On July 28, 2022 Labcorp (NYSE: LH), a leading global life sciences company, reported results for the second quarter ended June 30, 2022, and updated full-year guidance (Press release, LabCorp, JUL 28, 2022, View Source [SID1234617057]).

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"Labcorp continued to execute well during the second quarter," said Adam Schechter, chairman and CEO of Labcorp. "We remained dedicated to providing customers with the highest quality science and service while overcoming inflationary and macroeconomic challenges through our accelerated LaunchPad efforts. We also made significant progress against our strategy and reported plans to spin-off our Clinical Development business, resulting in two independent businesses poised for strong, sustainable growth."

Labcorp introduced several innovative diagnostics in the quarter and expanded its drug development capabilities to serve customers in Europe, the Middle East, Africa and Japan. Through Labcorp OnDemand, the company launched at-home collection kits for diabetes, men’s fertility, and for COVID-19, flu and RSV. Labcorp also made available a new skin cancer test for physicians that can also be used during clinical trials. And in July, the company began offering a test to help physicians diagnose conditions including concussions, Alzheimer’s and Parkinson’s.

Furthering its commitment to the fight against COVID-19, Labcorp maintained adequate capacity for current and future testing needs while providing innovations to assist in pandemic response efforts. To help address the monkeypox outbreak, the company collaborated with the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration to bring the CDC’s test to doctors and hospitals across the United States.

The company also advanced important strategic partnerships and acquisitions during the quarter, and its previously announced arrangement with Ascension is progressing through normal regulatory approvals.

On July 14, 2022, the company announced a quarterly cash dividend of $0.72 per share of common stock, payable on September 9, 2022, to stockholders of record at the close of business on August 18, 2022.

Spin-Off of the Clinical Development Business

In a separate press release issued this morning, Labcorp announced that its Board of Directors has authorized the company to pursue a spin-off of the company’s wholly owned Clinical Development business to Labcorp shareholders through a tax-free transaction. The spin-off will result in two independent, publicly traded companies, each poised for sustainable growth:

Labcorp: A leading global laboratory services business comprising the company’s routine and esoteric labs, central labs and early development research labs, all of which are leaders with deep scientific expertise, vast health data and insights, and an extensive, advanced global laboratory network.
The Clinical Development Business: A leading, global Contract Research Organization (CRO) providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.
Labcorp is targeting completion of the planned spin-off in the second half of 2023. Labcorp leadership will discuss the planned spin-off in further detail on the company’s conference call today at 9:00 a.m. ET.

Consolidated Results

Second Quarter Results

Revenue for the quarter was $3.70 billion, a decrease of (3.7%) from $3.84 billion in the second quarter of 2021. The decrease was due to organic revenue of (3.4%) and foreign currency translation of (1.1%), partially offset by acquisitions net of divestitures of 0.8%. The (3.4%) decrease in organic revenue was driven by a (4.8%) decrease in COVID-19 PCR and antibody testing (COVID-19 Testing), partially offset by a 1.4% increase in the company’s organic Base Business. Base Business includes Labcorp’s operations except for COVID-19 Testing.

Operating income for the quarter was $525.9 million, or 14.2% of revenue, compared to $704.1 million, or 18.3%, in the second quarter of 2021. The company recorded amortization, restructuring charges, and special items, which together totaled $130.2 million in the quarter, compared to $135.8 million during the same period in 2021. Adjusted operating income (excluding amortization, restructuring charges, and special items) for the quarter was $656.1 million, or 17.7% of revenue, compared to $839.9 million, or 21.9%, in the second quarter of 2021. The decrease in operating income and margin was primarily due to a reduction in COVID-19 Testing, higher personnel expense, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

Net earnings for the quarter were $358.6 million compared to $467.4 million in the second quarter of 2021. Diluted EPS were $3.87 in the quarter compared to $4.76 during the same period in 2021. Adjusted EPS (excluding amortization, restructuring charges, and special items) were $4.96 in the quarter compared to $6.13 in the second quarter of 2021.

Operating cash flow for the quarter was $572.5 million compared to $487.2 million in the second quarter of 2021. The increase in operating cash flow was due to higher cash earnings and favorable working capital. Capital expenditures totaled $143.3 million compared to $97.2 million a year ago. As a result, free cash flow (operating cash flow less capital expenditures) was $429.2 million compared to $390.0 million in the second quarter of 2021.

At the end of the quarter, the company’s cash balance and total debt were $1.1 billion and $5.4 billion, respectively. During the quarter, the company invested $99.8 million on acquisitions, paid out $66.7 million in dividends, and repurchased $400.0 million of stock representing approximately 1.7 million shares.

Year-To-Date Results

Revenue was $7.6 billion, a decrease of (5.1)% from $8.0 billion, in the first six months of 2022. The decrease was due to lower organic revenue of (4.9%) and foreign currency translation of (0.7%), partially offset by acquisitions net of divestitures of 0.6%. The (4.9%) decrease in organic revenue was a (7.4%) decrease in COVID-19 Testing, partially offset by a 2.5% increase in the Company’s organic Base Business.

Operating income was $1,213.8 million, or 16.0% of revenue, compared to $1,762.0 million, or 22.0%, in the first six months of 2021. The company recorded amortization, restructuring charges, special items, and impairments, which together totaled $236.3 million in the first six months of 2022 compared to $259.8 million during the same period in 2021. Adjusted operating income (excluding amortization, restructuring charges, special items, and impairments) was $1,450.1 million, or 19.1% of revenue, compared to $2,021.8 million, or 25.3%, in the first six months of 2021. The decrease in operating income and margin was primarily due to lower COVID-19 Testing and higher personnel costs, partially offset by a recovery in the Base Business.

Net earnings were $850.2 million compared to $1,237.0 million in the first six months of 2021. Diluted EPS were $9.11 in the first six months of 2022 compared to $12.58 during the same period in 2021. Adjusted EPS (excluding amortization, restructuring charges, special items, and impairments) were $11.07 in the first six months of 2022 compared to $14.92 during the same period in 2021.

Operating cash flow was $928.5 million compared to $1,644.8 million in the first six months of 2021. The decrease in operating cash flow was due to lower cash earnings and unfavorable working capital. Capital expenditures totaled $260.5 million compared to $192.6 million during the same period in 2021. As a result, free cash flow (operating cash flow less capital expenditures) was $668.0 million compared to $1,452.2 million in the first six months of 2021.

Second Quarter Segment Results

The following segment results exclude amortization, restructuring charges, special items, and unallocated corporate expenses.

Diagnostics

Revenue for the quarter was $2.26 billion, a decrease of (4.7%) from $2.37 billion in the second quarter of 2021. The decrease was primarily due to organic revenue of (5.7%), partially offset by acquisitions of 1.2%. The (5.7%) decrease in organic revenue was due to a (7.8%) decrease in COVID-19 Testing, partially offset by a 2.1% increase in the Base Business. Total Base Business growth compared to the Base Business in the prior year was 3.9%.

Total volume (measured by requisitions) decreased by (2.7%) as organic volume decreased by (3.1%) and acquisition volume contributed 0.4%. Organic volume was impacted by a (5.6%) decrease in COVID-19 Testing, partially offset by a 2.6% increase in Base Business. Price/mix decreased by (2.0%) due to a decrease in COVID-19 Testing of (2.2%) and a decline in organic Base Business of (0.4%), partially offset by acquisitions of 0.8%. Base Business volume was up 3.4% compared to the Base Business last year, while price/mix was up 0.5%.

Adjusted operating income for the quarter was $515.6 million, or 22.9% of revenue, compared to $663.2 million, or 28.0%, in the second quarter of 2021. The decrease in adjusted operating income and adjusted operating margin was primarily due to a reduction in COVID-19 Testing, higher personnel expense, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

Drug Development

Revenue for the quarter was $1.45 billion, a decrease of (2.9)% from $1.50 billion in the second quarter of 2021. The decrease was due to foreign currency translation of (2.6%) and lower COVID-19 Testing of (0.6%), partially offset by acquisitions net of divestitures of 0.2% and organic Base Business growth of 0.1%. Organic Base Business growth was impacted by reduced COVID-19 related work, the Ukraine/Russia crisis, and lower pass-throughs.

Adjusted operating income for the quarter was $213.3 million, or 14.7% of revenue, compared to $221.1 million, or 14.8%, in the second quarter of 2021. Adjusted operating income and margin decreased primarily due to COVID-19 Testing, a reduction in COVID-19 related work, the Ukraine/Russia crisis, and inflationary costs. These impacts were partially offset by organic Base Business growth and LaunchPad savings. In addition, personnel expense was lower due to cost reduction actions and variable compensation.

Net orders and net book-to-bill during the trailing twelve months were $7.15 billion and 1.23, respectively. Backlog at the end of the quarter was $15.21 billion, an increase of 6.5% compared to last year. The company expects approximately $4.84 billion of its backlog to convert into revenue in the next twelve months.

Outlook for 2022

Labcorp is updating 2022 full year guidance to reflect its second quarter performance and full-year outlook. The following guidance assumes foreign exchange rates effective as of June 30, 2022, for the remainder of the year. Enterprise level guidance includes the estimated impact from currently anticipated capital allocation, including acquisitions, share repurchases and dividends.

Use of Adjusted Measures

The company has provided in this press release and accompanying tables "adjusted" financial information that has not been prepared in accordance with GAAP, including adjusted net income, adjusted EPS (or adjusted net income per share), adjusted operating income, adjusted operating margin, free cash flow, and certain segment information. The company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the company’s operational performance. The company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results and trends, and growth and shareholder returns, as well as in comparing the company’s financial results with the financial results of other companies. However, the company notes that these adjusted measures may be different from and not directly comparable to the measures presented by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures and an identification of the components that comprise "special items" used for certain adjusted financial information are included in the tables accompanying this press release.

The company today is providing an investor relations presentation with additional information on its business and operations, which is available in the investor relations section of the company’s website at View Source Analysts and investors are directed to the website to review this supplemental information.

A conference call discussing Labcorp’s quarterly results will be held today at 9:00 a.m. ET and is available by dialing 800-715-9871 (646-307-1963 for international callers). The conference ID is 4124787. A telephone replay of the call will be available through August 11, 2022, and can be heard by dialing 800-770-2030 (609-800-9909 for international callers). The conference ID for the replay is 4124787. A live online broadcast of Labcorp’s quarterly conference call on July 28, 2022, will be available at Labcorp Investor Relations website beginning at 9:00 a.m. ET. This online broadcast will be archived and accessible through July 14, 2023.

On July 28, 2022 Ipsen (Euronext: IPN; ADR: IPSEY), a global specialty-driven biopharmaceutical company, reported its financial results for the first half of 2022 (Press release, Ipsen, JUL 28, 2022, View Source [SID1234617056]):

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H1 2022 financial results

Strong sales growth of 10.5% at CER1 (15.2% as reported)
Core operating margin of 39.6%; IFRS operating margin of 35.7%
Core consolidated net profit of €420m, growing by 19.9%. IFRS net profit up by 30.0% to €394m
Solid cash-flow generation and strong balance sheet (€2m closing net debt)
Strategic roadmap

Agreement to acquire Epizyme, expanding Ipsen’s portfolio in oncology
Completion of the divestment of Ipsen’s Consumer HealthCare business (CHC) to Mayoly Spindler
Submission acceptance by U.S. FDA for New Drug Application (NDA) for palovarotene
Upgraded 2022 financial guidance

Total-sales growth greater than 7.0% at CER1 (prior guidance: >2.0%)
Core operating margin greater than 36.0% (prior guidance: >35.0%)

David Loew, Chief Executive Officer, commented:

"In the first half of the year, the continuing execution of our strategy yielded strong results. Our innovative brands delivered double-digit growth, while sales of Somatuline remained stable. By divesting our consumer healthcare business, we are focusing Ipsen on Specialty Care. The transaction with Epizyme will further enrich our portfolio and pipeline in oncology. I am pleased with the recent positive regulatory developments for palovarotene.

The ongoing positive momentum at Ipsen is reflected in today’s upgraded sales and margin guidance. While we recognize an increasingly competitive environment for Somatuline in Europe and the U.S., our innovative brands will continue to deliver strong growth. With patients at the core of our purpose, we are well on track to execute on our four-pillar strategy, including the maximization of our brands and the replenishment of our pipeline."

Consumer HealthCare: completion of divestment

Ipsen today announces the closing of its agreement to divest its CHC business to Mayoly Spindler, with which it had entered into exclusive negotiations in February 2022. The consideration represents an enterprise value of €350m, including an earnout contingent payment of €50m.

The combination of Ipsen’s and Mayoly Spindler’s respective CHC businesses will create a global consumer-healthcare platform with a critical size and the capacity to support its growth. This was a major step forward in the Company’s execution of its strategic roadmap, presented in December 2020, towards building a more-focused Ipsen, centring on Specialty Care.

Review of results

In accordance with IFRS 5, the H1 2022 consolidated net profit and free cash flow resulting from the CHC business have been reclassified in separate line items: ‘Net profit/(loss) from discontinued operations’ in the profit and loss account and ‘Change in net cash/(debt) from discontinued operations’ in the cash-flow statement. The comparative figures for last year have been restated accordingly.

The performance of the CHC business is recorded within discontinued operations and, as such, all commentary on performance excludes the impact of CHC, unless stated otherwise.

Extract of half-year 2022 and 2021 condensed consolidated financial statements2:

– Total-sales growth in H1 2022 of 10.5% at CER3, or 15.2% as reported, to €1,433.7m, driven by double-digit growth of key medicines Cabometyx (cabozantinib), Dysport (botulinum toxin type A), Decapeptyl (triptorelin) and Onivyde (irinotecan), and stable sales of Somatuline (lanreotide)

– Core operating income of €568.0m, an increase of 21.8%, reflecting the strong growth in total sales and other revenue and a moderate increase in operating costs; core operating margin of 39.6%, an increase of 2.1 percentage points

– Core consolidated net profit of €420.5m, growing by 19.9% in line with the increase in core operating income; core EPS4 (fully diluted) up by 20.4% to reach €5.06

– IFRS operating income of €511.2m, increasing by 27.9% after higher amortization of intangible assets and lower other operating expenses

– IFRS consolidated net profit of €394.3m, an increase of 30.0% driven by a lower effective tax rate. IFRS EPS4 (fully diluted) up by 8% to €4.74

– Free cash flow of €339.0m, an increase of 17.3%, reflecting higher operating cash flow, partly offset by an increase in income tax

– Reduction in net debt to €2.3m, driven by the strong free cash flow of the period, the dividend distribution and milestones paid related to business development

The Board of Directors approved the condensed consolidated financial statements on 27 July 2022. The Company’s auditors performed a limited review of the H1 2022 condensed consolidated financial statements. The interim financial report, with regards to the regulated information, is available on ipsen.com, under the Regulated Information tab in the Investor Relations section.

Full-year 2022 guidance

Ipsen has upgraded its financial guidance for FY 2022. Guidance assumes a closing of the Epizyme acquisition in Q3 2022 and excludes any contribution from the CHC business:

– Total-sales growth greater than 7.0%, at constant currency. Based on the average level of exchange rates in June 2022, an anticipated additional favorable impact on total sales of 5% from currencies

– Core operating margin greater than 36.0% of total sales, excluding any potential impact of incremental investments from future external-innovation transactions

This guidance incorporates expectations of an increasing adverse impact from competitive activity on Somatuline in Europe and the U.S.

Business development

In June 2022, Ipsen and Epizyme announced that they had entered into a definitive merger agreement under which Ipsen will acquire Epizyme, a fully integrated, commercial-stage biopharmaceutical company developing and delivering transformative therapies against novel epigenetic targets for cancer patients. The terms of the agreement include an offer to acquire all outstanding shares of Epizyme for $1.45 per share in cash at closing for an initial estimated consideration of around $247m, and a contingent-value right (CVR) of up to $1.00 per share, based on the success of Tazverik (tazemetostat). The transaction is anticipated to close in the third quarter of 2022, subject to the satisfaction of all closing conditions.

Pipeline update

In June 2022, Ipsen announced that the U.S. FDA had accepted for Priority Review its resubmitted NDA for investigational palovarotene for the treatment of patients with fibrodysplasia ossificans progressiva, an ultra-rare genetic disorder. The FDA has assigned 29 December 2022 as the Prescription Drug User Fee Act goal date.

Company Social Responsibility: Generation Ipsen

Ipsen has recently refocused its company social-responsibility strategy. The new Generation Ipsen identity centers on the four key pillars of Environment, Society represented by Patients and People, and Governance. Good progress was made in the first half of the year, including the examples below:

– Environment: a 20% year-on-year reduction in carbon emissions, reflecting the switch of European-based manufacturing and R&D to green electricity in April 2021, plus less gas being consumed at manufacturing sites, despite significant sales-volume growth

– Patients: a donation of €1.5m to The Red Cross and Tulipe (a pharmaceutical distributor managing donations from health companies to meet the emergency needs of populations in distress) and a donation of medicines to support patients in Ukraine

– People: 45% of the Global Leadership Team now represented by women

– Governance: renewal of ISO 37001 anti-bribery certification

Conference call

A conference call and webcast for investors and analysts will begin today at 1.30pm Paris time. Participants can join the call by dialling +1 785 424 1102 or, for U.S. participants, 800-791-4813 toll-free; the passcode is 33569. A recording will be available on ipsen.com, while the webcast can be accessed here.

Calendar

Ipsen intends to publish its year-to-date and third-quarter sales update on 27 October 2022.

Notes

All financial figures are in € millions (€m). The performance shown in this announcement covers the six-month period to 30 June 2022 (the first half or H1 2022) and the three-month period to 30 June 2022 (the second quarter or Q2 2022), compared to six-month period to 30 June 2021 (H1 2021) and the three-month period to 30 June 2021 (Q2 2021) respectively, unless stated otherwise. Commentary is based on the performance in H1 2022, unless stated otherwise.

On July 28, 2022 Taiho Pharmaceutical Co., Ltd. (hereinafter "Taiho") reported that it has submitted to the Japanese Ministry of Health, Labour and Welfare a new drug application for futibatinib (TAS-120), a FGFR inhibitor as a treatment for previously treated locally advanced or metastatic biliary tract cancer harboring FGFR2 gene rearrangements, including gene fusions (Press release, Taiho, JUL 28, 2022, View Source [SID1234617051]).

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The NDA submitted is based on the data from the Phase 2 FOENIX-CCA2 trial. FOENIX-CCA2 trial was a Phase 2 trial in 103 patients with locally advanced or metastatic unresectable intrahepatic cholangiocarcinoma harboring FGFR2 gene rearrangements including gene fusions. In the trial, patients who had received one or more prior lines of systemic therapy received futibatinib 20 mg once daily until disease progression or unacceptable toxicity. The trial’s primary endpoint was objective response rate (ORR) ※.

※ORR(objective response rate): Percentage of patients with objective evidence of response to anticancer treatment and other treatments

Furthermore, a companion diagnostic device to detect FGFR2 gene rearrangements including gene fusions is being jointly developed in Japan with Sysmex Corporation.

Taiho will hereafter continue its effort to secure the approval of futibatinib, aiming to deliver this new treatment to patients in needs.

About Biliary Tract Cancer
Biliary tract cancer is a general term for cancer that develops in the biliary tract and is classified into bile duct cancer, gall bladder cancer, and papillary cancer, depending on the site of origin. Intrahepatic cholangiocarcinoma, which occurs in the bile ducts within the liver, is included as biliary tract cancer. According to the National Cancer Center, the annual incidence of biliary tract cancer, including intrahepatic and extrahepatic cholangiocarcinoma, gallbladder cancer, and papillary cancer, is approximately 25,000 in Japan.1 Currently, there are few treatment options, and no standard treatment for locally advanced or metastatic biliary tract cancer that has progressed after 1st line treatment.

About Futibatinib
Futibatinib (TAS-120) is an investigational, oral, potent, selective, and irreversible tyrosine kinase inhibitor of FGFR1, 2, 3 and 4 being studied as a potential treatment for patients with advanced solid tumors with FGFR1-4 genetic aberrations, including biliary tract cancer, who were previously treated with chemotherapy or other therapies. Futibatinib selectively and irreversibly binds to the ATP binding pocket of FGFR1-4 resulting in the inhibition of FGFR-mediated signal transduction pathways, reduced tumor cell proliferation and increased tumor cell death in tumors with FGFR1-4 genetic aberrations. For details of the FOENIX-CCA2 trial, please refer to ClinicalTrials.gov (View Source trial ID：NCT02052778).

FOENIX-CCA2 trial：PHASE 1/2 STUDY OF TAS-120 IN PATIENTS WITH　ADVANCED SOLID TUMORS Harboring FGF/FGFR Aberrations; FGFR Oral SElective Novel Inhibitor X [across] tumors

Overseas, in May 2018 futibatinib has been granted orphan drug status for the treatment of cholangiocarcinoma, and also have received Breakthrough Designation for the treatment of patients with previously treated locally advanced or metastatic cholangiocarcinoma in April 2021 from the US FDA. March 2022, FDA accepted the New Drug Application (NDA) for futibatinib under priority review.

About FGFR（Fibroblast Growth Factor Receptor）
FGFRs belong to a family of receptor-type tyrosine kinases involved in angiogenesis, wound healing and embryonic development. Fibroblast growth factors (FGFs) and their receptors (FGFR1-4) are expressed on diverse cell types and regulate cell growth, survival, migration and differentiation. Recently, FGF/FGFR gene abnormalities have been reported in several types of cancer, and have attracted attention as candidate driver genes for cancer.

On July 28, 2022 Step Pharma, a world leader in CTPS1 inhibition for the targeted treatment of cancer, reported that its lead asset STP938 has cleared both an Investigational New Drug (IND) application by the Food and Drug Administration (FDA), and a clinical trial application (CTA) by the UK’s Medicines and Healthcare products Regulatory Agency (MHRA), enabling Step Pharma to progress STP938, its first-in-class, selective CTPS1 inhibitor into the clinic in the US and UK (Press release, Step Pharma, JUL 28, 2022, View Source;utm_medium=rss&utm_campaign=step-pharma-progresses-into-oncology-clinical-trials-with-stp938-the-worlds-most-advanced-ctps1-inhibitor [SID1234617049]).

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STP938 has now entered an open label, first-in-human, Phase 1/2 study to evaluate the safety, tolerability, pharmacokinetics, and preliminary efficacy of STP938 in adult subjects with relapsed/refractory B cell and T cell lymphomas. Further details of the study can be found on clinicaltrials.gov under the identifier NCT05463263. Patients with such cancers currently face high relapse rates from existing treatments.

Step Pharma is pioneering a novel class of oral drugs that specifically inhibits nucleotide synthesis and the enzyme cytidine triphosphate synthase 1 (CTPS1) in particular, originally identified as an essential gene for lymphocyte proliferation. By targeting CTPS1, Step Pharma has unlocked the ability to selectively target the de novo pyrimidine synthesis pathway in cancer cells. This ground-breaking approach should enable the highly selective treatment of both blood cancers and solid tumours.

Andrew Parker, Chief Executive Officer of Step Pharma, said:

"Our unique approach to cancer treatment has the potential to yield a novel targeted cancer therapy that can form the backbone of both blood and solid tumour cancer treatment regimens. We are delighted to have moved STP938 into the clinic for hard-to-treat lymphomas with the ultimate goal of improving the lives of millions of cancer patients."

Dr. Brian Schwartz, Chief Medical Officer, commented:

"The clinical trial approvals by both the US FDA and UK MHRA are a significant milestone for Step Pharma and our highly differentiated lead candidate STP938, as we become a clinical-stage company and move at speed to bring this first-in-class treatment to cancer patients with high unmet medical needs."

Step Pharma will initially investigate STP938 in blood cancers, with a focus on T cell lymphomas, where there has been no improvement in five-year survival rates for over 20 years. However, as studies have shown that all cancer cells require CTPS1 for DNA synthesis, STP938 could be a key component of a multitude of cancer treatment regimens.

On July 28, 2022 Sareum Holdings plc (AIM: SAR), the specialist drug development company, reported that it has submitted an application for a Clinical Trial Authorisation ("CTA") to the UK Medicines and Healthcare Products Regulatory Agency ("MHRA") for the development of SDC-1801 as a potential new therapeutic for a range of autoimmune diseases with a focus on psoriasis (Press release, Sareum, JUL 28, 2022, View Source [SID1234617048]).

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Sareum also provides a broader update on operational activities and pipeline progress.

OPERATIONAL HIGHLIGHTS – STRONG PIPELINE PROGRESS

SDC-1801 (autoimmune disease)

SDC-1801 is a TYK2/JAK1 inhibitor being developed as a potential new therapeutic for a range of autoimmune diseases with an initial focus on psoriasis, an autoimmune condition affecting the skin.

Preclinical development activities required to apply for the CTA have been successfully concluded and, consistent with the Company’s clinical development plan, an application for a CTA has now been filed.

TYK2/JAK1 inhibition has demonstrated benefits in maintaining a healthy immune system and has strong clinical validation in psoriasis and psoriatic arthritis. Psoriasis is an autoimmune dermatological condition affecting more than 60 million adults worldwide, with a market size for potential treatments worth more than US$30 billion. Sareum believes that TYK2/JAK1 inhibition offers potential for increased efficacy in psoriasis, compared with existing approved therapies.

Sareum, working alongside a specialist contract research organisation (CRO), has designed a Phase 1a/b clinical trial with SDC-1801 in healthy subjects and psoriasis patients. Subject to regulatory approval from MHRA, the Phase 1a trial is planned to commence in Q4 2022 and will investigate the safety and tolerability of an oral formulation of SDC-1801 in ascending doses administered to healthy subjects. In addition, the trial will evaluate the effect of SDC-1801 on certain biomarkers of autoimmune disease that could be predictive of efficacy when tested in patients.

The Phase 1a part of the trial is expected to provide safety and dosing information applicable for any future trials in patients with other autoimmune diseases and the acute respiratory symptoms of viral infections, including COVID-19, should the Company decide to progress such trials.

Provided satisfactory safety data is obtained from this initial study, and subject to additional funding, a Phase 1b clinical study will commence in psoriasis patients in 2023. The CRO conducting and managing the studies has extensive experience in conducting trials in inflammatory diseases and will recruit up to 120 subjects at a site in Manchester, UK.

Synthesis of SDC-1801 drug substance under GMP conditions has been completed successfully, with a surplus of material for the planned Phase 1 clinical trials. GMP-compliant manufacture of capsules of SDC-1801, intended for use in the Phase 1 trial, is also complete, and the capsules are undergoing rigorous quality control checks before delivery to the clinical unit.

SDC-1802 (cancer immunotherapy)

Sareum continues to work on the translational studies needed to define the optimal cancer application prior to completing toxicology and manufacturing studies.

In April 2022, the Company was granted a new patent, protecting the SDC-1802 molecule and pharmaceutical preparations thereof as a therapeutic to treat T-cell acute lymphoblastic leukaemia (T-ALL – a cancer of a particular type of white blood cell called a T lymphocyte) and other cancers that are dependent on TYK2 kinase for survival.

Licensed Programme – SRA737: A Selective Chk1 inhibitor

As noted in April 2022, Sierra Oncology, Inc ("Sierra"), the licence holder for SRA737 (a novel Chk1 inhibitor discovered and initially developed by scientists at The Institute of Cancer Research in collaboration with Sareum, and with funding from Sareum and Cancer Research UK, licensed to Sierra in September 2016), has been acquired by GlaxoSmithKline plc ("GSK") for US$1.9 billion in cash. The transaction was completed on 1 July 2022, and we await an update concerning GSK’s plans in respect of SRA737.

FINANCIAL POSITION

Sareum had a cash position of approximately £4.3 million as at 30 June 2022 (cash of £5.6 million as at 31 December 2021).

Dr Tim Mitchell, CEO of Sareum, commented:

"The CTA application for SDC-1801 is an important milestone as we advance this promising potential new therapeutic into the clinic.

"SDC-1801 is a TYK2/JAK1 inhibitor which we believe has significant potential in autoimmune disease and we plan to explore this initially in psoriasis, where we believe dual inhibition of both TYK2 and JAK1 has the potential to offer superior efficacy compared to small molecules currently available and in development inhibiting each of the targets individually.

"We have completed most of the preparatory work for the clinical trial and have built a robust data package to support our ongoing partnering activities for this asset. Subject to regulatory approval by MHRA, we look forward to advancing SDC-1801 into clinical development."

Investor Presentation:

A presentation to the investment community by Chief Executive Tim Mitchell and Chief Scientific Officer John Reader will take place on 4 August 2022 at 10.00am via the Investor Meet Company platform.

Existing and potential investors wishing to participate in the presentation can register here.

Questions can be submitted before the event via the Investor Meet Company dashboard or at any time via the live presentation via the "Ask a Question" function. Responses from the Q&A session will be published at the earliest opportunity on the IMC platform.

A copy of the presentation will be made available on the Company’s website following the presentation.