Sareum Holdings plc (SAR) Earnings Call Transcript & Summary

Good morning, and welcome to the Sareum Holdings plc Final Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted for today and publish response when it is appropriate to do so. Before we begin, I'd like to submit the following poll. I now like to hand you over to Dr. Stephen Parker, Non-Executive Chairman. Good morning to you, sir.

Good morning, everyone, and thank you for joining the Sareum Holdings presentation for full year ending 30th of June 2023. I'm Stephen Parker, Chairman of the company, but I'm joined today by Dr. Tim Mitchell, Sareum CEO; and Dr. John Reader, our Chief Scientific Officer. So without furthermore ado, I'll hand you over to Tim to begin.

Thank you, Stephen, and good morning, everybody. So first, I just need to draw your attention to the usual disclaimer for the results statements. So this discussion may contain forward-looking statements with respect to clinical plan, strategy, financial performance that may cause our actual results, performance or plans to differ from those expressed on the call. Before we get into the detail of the discussion, I'll just take a moment to introduce Sareum for the benefit of those of you who are new to the company and a recap for those of you who know us quite well. So Sareum's is a clinical stage biotechnology company, and we're developing next-generation kinase inhibitors for autoimmune diseases and cancer. We have a deep expertise in kinase division and the JAK cell signalling family in particular. And this is a growing area of commercial focus with good scientific validation. And our particular focus amongst this JAK family is the TYK2/JAK1 kinase inhibitors. Our lead program, SDC-1801 is a novel dual TYK2/JAK1 kinase inhibitor, which is currently in a Phase I clinical trial, so this is in healthy volunteers. And in the first instance, we're intending to target psoriasis, which will be the clinical focus for the Phase Ib stage of the trial. Our strategy, as it's always been, is to develop our research programs to the late preclinical or only clinical stages before licensing or partnering to pharmaceutical majors. And we're expecting to report key clinical milestones for SDC-1801 in particular, throughout 2023 and 2024. I'll summarize the key developments we've achieved over the year here then. So for SDC-1801 and the TYK2/JAK1 programs, as I've already noted, the lead program is now in Phase Ia and that study is being undertaken in Australia. The objective of the study is to evaluate the safety and pharmacokinetics with an oral formulation of SDC-1801. This study was initiated in May with first subjects being dosed in June and is progressing very well at a specialist clinical unit in Melbourne, Australia. And in September, as you may have seen, after this period end, we started dosing in the multiple ascending dose phase of the clinical trial. So this move to the so-called MAD phase, followed approval by the [ Security ] Review Committee after the planned review of the preliminary data from the first 3 cohorts in the single ascending dose part of the first bit of study. John will take you through more details of this later in the presentation. In addition to the progress in the clinic for 1801 in June, Sareum was granted the first patent specifically for SDC-1801, and it just happened to be in China and patent applications progressing through the offices in the U.S., Europe and other major territories. Alongside SDC-1801, Sareum had a second TYK2 JAK kinase inhibitor. This is SDC-1802, which we believe holds significant potential in both -- in cancer and cancer immunotherapy. And for these translation studies continue, we still need to define the optimal cancer application before we move on to the necessary toxicology and manufacturing work for preparation for clinical trials for that compound. Alongside the TYK2/JAK1 portfolio, we continue to be optimistic about the potential for our Chk1 inhibitor, SRA737, which has demonstrated good clinical and preclinical efficacy. As you may have seen, Sierra Oncology, which is now a subsidiary of GSK, has returned the clinical study reports and other associated documents and data related to SRA737 to our co-development partner, CPF, Cancer Research Technology Pioneer Fund. CPF is taking the lead in evaluating the opportunities and next steps for SRA737, so we're really waiting for further developments from them, and we'll report those as soon as we're able. To summarize the financial results, we reported a loss for the 12 months to June of GBP 3.2 million. So that's an increase over the last year, but it reflects the higher research and development costs involved with late preclinical development and preparation for these clinical studies. Cash at the end of the period was GBP 1 million. And after the period end, we announced a funding facility worth up to GBP 5 million with Group called RiverFort, of which GBP 2 million has so far been received to date. After the period end, we also received a -- an R&D tax incentive from this Australian government and that was worth GBP 400,000 approximately. Now the slide here just shows the pipeline individual form. As you can see, SDC-1801 has now moved into clinical Phase I. We have 737 completed, two Phase I/II clinical trials. But our primary focus here is on advancing SDC-1801 through its Phase I trials. Before we move on to the technical parts of the presentation, I'll just spend a bit of time on the TYK2/JAK1 landscape and set out why we're so excited about this approach. So this is a space that's had increasing scientific and commercial momentum in recent years as more and more evidence grows around the role that JAK signalling can have in managing autoimmune diseases in particular. So TYK2 and JAK1 are involved in signalling pathways that are deregulated in many autoimmune diseases, including psoriasis and also lupus, psoriasis, psoriatic arthritis, inflammatory bowel diseases and many others. We've seen greater recognition by large Pharma and other developers of the potential that the TYK2 class in particular, has to offer patients with autoimmune diseases. And the approval last year of the Bristol Myers Squibb TYK2 inhibitors. So TYK2 by the FDA in the U.S. and then this year by the European regulators was important to us because it was the first specific TYK2 inhibitor to gain approval, and we believe that this approval validates and significantly derisks our approach. BMS are forecasting peak sales of GBP 4 billion for TYK2, so there's a good understanding of the commercial potential of the TYK2 [ plans ] out there. And then a more aligned with our business model, we are very interested to see from December last year. the acquisition of Nimbus Therapeutics Phase II stage TYK2 inhibitor by the Japanese pharmaceutical company Takeda, and this was for a $4 billion cash payment upfront and then there's a further $2 billion available to Nimbus in sales milestones. So having introduced Sareum and the TYK2 space, I'll hand over to John Reader to walk us through why we think our TYK2/JAK1 combination has great potential in this area.

Thank you, Chairman. Hi, everybody. So against the background that Tim set out, we think the combination of TYK2 and JAK1 has particular potential for a few reasons. We've known for a while of the potential of JAK signalling in autoimmune disease, but safety has been a concern. BMS is so TYK2 molecule, which is very selective for TYK2, was approved significantly without one of this so-called black box warnings. Unlike some of the first generation JAK inhibitors such as tofacitinib and baricitinib, which inhibits all of the JAKs to some extent, so we know that TYK2 has a better syndicate profile. We believe SDC-1801 or combining TYK2 with JAK1 inhibition has the potential to increase efficacy without compromising that safety. Furthermore, TYK2/JAK1 are good targets for several autoimmune diseases, which opens potential for us to explore other indications. So very high level, just walking through the [ sites ] behind our proprietary pipeline. The JAK family is involved with maintaining balance in the immune system. TYK2 and JAK1 are involved in signalling pathways that are implicated in multiple autoimmune diseases and notably psoriasis, but also a host of other autoimmune diseases such as inflammatory bowel disease, that's Krohn's disease, ulcerative colitis, also lupus and sclerosis. The inhibition of both TYK2 and JAK1 has the potential to yield superior efficacy compared with those agents with not just 1 but 2 [indiscernible]. So TYK2 and JAK1, we believe, therefore, make optimal targets within the JAK family for autoimmune diseases. That's targeting up for members such as JAK2 and JAK3, in particular, has led to unwanted side effects in some of the patients, leading to the black box warnings on the earlier first generation JAK inhibitors. So moving on to the next slide. I mean, we've touched on this already, but to provide a bit more detail about where we currently are in the clinical development plan. We're in a Phase Ia trial as a clinical unit in Australia. This is exploring the safety and tolerability and the pharmacokinetics of an oral formulation of SDC-1801 in healthy subjects. We've progressed to what's called the multiple ascending dose with the MAD phase of the trial and the single ascending dose phase is continuing through dis-escalation. The trial is blinded. And that means that neither we, of principal investigators, medical monitors and importantly, the participants, none of those people know which subjects receive SDC-1801 and which received placebo. And obviously, we appreciate this keen interest in the trial's progress. But given its blinded design, we will need to wait until the trial is completed before we can provide more details on the safety profile. That said, what we have shared already is that the initial safety indicates a favorable safety profile. And very importantly, the PK data supported once daily oral dosing, which I think is very important for commercial purposes. Subject to continuing good safety data and financing regulatory and recruitment considerations, our intention is to commence the Phase Ib in a phase of a trial in psoriasis patients in 2024. The synthesis of the drug substance for SDC-1801 and the capsules for the clinical trial have been successfully completed. And the current plan is to recruit up to 120 subjects in total, and that's 96 to Phase Ia and 24 patients for Phase Ib and the anticipated time lines of the trial are shown in the arrow below. So again -- subject to financing, regulatory approval and recruitments going to, plan, we anticipate the Phase Ib readout before the end of 2024. Turning briefly to SDC-1802, our cancer immunotherapy program. This is an immunomodulating inhibitor of the TYK2/JAK1 family, which we believe has potential both in cancer and autoimmune disease. SDC-1802 has demonstrated good efficacy in preclinical cancer models. We're working on translational studies with the aim of defining the optimal cancer applications before moving into a Phase I trial. We think that the experience of clinical development of SDC-1801 will support the development plan for SDC-1802 and the molecules are structurally quite related. And during the period, we were pleased to have been granted a patent by the U.S. Patent Office covering the treatment of autoimmune diseases by SDC-1802, which further expands for protection of this compound beyond immuno-oncology. Moving on to SRA737, then our Chk1 inhibitor, just to update you. I mean, I'm sure many of you are familiar with the history here. An SRA737 was developed for Sareum in collaboration with several cancer research, U.K.-funded organizations, including the current co-development partnership that we have with the Cancer Research Technology Pioneer Fund, the CPF. Under the terms of our co-development partnership, Sareum is entitled to 27.5% of any commercialization revenues associated with SRA737. 737 has completed 2 Phase I/II clinical trials, which were funded by Sierra Oncology, and the asset demonstrated a good safety profile and promising clinical and preclinical efficacy, particularly in combination settings. Sierra Oncology was subsequently bought by GSK driven by its interest in another of Sierra's assets. And GSK decided to return to SRA737 and all of the clinical study reports and data and materials have now been received from Sierra. CPF is evaluating potential licensing opportunities. We're very optimistic about the potential of this molecule and we think there's scope for further development that CPF is leading this process. I'll now hand back to Tim to cover the financials.

Thanks, John. So to briefly summarize the financial results that we published on Monday. Looking at the income statement then. So I've already mentioned higher R&D expenses that are associated with the setup and the start of the Phase I trial being responsible for the increased operating expenses. So the loss for the year was GBP 3.2 million this year compared to GBP 2.2 million this year, but fully in line with market expectations, let's say, reflecting these R&D costs. If you look on the tax line, there's plus GBP 833,000. So that represents the R&D tax credits. As we noted in the results RNS, we've already received the cash credit from the Australian government of around about GBP 400,000. And the rest would expect from the U.K. government. We normally get it around the end of the year, so maybe early in the new year. Moving to the balance sheet then. So we had a cash position at the end of June of GBP 1 million. But of course, this doesn't include the finance facility from RiverFort, which I'll just touch on in a minute, but we've so far received GBP 2 million from that, and that was in August. So the -- we are able to manage our cash resources very successfully. So just to recap on the RiverFort facility. Say, this was agreed and set after the period end. So the facility is for GBP 5 million, and that will enable us to complete the Phase Ia and the development of 1801 if it's fully drawn, plus also if we're in receipt of the expected tax credits. So we've received GBP 2 million so far. There's a further 2 payments of GBP 300,000 each, one in November, one in February they're committed, and then an additional GBP 1.4 million due in February. So these are 6-month anniversaries -- that's how the timings are working out. But they're subject to standard trading conditions. And then beyond that, a further GBP 1 million is available by mutual agreement, so that's essentially the bonus of the agreement. Okay. So that's the main part of the presentation. I'll finish by summarizing our progress before we hand over to the Q&A. So we're very optimistic about the potential of by TYK2/JAK1 kinase, as I hope we demonstrated in the presentation because of the efficacy and safety benefits they can offer and the growing commercial excitement around them. So this is the basis of our conviction in our pipeline. Hopefully, we've shown you that SDC-1801 is a differentiated asset in this space, which we believe has the potential to yield superior efficacy whilst maintaining a good safety profile. We're funded to the next clinical inflection point. So that's the end of the Phase Ib study, the RiverFort facility and the tax receipts will give us enough runway to complete this Phase Ia clinical development. So with that, I will thank you for listening to the presentation. I hope it was useful, and we'll take some questions.

[Operator Instructions] But just while the company take a few notes [indiscernible] questions have been submitted today, I'd like to remind you recording this presentation, along with a copy of the slides and the published Q&A can be accessed via your Investor dashboard. As you can see, received a number of questions, both pre-submitted and throughout today's live presentation. And Lauren, at this point, if I may just hand over to you to Chair the Q&A, I'll pick up on you at the end.

Great. Thank you, Alexander, and good morning, everyone. Is the Board able or willing to comment further on the progress of the 1801 trial, a question which is on all shareholders [ list ], If not, then when do they anticipate they might be able to do so.

I'll take this one. This is John. So yes, well, we appreciate the keen interest in the [indiscernible] 1801 trial. Obviously, it's very difficult. So currently, the Phase 1a trial is advancing as planned at the specialist clinical unit in Melbourne. As announced, we've transitioned from a single ascending dose phase to be multiple ascending dose phase. And that was following a review of preliminary data from the initial 3 SAD cohorts. A comprehensive safety data from a Phase Ia trial is anticipated during the first half of 2024. As I mentioned, the trial is blinded. So neither we nor the investigators or subjects are aware of which subjects are dosed with SDC-1801 or with placebo. But again, as reported in the initial safety data and the PK data was looking good, indicates a favorable safety profile supported once daily oral dosing. And just to sort of put a bit of flesh on the bones the way these studies progress, a cohort is dosed, lots of sampling is done, lots of readings are taken or physiological readings, et cetera. And then all that data is presented to a Safety Review Committee at the end of the cohort. That's all reviewed and only when that has been successful is the next cohort ready for dosing. So this sort of cycle times like that, the 3 SAD cohorts were reviewed before moving on to a MAD. So this is how it all works. We're committed to providing accurate and timely information as and when there are significant developments. Shareholders will be obviously informed.

Thank you. Along similar lines, again, asking about the completion timing, but also how long will it take for the analysis and for you to come to a decision based on the data obtained as to whether to proceed with the Phase Ib?

Yes. Well, so we're in the MAD phase -- this MAD phase is continuing. I think we're very optimistic we'll have all of this Phase Ia completed and data received and fully analyzed by the end of half 1, 2024, hopefully, sooner. But some of it is out of our control. So things like recruitment capacity at the unit, for example. So we're just being slightly cautious about time lines here. But so far, it's all gone to plan, all go on schedule. So we're optimistic we'll have that all completed by the end of 2024 -- sorry, by the end of half 1, '24. And the Phase Ia, just as a reminder, comprises 3 parts we've got single ascending dose or multiple ascending dose. And there's also a food effect study, which we haven't really touched on today. But that's investigating how food effects the PK or the uptake of SDC-1801. And each part of the study consists of multiple cohorts and groups of subjects. And as I've said, the data from [indiscernible] be reviewed by a Safety Review Committee before we move on to the next phase. I think the start of the MAD phase demonstrated that the single ascending dose study has been going well. Safety profile is looking good. Otherwise, we would not have been allowed to begin the MAD phase. But the exact timing, the subsequent phases, it depends on several factors and recruitment capacity in the clinical unit, et cetera.

Thank you. When do the Board expect to receive the 1801 patent for the U.S., Europe and other territories and how important is it to have these outstanding patents granted before any future potential license deals?

I'll take this one as well. Unfortunately, it's not an exact site, so we don't give any prediction or forecast when the various patent offices will pick our case for examination. Really, we could hear something next week or it might be another year or even longer. We just don't get any warning of when they're going to pick up a particular docket and start to deal with it, which can be frustrating. But I think what's important is that the Chinese Patent Office has granted our 1801 case, and it's essentially the same application in the other territories. There some very minor technical differences just to satisfy the different territories requirements. But essentially, we're looking to protect the same molecules with the same data. So I think the fact that it was granted in China has given us a great deal of confidence that it will be approved in the other territories when they do come to examine it. And the other part of the question is how that might affect future license deals. So it would be helpful if we have the granted patterns, but it's not essential. And again, I think the fact that the patent was granted in China, reassurance to anybody who's performing due diligence on our intellectual property that the patent is very likely to be granted in the other territories as well. So I think really getting that first patent away is actually crucial in validating the approach.

Okay. TYK2 and 1801, can we have clarification on 1801's progress with regards to being developed to combat severe respiratory diseases.

Yes. So hopefully, as you picked up from the presentation, our current focus and priority is on the development of SDC-1801 for autoimmune diseases, particularly psoriasis. And we believe that fact, current direction will best position the molecule to address significant unmet medical needs within the autoimmune disease space and that will deliver value to shareholders. But there is a broader potential for SDC-1801 both in autoimmune diseases, which we've mentioned, but also in other indications such as severe respiratory diseases. The cytokine storm that was seen recently in the COVID pandemic. We get some preclinical research in COVID, it certainly looks interesting. The results were positive. But I don't think we're envisaging undertaking any further preclinical studies. So any next step for 1801 would be in patients with severe respiratory distress and that would be possible if we've successfully completed the current Phase Ia studies. So the data that we're generating at the moment could be applicable to severe respiratory diseases if that's deemed a priority. But I think, certainly, for the moment, the priority is the autoimmune disease applications.

Okay. Moving on. At the AGM, it was stated that you hope to get a signal of efficacy for 1801 from the Phase Ib, and it may be enough to open up conversations. Does the Board have a plan or options on the table for funding, working capital beyond quarter 4, 2024 if a license deal isn't forthcoming at that point?

I'll take that. Thanks, Lauren. It's Tim. So as we've seen, the current plan is to complete the Phase Ib of 1801 by the end of 2024. I think we see that as a key inflection point where we'll have a good data package and one that we can compare to our competitors who have -- who run similar Phase Ia, [ b ] trials. So we'll obviously have a big push on licensing the product at that point. If an attractive licensing deal isn't available, then we'll look at other financing options to advance our pipeline. And we can't -- I suppose we can't really speculate on what those might be at this stage.

Okay. And then with cash burn being an ever more important factor for Sareum, what is the Board's strategy to ensure we remain well funded to complete our planned activities?

So certainly, in the medium term, the RiverFort facility, assuming it's fully drawn, plus our anticipated tax credits allow us to complete the Phase Ib. And that's really the -- that's the priority for us at least to complete that Phase 1b of SDC-1801.

Okay. And maybe sticking on this slide. Why did the company choose the funding arrangement with RiverFort as opposed to securing investment from high net worth individuals or institutional investors? How do you justify that this is the best available option for the company at the current time?

Okay. So the management team and the Board and along with our advisers, we assessed various funding options during the late summer and carefully considered them all on their merits. Of those, we found this prepayment facility with RiverFort to be the best option available to us to enable us to flexibly fund our further progress. So to say, yes, so the structure of the facility gives us potential to access capital in a nice, flexible and controlled manner. But obviously, we'll still continue to assess all opportunities that would serve the company's growth and development [indiscernible] should other funding opportunities arise.

Okay. Switching gears a little bit. We've have a number of questions relating to 737, and I'll read some of them out here. So first, last December, there was talk of conversations with numerous interested parties. What's the latest on this? Second, upon return of 737, the Board indicated that there was good interest in the compound. Can you please reiterate if there is still significant interest? And another one, things seem to have gone quiet. Has there been any progress?

Okay. So as John pointed out during the presentation that this has been led by CPF, as you're aware, they're the major partner. We own 27.5% of the program that they own the other 72.5%. So it's a major partner. They're responsible for the ongoing commercialization of the program. We're not able to provide any updates about status of any business discussions that might be going. I know -- I appreciate that might be frustrating for some people, but we can't say anything until -- so we have something significant in concrete to say. But of course we will update the market as soon as there's anything significant to report.

Okay. Jumping to 1802, what time scale are we looking for 1802 to go into toxicology studies? And when do you expect 1802 to progress to the next stage of development?

Okay. Yes, I will take this. This is John. Again, so as mentioned, we're still working on the translational studies for SDC-1802, trying to determine the optimal cancer application for the molecule. And once we finalize those, we can then move forward to the toxicology studies and the other preclinical development issue. So synthesis molecule on scale, formulation and synthesis of the formulated product. We should be quite quick once we get going on that because we do have a lot of compounds in hand already, so we can move to the toxicology studies quite rapidly. But I can't really give a definite time line on that at the moment. And just to say, we'll keep our shareholders updated as we reach milestones in the development process.

Okay. John. Another question here. So with Sareum in Phase I now, has there been an increase in the level of conversations on deals with possible partners? I.e. Is Sareum getting noticed?

We'll certainly be noticed, yes, so it's Tim again. So yes, we're seen as a clinical player in this space, and I think that's an important step in the program is significantly derisked now that we have got approval to go into clinic, independent assessors have looked for the data and says, yes, that's suitable for clinical development. And obviously, moving on to the MAD phase, again, real human volunteers have taken -- well, in this case, single doses of 1801 and the Safety Review Committee has considered that it's all fine for the trial to progress into the multiple ascending dose stages. There's some good validation coming in and obviously, potential pharmaceutical partners like to see all that. So we can't comment in detail about the status of any discussions again. They're obviously commercially confidential, but we continue to engage with potential partners as part of our ongoing business development activities.