Sareum Holdings plc (SAR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Sareum Holdings plc interim results investor presentation. [Operator Instructions] The company may not be in a position to answer every question they receive during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Chairman, Dr. Stephen Parker. Good afternoon, sir.

Hello. Good afternoon, everybody. Thank you for joining the call as we go through the half year results and the various progress that we made in the last few months to discuss. With that, I'm going to hand you over to Tim Mitchell, our CEO, who will take you -- go through the presentation and guide the Q&A. Thank you.

Thank you, Stephen, and good morning, everybody. Thank you for joining us this afternoon. Sorry, good afternoon. I'm here with our CFO, John Reader. So John and I will take you through the results presentation then we'll hand back to Alex, who will host the Q&A session. So let me start with highlights from the past period. The main news for us, as we announced on Monday, is that we've applied to run the Phase I clinical trial in Australia on SDC-1801. That's our TYK2/JAK1 inhibitor for auto immune diseases. So the proprietary work for this trial is all completed. We're expecting a decision on approval by the HREC, that's the Human Research Ethics Committee and exception to the clinical trial notification by Australia's Therapeutic Goods Administration in the next few months. And we'll look to open this trial and start dosing healthy volunteers shortly after receiving this approval. So we're going to more details on the study later on. But if we first look at the other programs that we have running for SDC-1802, that's the TYK2/JAK1 inhibitor for cancer immunotherapy. We continue to work on the translational studies to identify the best cancer application for this candidate. And we note that our experience with the closely related SDC-1801 molecule will help us plan and execute the further preclinical studies. For SRA737, the Chk1 inhibitor for cancers, we've reported that our co-development partners, CPF, have now received the clinical study reports and other documents back from Sierra Oncology, and we're evaluating the potential future development opportunities alongside CPF. We've also noted an expansion of the SRA737 patent estate with the branding in the U.S. The patent describing the combination of SRA737 with PARP inhibitors as a method of treating cancer. On the financial side, we reported a loss after tax of GBP 1.4 million, so that's higher than last year, but it reflects the setup costs needed to start clinical trials and a cash balance of GBP 2.9 million. Looking at where our programs are in the development pipeline, we see that SDC-1801 at the top there is about to enter clinical Phase I as well as the potential to treat autoimmune diseases such as psoriasis, which will be our initial focus. There's still the opportunity to investigate the treatment of respiratory symptoms arising from viral infections such as COVID-19 and our Phase Ia trial is expected to enable all our applications of SDC-1801. Our primary focus over the past few months has been on SDC-1801, as you can imagine, but SDC-1802 still remains there in preclinical development. SRA737 was formally returned to us in January this year, having completed 2 Phase I/II trials while it was under license to Sierra Oncology. These were as a monotherapy and in combination with low-dose of gemcitabine and there's also preclinical data to identify effective combinations of SRA737 with a number of targeted therapeutics, including cancer immunotherapies and the PARP inhibitors I mentioned earlier. As we know, our main focus is on our TYK2/JAK1 inhibitor, that's SDC-1801 for autoimmune diseases. And we've seen, particularly in the last few months that the TYK and JAK space is being increasingly recognized as an area of great commercial interest. So BMS is -- so TYK2 -- was the first TYK2 specific inhibitor to be approved for sale. That was in September last year. And importantly, the approval didn't come with any of the black box warnings for severe side effects that we see in the first generation JAK inhibitors such as tofacitinib and baricitinib. We've seen good clinical validation by BMS and others for TYK2 and dual TYK2/JAK1 inhibitors in both psoriasis and psoriatic arthritis. And there are mid- and late-stage clinical trials ongoing for TYK2 and TYK2/JAK1 inhibitors in several other autoimmune diseases, including lupus and inflammatory bowel diseases, and we're expecting to see readouts from these over the next few years. In terms of commercials, we noted earlier this year that Takeda acquired Nimbus Therapeutics' late-stage TYK2 inhibitor from cash payment of $4 billion, which I think very nicely underscores the commercial potential of these types of inhibitors. And then also the BMS are forecasting $4 billion sales for TYK2 inhibitor in [ 2019. ] And for the respiratory symptoms arising from viral infections, we note that 2 of the first generation JAK inhibitors, that's tofacitinib and baricitinib have been approved for use in some COVID-19 patients. So I'll now hand over to John, who will take you through the scientific programs in more details.

Yes. Thank you, Tim, and good afternoon, everybody. So inhibition of the JAK family of kinases can restore immune system balance. And TYK2/JAK1 are both involved in a signaling pathway that can be deregulated in multiple autoimmune diseases. And what we've shown in schematic on this slide is that TYK2 plays a very important role in signaling in the interferon alpha, the IL-12 and the IL-23 cytokines. Deregulated interferon alpha IL-12, IL-23 signaling is associated with diseases such as psoriasis, inflammatory bowel diseases and additional lupus rheumatoid arthritis, resistance to immuno-oncology therapeutics. And of course, that's very important for SDC-1802 and viral bacterial pneumonia. So the inhibition of both TYK2 and JAK1 has the potential to yield superior efficacy compared with agents that block just 1 of the 2 kinases. We believe TYK2 and JAK1 are optimal targets for autoimmune diseases and targeting other kinases as the same family, so that's JAK2 and JAK3 has led to unwanted side effects in some patients. SDC-1801, therefore, is being positioned as an autoimmune disease therapeutic. The initial focus will be on psoriasis. That's an autoimmune condition that affects the skin. And as you've heard recently, we have now applied to the Australian regulatory authorities to perform a Phase I trial in Australia under the clinical trial notification scheme. Once we have regulatory approval, there's a plan to commence the Phase Ia trial, which will investigate the safety and tolerability of an oral formulation of capsules of SDC-1801 in healthy subjects and provided we get satisfactory safety data from that Phase Ia study we intend to commence a Phase Ib clinical study in psoriasis patients next year. So in preparation for the trial, the synthesis of SDC-1801 drug substance as the molecule itself has been completed under GMP conditions. We have a surplus of material for the planned Phase I clinical trials. And we've completed manufacture of the capsules of SDC-1801, also under GMP conditions, which will be used in the Phase I clinical trial. As I'm sure most of you are aware, we submitted last July an application for a clinical trial authorization to the MHRA in the U.K. We provided a robust preclinical data package. The preclinical data was generated in world-renowned and world-leading CROs. However, in November, last year, the MHRA stipulated that they wanted an additional review of some of the preclinical data by the U.K. GLP monitoring authority. Unfortunately, to date, MHRA has not proceeded with the request of U.K. GLP monitoring authority. This is despite us asking them on repeated occasions to do that. So in the meantime, and in parallel with these discussions, we looked at alternative locations to conduct the clinical trial. We looked at 2 or 3 territories in Europe and additionally, Australia. And we identified Australia as the optimal route to progress SDC-1801. Australia is an ideal location for Phase I studies. It has a state-of-the-art research facilities, a streamlined and efficient approval process, good access to psoriasis patients and significant tax incentives for companies to conduct research in Australia. So an allowance to claim up to 43.5% of eligible R&D expenditure as a cash payment. We've established a required local presence by setting up a legal entity in Australia that allows us to access the R&D tax credits. Moving on to SDC-1802. This is a molecule we're positioning as a cancer immunotherapy. It's an immunomodulating molecule that's demonstrated good efficacy in preclinical models of cancer. We need to complete our translational studies to define the optimal cancer application, which would allow us to select a patient population prior to commencing a Phase I clinical trial. And as Tim mentioned earlier, the experience that we've gained in the development of SDC-1801, we will greatly aid in the development of SDC-1802, 2 molecules derived from the same chemical class. So the synthetic experience we've gained will really be beneficial in pushing forward with 1802. Moving on to our co-development pipeline then, and we're talking about the CHK1 inhibitor, SRA737, targeting cancers. This was originally developed by Sareum in collaboration with several Cancer Research U.K. funded organizations and including our current co-development partnership with the Cancer Research Technology Pioneer Fund, CPF. Under the terms of the co-development partnership, Sareum is entitled to 27.5% of commercialization revenues. Program so far has successfully completed 2 Phase II clinical trials, which were funded by Sierra Oncology. Sierra was subsequently purchased by GSK that was to access Sierra's myelofibrosis therapeutic momelotinib. And the GSK Sierra decided to return program SRA737 to CPF. So we've now received the clinical study reports, the other associated documents and data in March of this year from Sierra, and Sareum and CPF are evaluating potential development opportunities for SRA737. Okay. I'll hand you back now to Tim to take you through the rest of the presentation and to lead the Q&A session.

Thanks, John. So we announced our half year financials today, so I'll quickly take you through the main points of those. So on the income statement here, we see an increase in operating expenses over the previous period. And as I've noted earlier, this reflects the increased cost to get the 1801 TYK2/JAK1 inhibitor ready for its clinical trials. You'll see a tax line there 285, that's the R&D tax credit that we'll claim back later in the year as a cash credit. And of course, there's another 6 months of spend to add on top of that. On the balance sheet, we see cash of GBP 2.9 million. Okay. So I'll finish the presentation part then on a slide on where we see the value in Sareum, particular -- with a particular focus on our SDC-1801 asset. So we've noted the commercial potential, particularly in the TYK2 space, and the interest in the area from the pharmaceutical majors, so BMS and Takeda are obviously heavily invested in the area. The sites have been well validated both in the [indiscernible] clinic and the absence of black box warnings with the PSO TYK2 approval validates a good safety profile attainable with PSO TYK2 inhibitors. Psoriasis and other autoimmune diseases are a very large market opportunity with psoriasis affecting over 60 million patients worldwide and BMS focusing sales of $4 billion for PSO TYK2. So now we have the opportunity to be a clinical stage player in this area with the first trials in 1801 expected to start very soon. Okay. So I'll hand over to Alex to host the Q&A.

Tim, John, Stephen, thank you very much for your presentation. [Operator Instructions] Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed by our investor dashboard. As you can see, we have received a number of questions throughout today's presentation, and thank you to all of the investors for submitting their questions. Alex, if I may just hand over to you to read out the questions and give responses where it's appropriate to do so, and I'll pick up from you at the end.

Great. Thank you. Okay, the first question, given that the required GLP review has not yet taken place, meaning that any errors or irregularities are currently unknown, what's to stop the Australian authorities from raising the same ?

Shall I to take that and maybe add anything else, John. So we've inquired amongst people who are supposed to have expert experience with the Australian authorities just to double and triple check that this won't be an issue, and we're assured it won't. So we're not expecting the same problems with the Australian or even European regulators as we have done with MHRA. So we understand this is and MHRA specific issue that we won't be encountering elsewhere.

Okay. Could you please tell us if there are any transferability issues from Australia for Phase I applied for into other potential regions or regulators, for example, the U.S. or the U.K.?

Yes. So first in human data generated in Australia is accepted by the FDA, by EMA, by MHRA, by the Japanese authority who's acronym I've forgotten temporarily. But yes, no, the data is perfectly acceptable to other regulatory authorities around the globe.

Great. What is the time scale for commencement of the trial following the CTN HREC approvals. The signed off project plan with the sponsor CRO is presumably just an indicative timeline.

Yes. I mean I'm not going to go into the details of exactly those timelines, but we have done everything that we can beforehand to enable us to start the trial as quickly as possible after we get the go ahead from the Australian regulatory authorities. So there should not be much of a delay between getting that approval and beginning the trial.

Great. Would 1801 have a therapeutic opportunity in endometriosis at all?

Pass. I'm not going to -- I don't know honestly.

I've not seen that many -- yes, I'm not aware of it.

We can have a look, and we'll provide a written opinion on that. But certainly not something that I've come across in the past.

Okay. So how does the U.K. tax credit for R&D following the budget compared to the move music we were hearing beforehand? And what more broadly do you think the U.K. government needs to do to encourage R&D here?

So I think yes, we are very pleased to see that tax credits have been pretty much restored. So the autumn statement last year, which said that R&D tax credits for SMEs were going to be essentially halved. I think we were very disappointed to see. But there's been extensive lobbying both by, I suppose the people in the industry personally including myself, and then the BioIndustry Association have been very active in persuading the government to change his mind on that. So R&D-intensive companies such as ourselves should be able to claim tax credits. So I just haven't done a like-to-like comparison, but the -- they're very comparable to how they used to be, so we're pleased to see that. And then in terms of encouraging R&D here. I mean, from our point of view, there are -- there seem to be issues with the MHRA. I think they're understaffed, overstretched, slow to respond. We've had all sorts of problems with them. And I -- so I understand that a big review of MHRA is ongoing. And obviously, we will be telling our story to the BIA and other lobbying groups to make sure that the government understand the problems we've had.

Okay. Great. The question on the Australian subsidiary. Can you elaborate a little bit more -- give a little bit more detail where is it, what type of entity it is and what's it called?

Yes. So the name of the Australian subsidiary is [indiscernible] Pty Ltd. It's registered in Victoria, and it's basically -- it's a PO box essentially. I mean it has directors and has an existence, but it's purely there to enable us to claim the Australian tax credits, which I think we noticed in -- noted in the results statement are rather generous 43.5%. But to do that, you need to have -- you need to build the expenses in Australia through a company that's registered in Australia, so we've set that up to do that.

Great. More on Australia, what is the process of patient recruitment in Australia and their timing thereof? Do we have a hospital lined up?

We have a clinical unit lined up for the Phase Ia trial. So that will be in healthy subjects, so not performed in a hospital, although it is actually on the grounds of a hospital, which is very good from a safety point of view. So the -- all of these clinical units have recruitment processes, which involves large databases of volunteers who have already registered with the clinical unit. They've registered an interest in taking part in clinical trials in general. So what the recruiters do is go through that database searching for people who are suitable who meet the requirements to be included in our clinical trial. In addition, in Australia, they can do lots of advertising using social media to look for volunteers for these trials. So I think for the healthy subjects portion, again, I'm not anticipating any particular delays due to recruitment. Let's get into the trial and see how that pans out. But certainly, at the moment, we're reassured that there won't be delays. For the patient part of the trial. So we'll be working with dermatology clinics who will be referring patients again suitable for inclusion in the trial to the unit where the trial will take place. So again, it's not in a hospital, but it is, of course, accessing patients through the dermatology clinics. And that was 1 of another attraction of taking the trial to Australia is this availability of psoriasis patients.

A couple of questions on the MHRA again. So what will happen to the costs incurred for the U.K. CTA, will it be refunded?

Well, so there's no application as such to submit the MHRA, but there's no -- there are no actual costs to be refunded.

Okay. If the MHRA do respond and ultimately accept our submission, would we run trials in both territories? Or are we now putting all our eggs in the Australia basket?

For the -- certainly for the Phase Ia trial, all our eggs are in the Australia basket. When it comes to expanding the trial for Phase Ib, so let's never close any doors. It's possible that we could look for patients in other disease areas in the U.K. or in other European territories. It's certainly not the plan at the moment, but I don't want to close any doors. But the trial will be performed in Australia. That's the plan. The MHRA application is over, I think.

Okay. Great. Okay. So just moving on to SDC-1802. At what stage are the translational toxicology and manufacturing studies? And when do you expect the respective stages to be concluded?

So we haven't given timelines for any of those things. The translational studies are in progress. It's an involved process. And I would add that, obviously, SDC-1801 has been our priority in all of this. So 1802 has necessarily taken a back seat there. Translational studies are in progress. Once those are complete, and we're satisfied that we have a good data pack with respect to potential efficacy of a molecule, then we'll be beginning the toxicology studies. We have done some short-term acute tox studies with the molecule, all of which were fine, but we need to get into the actual GLP toxicology studies to support clinical trials application wherever that may be. Manufacturing also we've not started, but certainly, some of the steps are repeats of chemical synthesis steps used for the production of SDC-1801. So I think we'd be able to get going very quickly on the actual manufacture of 1802.

Okay. Also on 1802, will you look to perform clinical trials for 1802 in Australia as well, given the disappointing lack of communication from the relevant authorities in the U.K.

I think it's too early to say. I mean obviously, 1802 will begin clinical trials in patients. So Australia has really built a very strong position in first-in-human studies in healthy subjects. I don't necessarily know of any particular advantages they have when it comes to patients. So we'll be assessing all the possibilities. Obviously, mindful of our experience with MHRA in the past, which may drive our thinking. But I think yes, at the moment, we're open-minded, and it will be quite a different Phase I clinical trial to that envisage through 1801.

Okay. Moving on to SRA737. Do you expect there to be any change to Sareum's existing 27.5% share in any future deal?

No. I suppose. I mean -- and looking at potential things that could happen to that, I suppose, if we were to fund some further development to another clinical trial, independent of CPF, we would have invested more in the program. And therefore, we would expect to negotiate a higher percentage. But no, as it stands, we -- our 27.5% is maintained.

Okay. Is there active interest in SRA737 and what time scale can we expect to see the next steps of its commercialization?

So we have a number of inquiries. We've received them. CPF, I understand are dealing with them. But we can't really comment on the stage of these inquiries or any timelines for them to complete.

Okay. Just going back to 1801. Do you have a rule of thumb for how much per patient the Phase Ia trial will cost?

I mean, yes, I mean, we know how much it's going to cost, and we know how many patients we're going to recruit, but it's, I suppose, it's commercial confidential between us and the clinical units.

Okay. Then there are a couple of questions relating to why the MHRA did not allow Sareum to proceed with the trial.

So the MHRA requested some review of some of the preclinical data we submitted to them through the U.K. GLP monitoring authority as to the U.K. good laboratory practice monitoring authority, so -- which wouldn't have been a problem. We would be sure that the data would have stood up, but the request to do this review had to come from MHRA. So we asked MHRA to make that request. But that was pretty much the point. They stopped responding. So we were kind of -- we're a bit stuck really. We couldn't go ahead without MHRA requesting it. And MHRA were not responding to our request to do that, and that's where we kind of came to a stop with MHRA.

Great. Just a couple of being sent in advance. What is the cash burn likely going forward?

So we will not comment on that. Thank you very much.

I think that is the majority of the questions that we've had through.

Tim, John, thank you. And I think you have addressed all those questions you can from investors. And of course, the company will review all questions submitted today, and we will publish those responses on the Investor Meet Company platform. Perhaps for redirecting investors to provide you with their feedback, which I know is particularly important for yourself and the company. Stephen, could I please just ask you for a few closing comments.

Yes, indeed. Well, again, thank you all for joining this call today. I hope it's been helpful to you. We do believe that we are very firmly in 1 of the most successful periods in the company's history. We will look forward to continuing to brief you and keep you apprised of progress. We do appreciate the [indiscernible] of the company, and we do like and mostly enjoy the comments and questions that you ask. So thank you again. And with that, we'll bring things to close.

Tim, John, Stephen, and thank you for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Sareum Holdings plc, we'd like to thank you for attending today's presentation. Good afternoon to you all.