SMALL CAPS FOCUS: Sareum Holdings shares up 300 per cent as it makes progress in drugs research

By Ian Lyall, Proactive Investors
Updated: 10:10 EDT, 3 October 2011

The past year has been one of remarkable progress for the cancer drug discovery group Sareum Holdings.

This is reflected in the annual results statement last week, and underlined by a share price that has shot up more than 300 per cent in the last 12 months.

It is fully funded for the foreseeable future. And it has two lead candidates – one for solid tumours and the other with the potential to treat acute myeloid leukaemia – that are showing some early promise.

Fully funded: Sareum Holdings has heavyweight backing for its pre-clinical research programmes

Tie-ups Cancer Research Technology and the Institute of Cancer Research, meanwhile, lend its pre-clinical research programmes heavyweight backing. The only thing missing from this story is a collaboration deal for its cancer compound, known as a Checkpoint 1 inhibitor, which has long been mooted but so far has failed to materialise.

‘We have got a number of irons in the fire,’ said chief executive Dr Tim Mitchell, when I visited the group at its rather modest offices on the outskirts of Cambridge.

‘Whether it is licensing, whether it is co-development we don’t know. But there are those sorts of discussions going on.’

Of course Mitchell can’t tell us exactly when a sugar-daddy might agree to fund research on this potentially break-through treatment for cancer.

However recent precedent suggests a tie-up with a big pharmaceuticals or biotechnology group could, and probably will be, transformational.

In August tiny Array BioPharma cut a deal worth as much as $685million in royalties and milestone payments with Genentech for the right to develop Checkpoint 1 compound similar to that being developed by Sareum.

Checkpoint 1 works by preventing the cancer cell from repairing its DNA. It is expected to work well in combination with traditional chemotherapy, and has the capacity to combat a range of so called P53 mutant cancers, which encompasses around 60 per cent of all solid tumour types.

On a stand-alone basis it may prove a powerful treatment for leukaemia and a pernicious childhood cancer called neuroblastoma, Michell said.

More to the point, the company’s fledgling drug may be superior to alternative currently under development in that it is being designed as a once-a-day, oral treatment. Taken by mouth, a single dose will last 24 hours, which is far more efficacious than a twice a day treatment administered by injection.

‘You need to take out the repair mechanism for a whole cell cycle which is 24 hours,’ said Mitchell. ‘So ideally you want 48 hours of inhibition. In that case two pills are going to work better than four injections.’

Sareum’s plan is to develop ‘best in class not first in class’, which is what it is aiming for with its other drug candidate. It is what’s called an Aurora Kinase inhibitor, which blocks the enzymes involved in cell division and may kill cancer cells.

While it is developing an intravenous treatment, it is also trying to perfect an orally administered dose. The drug has a dual action that targets something called the FLT3 Kinase associated with acute myeloid leukemia, which may mean it is more efficacious than similar treatments in development.

‘Our forte is being very nimble and to follow up with this best in class rather than first in class model,’ Mitchell said.

‘With Checkpoint 1 we knew it absolutely needed oral administration to give that 24-hour knockdown. We were able to change tack quickly. The same goes with aurora...with fLT3.

‘The fact is this is a small organisation. If we want to make a decision it takes us half an hour, where it might take six months for a large company to do that.

‘This is how we beat the big companies at their own game. In fact I would go as far as to say the big companies have shown they are not very good at research yet they spend a lot of money on it.’

Sareum at a Glance

AIM ticker: SAR

Market Value: £23million

Current price: 1.58pence

Year-high: 4.79pence

Low: 0.21pence

• For more information on this or other growth stocks go to www.proactiveinvestors.co.uk