Sareum Holdings (LSE: SAR) stock is up over 1,000% in a year. Today the Sareum share price has risen about 15%. This morning Sareum announced that it had completed its COVID-19 research competed and the results were encouraging.
Before May 2020, Sareum’s stock price was pretty flat. After May, it has not stopped rising. The beginnings of Sareum shares momentum coincide with the company investigating (and report) its drug’s use in treating severe COVID-19.
Severe COVID-19 and janus kinase inhibitors
Tofacitinib is a small molecule drug manufactured by Pfizer. It inhibits janus kinase 1 (JAK1) and janus kinase 3 (JAK3). Tofacitinib is approved for use in the US for the treatment of rheumatoid arthritis and ulcerative colitis. Both of these conditions are associated with an exaggerated or inappropriate immune response. Its use in the treatment of severe COVID-19 jas also been investigated.
Severe COVID-19 is seen in hospitalised patients. An exaggerated immune response characterises it, and this leads to complications like acute respiratory distress syndrome (ARDS). These patients require intensive care and have high mortality rates. Dexamethasone, a cheap and widely available steroid, is used to treat severe COVID-19 and has shown considerable success. Tofacitinib has been shown to reduce the risk of death or respiratory failure over 28 days in patients hospitalised with COVID-19 compared to placebo.
Sareum’s SDC-1801, a tyrosine kinase 2/janus kinase (TYK2/JAK1) dual inhibitor, has today been reported to be superior to dexamethasone in reducing the levels of cytokines associated with ARDS in human lung cells infected with the SARS-CoV-2 virus that causes COVID-19. Does Sareum have a treatment for COVID-19?
The potential of this dual inhibitor as a treatment for COVID-19 is what kicked off the interest in Sareum stock. Today’s news proves that Sareum has severe COVID-19 therapy, and the share price rise was justified, right? Well, not quite.
This research proves that TYK2/JAK1 does temper the mechanism that can lead to ARDS in severe COVID-19 in vitro. It stills needs to be proven to work in actual patients. Now, the results from Pfizer’s drug lead me to believe that it will. But, phase 1 trials are due to begin in early 2022. Now, the UK government is fast-tracking COVID-19 treatments, so, if successful, Sareum could have an approved therapy for COVID-19 in 2022.
But even if TYK2/JAK1 works, it is going up against dexamethasone in treating severe COVID-19. Dexamethasone is cheap and readily available. Furthermore, its side-effect profile is well understood. This is not the case with TYK2/JAK1. Even if Sareum’s drug is better than dexamethasone, depending on the degree of superiority, it might not be approved or approved in limited cases because of cost-benefit considerations.
Furthermore, with vaccine rollouts continuing at a pace, the number of cases of severe COVID-19 are likely to have fallen considerably by next year. Vaccines are so far very successful at preventing hospitalisations for COVID-19. Also, consider that severe COVID-19, and ARDS, are acute conditions, requiring treatment for a relatively short period of time.
What’s next for the Sareum stock price?
It is my opinion that investors are overreacting to Sareum’s potential in COVID-19 treatment. My fear for this stock is that once the pandemic abates, investors might abandon Sareum. This would be a pity, as Sareum has potential in its pipeline and out-licensed drugs to treat other burdensome conditions. For example, its licensed treatment — SRA737, a selective checkpoint kinase 1 (Chk1) inhibitor — shows promise in the treatment of solid cancers. Sareum is due to receive a $2m milestone payment when Chk1 is administered to a patient in a clinical trial, and trials could start this year. Overall the license is thought to be worth $290m plus royalties.
TYK2/JAK1 also has applications in the treatment of autoimmune diseases and cancer. Work on this has been delayed due to pandemic disruption, but I also imagine because of the COVID-19 work. However, the COVID-19 applications of TYK2/JAK1 are, I think, limited.
DISCLAIMER: James J. McCombie does not own shares in Sareum Holdings. The Storied Investor has no beneficial interest in Sareum Holdings.
The Storied Investor 