Sareum : Final Results

Sareum Holdings plc

('Sareum' or 'the Company')

Final Results

Sareum Holdings plc (AIM: SAR), the specialist cancer drug discovery and development company, announces its final results for the year ended 30 June 2017.

Operational highlights

• Lead cancer drug candidate SRA737 (formerly CCT245737), a novel Chk1 inhibitor, licensed for clinical development and commercialisation to NASDAQ-listed company Sierra Oncology, Inc. by Sareum's co-investment partner, CRT Pioneer Fund (September 2016).
• Good progress reported by Sierra Oncology in the two ongoing clinical studies with SRA737 as both a monotherapy and in combination with chemotherapy in a range of cancers (June 2017).

• Patents protecting SRA737 were granted in the USA and Europe (May 2017), extending the protection period to 2033 in the USA.
• Successful outcome from feasibility study with TYK2 inhibitors in T-Cell Acute Lymphoblastic Leukaemia (T-ALL). In disease models, Sareum's compounds demonstrated good oral bioavailability, were well tolerated and showed tumour reduction of up to 80% (October 2016). These results support the further advancement of the programme.
• Further patent grants for Aurora+FLT3 kinase programme in Japan, Singapore, China, and Hong Kong, completing IP protection for the candidate in all major territories.

Financial highlights

• Maiden profit (after taxation) on ordinary activities of £400,000 (2016: loss of £1.05 million).

• Net assets at period end were £2.34 million (2016: £1.86 million), of which £2.31 million comprised cash at bank (2016: £1.25 million).
• £1.50 million received from Sierra Oncology as the Company's share of the $7 million upfront payment from the out-licensing agreement for SRA737 (September 2016). Milestone payment of £450,000 received (share of $2 million payment) following the successful transfer of the two ongoing Phase 1 clinical trials of SRA737.
• Received £229,000 in unspent funds previously invested in clinical development of Chk1 upon the out-licensing of SRA737.

Full Year Results 2017 available as PDF document:FY Results 2017

Dr Tim Mitchell, Chief Executive Officer of the Company, said: 'We are very pleased with the progress made during the period across our pipeline. The licensing of SRA737 is an important milestone for several reasons: it places the clinical development and future marketing of this exciting oncology candidate in the hands of a highly experienced and well-funded team; the agreement has the potential to provide substantial funds to Sareum, enabling us to advance and broaden our own pipeline programmes; and overall it provides important validation of our business model and expertise for the design and early development of novel drug candidates that offer attractive licensing opportunities for potential partners. We expect further important newsflow in the coming year and look forward to updating shareholders.'

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About Sareum

Sareum is a specialist drug discovery and development company delivering targeted small molecule therapeutics, focusing on cancer and autoimmune disease, and generating value through licensing them to international pharmaceutical and biotechnology companies at the preclinical or early clinical trials stage.

Its most advanced programme, SRA737, is a novel Checkpoint kinase 1 (Chk1) inhibitor licensed to NASDAQ-listed Sierra Oncology and in clinical trials targeting a range of advanced cancers. The key role of Chk1 in cancer cell replication and DNA damage repair suggests that SRA737 may have broad application as a targeted therapy in combination with other oncology and immuno-oncology drugs in genetically defined patients.

Sareum is also advancing programmes to develop novel tyrosine kinase 2 (TYK2) inhibitors in autoimmune diseases and cancers, and Aurora+FLT3 inhibitors in haematological cancers, which are in the IND-enabling preclinical and lead optimisation stages.

The Company's drug discovery technology platform (SKIL® - Sareum Kinase Inhibitor Library) is being applied to generate drug research programmes against other kinase targets.

Sareum Holdings plc is listed on the AIM market of the London Stock Exchange, trading under the ticker SAR. For further information, please visit www.sareum.co.uk.

Full year results for the twelve months ended 30 June 2017

Chairman and CEO's statement

Sareum made important progress during the year ended 30 June 2017 across its key development programmes. The highlight of the year was the signing of a licence agreement for the Chk1 programme with Sierra Oncology, Inc (NASDAQ: SRRA). This agreement has brought a highly committed and well-funded partner, with proven experience in oncology drug development, to realise the value of this exciting programme. Already, the impact of Sierra Oncology's commitment is being seen with the implementation of highly innovative clinical trial designs. Additionally, clinical opportunities to explore the potential of SRA737 with other new classes of targeted cancer therapy are expected in 2018.

The agreement with Sierra Oncology represents a significant validation of Sareum's business model, which is based on its expertise in small molecule drug design and its strategy to develop programmes to late preclinical or early clinical stages. Sareum aims to take advantage of the substantial values associated with out-licensing programmes at these stages.

The transfer of development costs to Sierra Oncology, alongside income from the Chk1 agreement, is enabling Sareum to allocate more resources to its other programmes. In particular, the TYK2 programme has made encouraging progress during the period and candidate selection studies for both autoimmune and cancer indications are expected to commence in the first half of 2018, while the Aurora+FLT3 programme is advancing through preclinical development despite some delays.

From a financial perspective, continued efficient capital use and the receipt of licensing income has resulted in the Company achieving a maiden profit of £400,000.

Programme updates

SRA737 - Checkpoint Kinase 1 (Chk1)

Targeting solid tumours, licensed to Sierra Oncology

SRA737 (formerly CCT245737) is a potent, highly selective, orally bioavailable small molecule inhibitor of Chk1, a key regulator of important cell cycle checkpoints and central mediator of the DNA Damage Response (DDR) network. SRA737 was discovered as the result of a research collaboration between Sareum, the Institute of Cancer Research and Cancer Research Technology (CRT). Preclinical and initial clinical development was carried out in a co-investment collaboration between Sareum and the CRT Pioneer Fund. The programme was licensed for further clinical development and commercialisation to Sierra Oncology in September 2016.

Sierra Oncology is advancing next-generation DDR therapeutics for the treatment of patients with cancer, and SRA737 is its lead candidate. This company has a strong management team with a proven track record in oncology drug development and is well financed with $116 million cash as at the end of June 2017.

Under the terms of the co-investment agreement with CRT Pioneer Fund, Sareum is eligible to receive 27.5% of up to $328.5 million in upfront, development and commercialisation milestone payments, as well as royalties on sales. An upfront payment of $7 million and a first milestone payment of $2 million have already been paid by Sierra Oncology (September 2016 and January 2017, respectively), with Sareum receiving a total of nearly £2 million as its share of this licence income.

SRA737 is being evaluated by Sierra Oncology in two innovative Phase 1 clinical trials in patients with advanced cancer and tumours identified to have genetic aberrations (mutations) that are thought to confer sensitivity to Chk1 inhibition. Tumour cells can have many genetic mutations and several of these may result in a strong reliance on Chk1 function for survival of the tumour. By blocking Chk1 function in these cases, the tumour cells die; this is an example of the concept known as 'synthetic lethality'. Sierra Oncology submitted amended protocols for both trials, approved in May 2017, that aim to take advantage of this fundamental role of Chk1 in cancer with the objective of enhancing patient selection and maximising potential responses. These innovative trial designs were also presented at the American Society of Clinical Oncology (ASCO) annual meeting in June 2017.

The first trial is intended to evaluate the potential of SRA737 as a monotherapy in patients whose cancer has the defined genetic profile described above. In June 2017, Sierra Oncology reported that the dose escalation phase of the monotherapy trial had advanced successfully to beyond 600mg/day dosing (c. 4x the estimated minimum efficacious dose of 160mg/day) with a well-tolerated safety profile. The cohort expansion phase of this trial, now running at eight UK hospitals, is enrolling patients with five cancer types that are predicted to be highly sensitive to Chk1 inhibition: colorectal, head and neck, non-small-cell lung, ovarian and prostate. The trial will assess the maximum tolerated dose (MTD) of SRA737 and recommend a dose for further (Phase 2) clinical studies. To determine potential patient selection strategies for further clinical development, the response of the patients' cancer to treatment will also be measured to evaluate the preliminary efficacy of SRA737.

The second trial is designed to explore the potentiating effects of low-dose gemcitabine (a chemotherapy that causes replication stress and DNA damage) in combination with SRA737, also in patients with genetically profiled cancers. The chemotherapy combination study is initially enrolling patients with the aim to establish the safety profile, to determine the MTD and to propose a recommended dose for further development of SRA737 in combination with low-dose gemcitabine. Once an MTD and dosing schedule have been determined, the study will evaluate the preliminary efficacy of SRA737 in combination with low-dose gemcitabine in genetically defined subjects with bladder or pancreatic cancer.

Sierra Oncology has announced that it will provide an update on the SRA737 development programme in late February 2018. Sierra Oncology also expects to present data from its studies at a medical conference in the second half of 2018.

In addition, Sierra Oncology is evaluating SRA737, with potential clinical opportunities in 2018, in combination with targeted cancer therapeutics where there is a strong biological rationale for synergy with Chk1 inhibition. These include anti-PD-1 and PD-L1 therapies, which are fast becoming established as key therapeutic options for a range of cancers, and other DDR inhibitors such as PARP inhibitors.

Sierra Oncology reported, in May 2017, the grant of US and EU patents extending the protection of SRA737 in these important markets to 2033.

Tyrosine kinase 2 (TYK2)

With Sierra Oncology now funding the development of SRA737, Sareum has increased the resources allocated to developing its TYK2 programmes in autoimmune diseases and cancer.

TYK2 is a member of the Janus kinase (JAK) family of kinases with roles in pro-inflammatory responses in autoimmune diseases and tumour cell proliferation in certain cancers. Members of the JAK family are the targets of several marketed and clinical-stage drugs for cancer and autoimmune diseases, although there are currently no marketed products specifically targeting TYK2.

Sareum is developing potent and selective, orally available TYK2 inhibitors with potential best-in-class profiles that have shown initial proof-of-concept in in vivo models of:

• Psoriasis, rheumatoid arthritis and ulcerative colitis; and
• T-cell Acute Lymphoblastic Leukaemia (T-ALL).

Sareum has an ongoing co-development agreement with SRI International (Menlo Park, CA, USA) to develop TYK2 inhibitors in autoimmune diseases and retains commercialisation rights for these and other TYK2 inhibitors with profiles optimised for oncology and immuno-oncology applications.

Targeting autoimmune and inflammatory disorders

Sareum has conducted preclinical studies with several of its TYK2 inhibitors, which have demonstrated promising and potentially superior therapeutic profiles in disease models of psoriasis, rheumatoid arthritis and ulcerative colitis, compared with a marketed JAK family kinase inhibitor in the latter two cases.

These data have led the Company's partner, SRI International, to investigate advanced lead molecules in disease models of lupus, and promising initial efficacy has been observed. These studies are supported by a US government research grant (US Department of Defense) of $360,000.

New analogues, with improved selectivity and ADMET (ADME-Tox, absorption, distribution, metabolism and excretion) properties continue to progress through internal screening cascades. Disease model studies with these compounds are planned during the fourth quarter of 2017. If these disease model studies are successful, the Company expects to move into the candidate selection phase in the first half of 2018.

Targeting cancers

Initial studies, assisted by funding from the Innovate UK Biomedical Catalyst Fund, to investigate the potential of Sareum's lead TYK2 inhibitors to treat T-ALL have concluded successfully. The study demonstrated good efficacy of several Sareum TYK2 inhibitors in disease models of T-ALL, both as a single agent and in combination with standard-of-care chemotherapy. In disease models, Sareum's compounds demonstrate good oral bioavailability, were well tolerated, presented good exposure to plasma and tumour tissue, and showed a dose-dependent effect on a biomarker of TYK2 inhibition and tumour reduction of up to 80%.

These data were presented by Sareum in November 2016 at the American Association for Cancer Research - National Cancer Institute - European Organisation for Research and Treatment of Cancer (AACR-NCI-EORTC) international conference and updated results were presented by the Company at the International Cancer Cluster Showcase in June 2017.

The Company is also investigating the potential of its TYK2 inhibitors in solid tumours and blood cancers where there is strong evidence in the literature that TYK2 inhibition could be effective, both as a single agent and in combination with standard-of-care chemotherapy. Several of these studies are being carried out in leading academic centres worldwide under material transfer agreements.

Furthermore, Sareum is investigating the potential of its TYK2 inhibitors to overcome tumour resistance to new immune checkpoint inhibitor therapies. Initial results are promising, and additional experiments are in progress seeking to identify which tumour types and immune checkpoint inhibitor combinations might be expected to benefit most from TYK2 inhibition.

The Company expects to select a candidate for further development in the oncology field in the first half of 2018, pending the success of ongoing studies in any one of these cancer applications.

Aurora+FLT3 kinases

Targeting AML and other blood cancers, in partnership with HMUBEC

Sareum's third programme is focused on small molecule inhibitors of Aurora and FLT3 kinases that it has identified as having potential to be single agent therapies for acute myeloid leukaemia (AML) and other leukaemias. A lead candidate is in preclinical development, funded by Sareum's Chinese partner, Hebei Medical University Biomedical Engineering Center (HMUBEC).

Previous studies have confirmed the potential of this candidate in AML, and particularly FLT3-mutant AML. Toxicology studies are underway with initial results suggesting that the candidate is well tolerated at the predicted therapeutic dose. Further formulation work, which is causing additional delays, is ongoing to complete the toxicology studies, with Sareum funding some studies in the UK to accelerate the resolution of these formulation issues.

The Company is now targeting completion of the preclinical studies in the second half of 2018.

Separately during the period, the Company's intellectual property around its Aurora+FLT3 kinase programme was strengthened by notifications of patents granted in China, Hong Kong, Singapore and Japan. Sareum now has patent protection in all the major territories for this programme.

Financial review

Sareum is pleased to report its maiden profit on ordinary activities for the year ended 30 June 2017 of £400,000 (after taxation) (2016: loss of £1.05 million).

The Company ended the year with net assets of £2.34 million (2016: £1.86 million), of which £2.31 million comprised cash at bank (2016: £1.25 million). The Company received £1.50 million from Sierra Oncology as its share of the $7 million upfront payment from the out-licensing agreement for SRA737 and a milestone payment of £450,000 received (share of $2 million payment) following the successful transfer of the two ongoing Phase 1 clinical trials of SRA737.

Sareum also received £229,000 in unspent funds previously invested in the co-investment partnership with the CRT Pioneer Fund for the clinical development of the Chk1 programme during the second half of the period.

Outlook

Overall, the Directors are delighted with the progress made across the Company's programmes during the period. Sareum's business model and its expertise in the design and early development of novel drug candidates that offer attractive commercialisation opportunities has been strongly validated by the licence agreement with Sierra Oncology.

From a financial perspective, this progress has culminated in a maiden profit for the Company.

More importantly, however, Sareum has gained an experienced, highly committed and well-funded development partner for SRA737 in Sierra Oncology. The next update from the innovative clinical development programme with SRA737 that Sierra Oncology is driving is expected in February 2018.

The income received to date and the future milestone payments possible (pending their achievement) from this programme is providing Sareum with increased resources to accelerate its internal activities. This includes the selection of clinical candidates in its TYK2 programmes in both autoimmune diseases and cancer indications, expected in 2018, and further preclinical progress anticipated in the Aurora+FLT3 programme.

The Company continues to engage with potential partners with a view to securing commercial licences for its products and programmes, while exploring new research programmes from its in-house drug discovery platform, as well as external early stage opportunities that can be potentially in-licensed and progressed into the clinic.