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TYKing the boxes

Sareum Holdings’ (Sareum’s) investment case centres on the development of a therapy for the treatment of solid tumours (SRA737, a Chk1 inhibitor – see page 6 for an explanation) and the potential licensing of internally-generated candidates for the treatment of autoimmune disease and cancer (TYK2/JAK1 inhibitors –see page 8). Sareum is effectively a passive investor in SRA 737, which is licensed for development to Sierra Oncology. QuotedData’s model values Sareum’s 27.5% economic interest in this licensing deal at £20.3m. This figure could rise by £2-3m a year over the next two years, as development progresses, before doubling to around £52m in 2021. By contrast, Sareum’s enterprise value (market cap less cash, EV) is £22m. In addition, Sareum’s TYK2/JAK1 assets represent potentially highly attractive licensing opportunities. These could become increasingly valuable as their development progresses. In view of their early development stage, QuotedData’s model places an indicative value of £7-15m on these assets. However, the model suggests that their value could double with a small incremental investment (in the region of £1-2m) and rise a further fivefold to about £150m in the early 2020s on reaching clinical proof of concept. With normal assumptions for research and development (R&D) spending, overheads and tax, QuotedData’s model suggests a current value for Sareum of £25-33m (0.87-1.14p/share), which offers up to 35% upside to the share price.