online. And that now concludes today's session. Good morning to you all.