| Sareum - Licensing deal imminent by James Faulkner of WatsHot.com On specialist small cap website Watshot.com, editor James Faulkner provides two hot new recommendations each month, regular updates on his share tips, investment ideas, rumours, book reviews and his daily thoughts and insights into the markets. James believes that Sareum is one of the most attractive cancer drug developers on the UK market right now. To find out his other favourite pick in the sector watch out for his weekend editorial tomorrow! James will be also be publishing TWO hot new tips next week on a pair of stocks he believes have significant growth potential. To access those tips and much much more... And here is why James thinks Sareum is an attractive stock... Sareum is one of the most attractive cancer drug developers on the UK market right now (to find out my other favourite pick in the sector watch out for my weekend editorial!). Biotech outfits like this can be a very exciting ride - but they're certainly not for the faint-hearted or risk averse! Since I first tipped Sareum at 1.4p last year, the shares have taken investors on one hell of a rollercoaster ride, having almost doubled before slipping back to less than half my tipping price. However, I retain high hopes for the stock, which is now firmly back in play after the company alerted the market that it was in the final stages of negotiating a licensing deal for one of its compounds last week. The first thing to note about Sareum is that it operates a 'virtual' research model, meaning it does not carry out any research itself; rather, it outsources its research to third party laboratories. This is important, as it enables the company to remain flexible and keep costs to an absolute minimum. Sareum's research is focused on 'targeted small molecule' therapies, whereby the aim is to disrupt specific biochemical processes involved in tumour growth through inhibiting a class of enzymes called kinases. Aberrant kinase activity is associated with many cancer types, as well as other diseases including certain types of auto-immune disease and diabetes. Sareum's approach is superior to conventional treatments such as radiotherapy or chemotherapy because - as the name suggests - it is more targeted and therefore minimises the impact on normal cells. In May 2010, Sareum launched its "SKIL" technology platform. SKIL (Sareum Kinase Inhibitor Library) includes a patent-protected molecular core and the intellectual know-how to fine-tune these molecules into inhibitors of a wide range of kinase enzymes. Sareum's research is focused on building its portfolio of data on these molecules in order to better attract potential licencees. Sareum has developed seven drug discovery programmes (five of which are active) that are now at various stages of pre-clinical development. The Checkpoint Kinase 1 (Chk1) Programme - its most advanced - has been developed in a mutual programme with leading research organisations the Institute of Cancer Research (ICR) and Cancer Research Technology Ltd (CRT). It is close to completion in preclinical scientific terms for outlicensing, with several Chk1 inhibitors having shown efficacy in 'in vivo' (i.e. within the living) models. Sareum expects it will soon be able to nominate a candidate compound for Chk1 and sign a licensing deal with an organisation who will take it through the final pre-clinical stage and into phase I trials. Other programmes currently under development include the Aurora Kinase programme, aimed at preventing mitosis (cell division) in tumour cells; the FLT4 Kinase programme (see below), aimed at preventing tumour spread (metastasis); and the FLT3 Kinase programme, aimed at treating Acute Myeloid leukaemia (AML) and inflammatory diseases such as multiple sclerosis and rheumatoid arthritis. There are also three other programmes on hold, but these are non-core to the investment case.
The shares originally sprung to life on 7th February 2011, when Sareum announced the results of a pre-clinical in-vivo study for its Aurora+FLT3 Kinase programme, which is targeting acute myeloid leukaemia (AML), the most common form of adult leukaemia. The results "showed that the leukaemia regressed to such an extent that no detectable cancer could be found in any of the cases treated (ten in total) with a Sareum compound". By comparison, leukaemia increased five to fifteen fold in the study examples treated without Sareum's compound. At six weeks following treatment, no detectable cancer could be found in two of the ten examples dosed with the Sareum compound. In the remaining eight treated examples, the average time taken for the leukaemia to increase 5-fold was six weeks, compared to two weeks in the untreated cases. Clearly these are very positive results which, crucially, "compare very favourably with those from similar pre-clinical studies published for Aurora kinase inhibitors currently undergoing clinical trials". Following the massive volumes of shares traded on the back of these results, the company was compelled to comment that it was NOT "in advanced stages of discussion with a potential licencing partner and there can be no certainty that the announcement of these results will lead to a licencing agreement being entered into". HOWEVER, it added that "the results of the study have, in the ordinary course of business, been sent to potential licencing partners" to "determine their interest" in the data. In March 2011, Sareum followed up with more excellent results, this time from Chk1, its lead compound. A colon cancer pre-clinical model study carried out by The ICR (Institute for Cancer Research) revealed that "the combination of a collaboration Chk1 inhibitor, dosed via the oral route, in combination with a chemotherapeutic, gemcitabine, demonstrates a greater than two-fold reduction in cancer growth rate compared to treatment with the same dose of gemcitabine without the Chk1 inhibitor". Furthermore, other pre-clinical in-vivo studies conducted for the programme have shown that the collaboration Chk1 inhibitor, dosed alone, can reduce cancer growth in models of AML (acute myeloid leukaemia) and neuroblastoma (a childhood cancer). Indeed, certain cancers, such as these, "are believed to be dependent on Chk1 for survival". A long period of relative silence from the firm was brought to an abrupt end last week, which saw the shares trade as high as 2.2p after the firm confirmed "that advanced stages of negotiations are taking place with a potential licencing partner which may or may not lead to a licencing agreement regarding one of the Company's research programmes". The most likely candidate is the Checkpoint Kinase 1 (Chk1) Programme - its most advanced - which has been developed in a mutual programme with leading research organisations the Institute of Cancer Research (ICR) and Cancer Research Technology Ltd (CRT). In recent years, up-front payments for development deals have ranged anywhere between $5 million and $230 million, while further 'milestone' payments have been in the range of $70 million to $660 million. This puts last week's terrific bounce into context somewhat. At 1.4p, the shares are now trading well off of last week's highs, and the stance is 'strong hold' pending the release of further details on this potentially transformative agreement.
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