Sareum Holdings plc - Pre-Close Trading Update for 27 August 2019

27 August 2019

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014

Sareum Holdings PLC

(“Sareum” or the “Company”)

Pre-Close Trading Statement

Sareum Holdings plc (AIM: SAR), the specialised small molecule drug development business, provides the following trading update ahead of its full year results for the year ended 30 June 2019. Sareum expects to report its full audited annual results by mid-October 2019.

Operational Highlights

Selective TYK2/JAK1 Inhibitors in Autoimmune Diseases and Cancer

• Advancing two distinct molecules selected from our proprietary dual tyrosine kinase 2 (TYK2) / Janus kinase 1 (JAK1) programmes as potential therapies for autoimmune diseases (SDC-1801) and cancers (SDC-1802)
• Programmes continue to attract interest from international pharmaceutical companies
  • Both molecules demonstrate high selectivity for TYK2 and JAK1 kinases as well as compelling activity in relevant disease models
  • Drug candidates have the potential for once-daily oral dosing and have shown a good early safety profile
  • Data arising from some of this work are being prepared for publication via peer-reviewed journal and conference presentations
• Formal preclinical development continues to progress well
  • SDC-1801 has demonstrated excellent tolerability in toxicology studies in rodents (as reported in June 2019), with doses up to 30 times the level that displayed good responses in efficacy studies
  • Dosing in two short-term dose range finding studies has now completed and laboratory analysis of the data obtained is on-going. These studies have been designed to identify low, medium and high doses to use in specific longer-term toxicology studies, which would form part of the regulatory documentation needed to apply to begin human trials
  • A robust manufacturing route has been developed for SDC-1801 to produce active ingredient for both preclinical and clinical studies and the product required for the next round of toxicology studies has been delivered. Research is ongoing to find the most reliable manufacturing process for the best solid form of the molecule to progress into clinical studies
  • Activities continue to confirm an optimal route of synthesis for SDC-1802. Enough material is in hand to initiate short-term toxicology studies in rodents
• Additional research to refine the Company’s clinical plans, including prioritisation of indications, is continuing, with detailed profiling of SDC-1801 in human tissue, and of SDC-1802 in immune-competent mouse models of cancer. Human clinical trials are targeted to start in late-2020, subject to successful progress and financing

SRA737 – Promising Data Presented at International Cancer Congresses

· In June 2019, Sierra Oncology (“Sierra”), the licence holder of SRA737 (an oral selective Chk1 inhibitor), announced promising preliminary efficacy and safety data at the annual meeting of the American Society of Clinical Oncology (ASCO) from two ongoing Phase 1/2 clinical trials. These trials were evaluating SRA737 across multiple indications, as a monotherapy and as a combination, potentiated by non-cytotoxic low-dose gemcitabine (LDG)

· The studies delivered highly encouraging results:

o SRA737 demonstrated notable anti-cancer activity in multiple indications including a 30% Overall Response Rate (ORR) in evaluable patients with anogenital cancer treated with SRA737+LDG. Anogenital cancer is an indication for which the second-line metastatic setting represents a significant unmet medical need, with there being no approved therapies and a very poor life expectancy for patients

o Additionally, evaluable subjects whose tumours harboured distinct genetic profiles (RAS wild type with FA/BRCA gene network mutations) displayed favourable outcomes across multiple indications, with an ORR of 25%

· Sierra has also presented evidence highlighting the potential of combining SRA737 with other novel therapeutic approaches that are gaining traction as mainstays of targeted cancer treatment, including PARP inhibition (PARPi) and immune checkpoint blockade

o At the DNA Damage Response (DDR) Therapeutics Summit in January 2019, Sierra noted promising data demonstrating that Chk1 inhibition, with agents such as SRA737, could address the significant and growing clinical problem of acquired resistance to PARP inhibitors

o In addition, at the American Association of Cancer Research (AACR) conference in April 2019, Sierra showed that SRA737+LDG induced significant anti-tumour activity when combined with anti-PD-L1 immunotherapy. These data demonstrated durable tumour regressions in a mouse model of small cell lung cancer (SCLC)

o At an analysts’ meeting held during ASCO, Sierra presented similarly striking data with the SRA737+LDG anti-PD-L1 combination in a mouse model of colorectal cancer, with 80% regressions observed following three treatment cycles

SRA737 Development Update

• In June 2019, following its ASCO presentation, Sierra announced it was exploring non-dilutive strategic options to support the next stages of development of SRA737, as it had decided to prioritise the development of its Phase 3 myelofibrosis candidate, momelotinib
• The ongoing SRA737 monotherapy and SRA737+LDG combination Phase 1/2 studies continue with completion expected in the first half of 2020

Sareum’s Potential Financial Returns from SRA737 – Partial Details Disclosed for the First Time

• In its most recent Form 10-Q filing with the US Securities and Exchange Commission (dated 8 August 2019), Sierra revealed the following, previously confidential, details of its licensing agreement with CRT Pioneer Fund (“CPF”) in relation to the future near-term clinical milestones due from the remaining US$319.5 million:
  • US$7.5 million would be due upon the dosing of the first patient in the first Phase 1 trial of SRA737 in the United States
  • US$12.0 million would be due upon the dosing of the first patient in a randomised Phase 2 trial of SRA737
  • US$19.5 million would be payable in the event the milestone for Phase 2 is achieved but no milestone payment for Phase 1 has been paid
• SRA737 was discovered and initially developed by scientists at The Institute of Cancer Research (London, UK) in collaboration with Sareum, and with funding from Cancer Research UK
• CPF licensed SRA737 to Sierra in 2016 for up to US$328.5 million, including an upfront payment of US$7 million and US$321.5 million payable upon the achievement of certain developmental, regulatory and commercial milestones, plus royalties on future sales
• CPF has a Co-investment and Partnership agreement with Sareum. Under this agreement Sareum is eligible to receive 27.5% of all payments made to CPF as SRA737 advances, equivalent to up to a total of US$88 million in future milestone payments, plus sales royalties
• CPF is responsible for the on-going relationship with Sierra, and the Company is in regular dialogue with CPF to ensure that it is kept informed of developments. While Sareum must ensure compliance with the confidentiality restrictions in both the licensing agreement between CPF and Sierra, and the Partnership agreement between CPF and Sareum, the Company is committed to keeping the market updated as and when it can

Financial highlights (subject to audit)

· Raised £850,000 before expenses in November 2018, through a placement of 130,769,231 new ordinary shares at 0.65p per share, to progress its drug development programmes as well as for working capital purposes

· Raised £781,484 before expenses in June 2019, through a placement and offer of 195,371,000 new ordinary shares at 0.4p per share to progress the Company’s TYK2/JAK1 drug development programmes as well as for working capital purposes

· Loss on ordinary activities (after taxation) of £1.45m (2018: loss of £1.47m)

• Cash at bank as at 30 June 2019 was £0.92m (excluding the £0.78m raised in the June 2019 placing) (£1.54m as at 31 December 2017; £1.38m as at 30 June 2018)

Dr Tim Mitchell, CEO of Sareum, commented:

“We believe our two TYK2/JAK1 inhibitors have the potential to address unmet needs in autoimmune diseases and cancer, through a novel mechanism that is clearly gaining increasing interest from both the pharmaceutical industry and financial investors.

“Given this positive background, we remain focused on applying our available resources as efficiently as possible to advance our first TYK2/JAK1 inhibitor towards clinical trials in 2020 and are continuing activities to determine the priority indications.

“The preliminary clinical data presented by Sierra on SRA737 at ASCO, alongside other evidence on the use of SRA737 or Chk1 inhibition in combination with PARPi and immuno-oncology approaches, have been very encouraging. These findings give us confidence that SRA737 has the potential to become an attractive new therapeutic option for patients in several important and underserved cancer indications. However, it is now clear that the next stages of development of SRA737 are dependent on Sierra being successful in securing a non-dilutive strategic option to enable its planned clinical and preclinical programmes to advance.

“We continue to believe, based on the very promising clinical data that has been generated to-date, that Sierra should have every chance of finding a suitable solution to progress the development of SRA737, which in due course would lead to Sareum receiving the milestones set out in the CPF/Sierra licensing agreement.”

For further information, please contact:

Notes for editors:

Sareum is a specialist drug development company delivering targeted small molecule therapeutics to improve the treatment of cancer and autoimmune disease. The Company aims to generates value through licensing its candidates to international pharmaceutical and biotechnology companies at the preclinical or early clinical trials stage.

Sareum is advancing internal programmes focused on distinct dual tyrosine kinase 2 (TYK2) / Janus kinase 1 (JAK1) inhibitors through preclinical development as therapies for autoimmune diseases (SDC-1801) and cancers (SDC-1802). The Company is targeting first human clinical trials in each indication in 2020.

Sareum also has an economic interest in SRA737, a clinical-stage oral, selective Checkpoint kinase 1 (Chk1) inhibitor that targets cancer cell replication and DNA damage repair mechanisms. Preliminary data suggest SRA737 may have broad application in combination with other oncology and immune-oncology drugs in genetically defined patients. SRA737 was discovered and initially developed by scientists at The Institute of Cancer Research in collaboration with Sareum, and with funding from Cancer Research UK. SRA737 was licensed by CRT Pioneer Fund (CPF) to Sierra Oncology, in a $328.5m plus royalties licence deal, with Sareum eligible to receive 27.5% of all payments to CPF under the agreement.

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

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Citigate Dewe Rogerson Ltd is registered in England NO 2184041. Registered office is 8th Floor, Holborn Gate, 26 Southampton Buildings, London, England, WC2A 1AN, UK.