Annual Report 2023/24

Strategic report 02 Highlights

1. Executive Chairman's report
2. Progressing our strategy

1. Key performance indicators (KPIs)

1. Risk management and principal risks

Governance

08 Directors

1. Group strategic report

1. Report of the directors
2. Corporate governance report

1. Remuneration Committee report

Financial statements

19 Report of the independent auditor

1. Consolidated statement of comprehensive income
2. Consolidated balance sheet
3. Company balance sheet
4. Consolidated statement of changes in equity
5. Company statement of changes in equity
6. Consolidated cash flow statement

1. Company cash flow statement
2. Notes to the consolidated financial statements

HIGHLIGHTS

Operational highlights

SDC-1801 (autoimmune disease)

• After the period end, Sareum announced the successful completion of its Phase 1 clinical trial for SDC-1801, including both single ascending dose ("SAD") and multiple ascending dose ("MAD") stages.
• Positive topline data revealed that blood plasma levels of
  SDC-1801 significantly exceeded the predicted therapeutic exposure, with a half-life of 17-20 hours, suggesting once-daily dosing will be possible.
• No deaths or serious adverse events due to SDC-1801 were reported and the frequency of adverse events (all mild or moderate) were similar in the active and placebo groups.
• Post-period,the Company secured funding of £3.4 million through share subscriptions and received a A$1.9 million (c. £1 million) Australian R&D tax credit. This funding will enable further development of SDC-1801, including required longer term toxicology studies, to prepare
  the asset for Phase 2 clinical trials and undertake further translation and preclinical development on its SDC-1802 cancer immunotherapy programme.
• IP position has been strengthened with patent allowances in China for certain crystalline forms of SDC-1801 and
  in the US for the chemical structure, for the use in treating inflammatory diseases, and for certain methods of chemical synthesis.

2024"has been an important year for Sareum. We have reported positive topline data from our completed Phase 1 trial of SDC-1801, which demonstrated a favourable safety profile and achieved blood plasma levels significantly exceeding the predicted therapeutic exposure. These results, along with our strengthened financial position and IP portfolio, position us well to advance SDC-1801 towards Phase 2 clinical trials and accelerate the preclinical development of SDC-1802. The Clinical Study Report from the Phase 1 trial is expected to be available later in 2024. We look forward to building on this momentum in the coming year.

STRATEGIC REPORT

SDC-1802 (cancer immunotherapy)

• SDC-1802is a TYK2/JAK1 inhibitor being developed for cancer immunotherapy.
• Funds from the recent share subscriptions will accelerate the translational studies needed to support development of SDC-1802, defining the optimal cancer application before completing toxicology and manufacturing studies

SRA737 (cancer)

• During the period, the CRT Pioneer Fund LP ("CPF"), Sareum's major partner for SRA737, secured a new out licence with a private US biotechnology company.
• Sareum continues to believe that, based on preclinical and early clinical data, SRA737 holds strong promise for the treatment of cancer, particularly in combination settings and we are hopeful of clinical trials recommencing during the current period.

Financial highlights

• Cash at 30 June 2024 of £1.5 million (£1.0 million as of 30 June 2023).
• Loss on ordinary activities after taxation for the year ended 30 June 2024 of £3.4 million (£3.2 million loss for the year ended 30 June 2023), which reflects the increased
  R&D investment required for the conduct of the clinical trial and higher level of activity.
• R&D tax credits of £0.8 million received in the year.
• Funding facility provided by RiverFort Global Opportunities PCC Ltd ("Riverfort") was fully settled in April 2024. The Company raised net funds of £4.4 million via share issues during the period.
• Post period end, the Company completed fundraises totalling £3.4 million (before expenses), from certain high net worth individuals, corporates and institutions, via subscriptions for a total of 16,264,444 new ordinary shares of 1.25 pence each in the capital of the Company ("Ordinary Shares") at an aggregate price of 20.7 pence per new Ordinary Share. An Australian R&D tax credit of AS1.9 million (c£1.0 million) was also received in October 2024.

Stephen Parker DPhil

Executive Chairman

COMPANY OVERVIEW

Sareum is a clinical-stage small molecule drug development company which is focused on advancing inhibitors of the JAK kinase family into clinical development for autoimmune disease and cancer. It is led by a highly experienced team with expertise in kinase inhibition and decades of experience in R&D and public company management.

Sareum's pipeline is focused on TYK2/JAK1 inhibitors, which are involved in signalling pathways that are deregulated in multiple autoimmune diseases. Inhibition of TYK2 and JAK1 has the potential to yield a superior efficacy compared with agents that block just one of these two kinases and with

a superior safety profile than "first generation" JAK family inhibitors that also modulate JAK2 and JAK3.

Sareum also has an economic interest in SRA737, a clinical-stage Chk1 inhibitor which it originally developed in collaboration with several Cancer Research UK-related organisations. SRA737 has shown promising safety and efficacy in two Phase 1/2 clinical trials.

Our approach is to discover and develop programmes to late preclinical or early clinical stages before licensing or partnering. We maintain a lean cost base with a small, highly specialised team and use trusted third-party providers to maximise return on investment.

Sareum has now completed a Phase 1 clinical trial designed to investigate the safety, tolerability, pharmacokinetics and pharmacodynamics of an oral formulation of SDC-1801 in healthy subjects, conducted at a clinical unit in Melbourne, Australia. Analysis of the data set generated in the trial has revealed that SDC-1801 is safe and well-tolerated, showing no severe adverse events ("SAEs") attributed to the drug and mild to moderate adverse events ("AEs"), none of which gave the safety committee overseeing the trial any concerns. Particularly pleasing was the fact that SDC-1801 showed none of the dose-limiting side effects which were seen in brepocitinib, the competing drug from Pfizer/Roivant.

Although SDC-1801 is the Group's primary focus, translational studies are also continuing on SDC-1802, an immunomodulating molecule that has demonstrated good efficacy in preclinical models of cancer.

During the period, the CRT Pioneer Fund LP ("CPF"), Sareum's major partner for SRA737, secured a new out-licence with

a private US biotechnology company. Sareum continues to believe that, based on preclinical and early clinical data, SRA737 holds strong promise for the treatment of cancer, particularly in combination settings and we are hopeful of clinical trials recommencing during the current period.

FINANCIAL REVIEW

The loss on ordinary activities after taxation for the year ended 30 June 2024 was £3.4m (2023: loss of £3.2m), which reflects the increased R&D investment required for late preclinical development and the commencement of the clinical trial. Sareum ended the year to 30 June 2024 with cash at bank of £1.4m (30 June 2023: £1.0m). The Group received R&D tax credits of £0.8m in the year.

During the year Sareum made use of a funding facility provided by RiverFort Global Opportunities PCC Ltd ("Riverfort") which was fully settled in April 2024. The Company raised net funds of £4.4m via share issues. In October 2024 the Company raised a further £3.4m via share issues and received an Australian A$1.9 million R&D tax credit.

These funds will enable the Company to conduct further development of SDC-1801, including longer-term toxicology studies, to prepare the asset for Phase 2 clinical trials thereby enhancing its potential value, and also undertake further translational and preclinical development on its SDC-1802 cancer immunotherapy programme, thereby enhancing their potential value.

• Minimise ongoing development risk
• Move up the value chain
• Potential for higher deal values

2024 updates

In July 2024 SDC-1801 completed a Phase 1 clinical trial in Australia. This demonstrated a favourable safety profile and achieved blood plasma levels significantly exceeding the predicted therapeutic exposure, with a long half-life of up to 20 hours. No serious adverse events attributable to SDC-1801 were observed.

2025 objectives

We have planned toxicology studies designed to further validate the safety and tolerability of SDC-1801 over an extended period, providing essential data for regulatory submissions to conduct future clinical studies. The Company anticipates that these studies will substantially enhance the compound's attractiveness to potential out-licensing partners, should it choose to pursue this strategic option for Phase 2 development.

In parallel, funds from recent share subscriptions will enable the acceleration of translational studies needed to support the development of SDC-1802, defining the optimal cancer application before completing toxicology and manufacturing studies.

• Spread financial cost and risk
• Access specialist development and commercialisation expertise

2024 updates

During the period, the CRT Pioneer Fund LP ("CPF"), Sareum's co-development partner for SRA737, secured a new out- licence with a private US biotechnology company, which triggered a signature payment of US$500,000, of which $137,000 was paid to Sareum.

2025 objectives

There is a further milestone potentially due in December 2024, with an additional payment due to the collaborators.

We continue to believe that, based on preclinical and early clinical data, SRA737 holds strong promise for the treatment of cancer, particularly in combination settings and are confident in the potential of this molecule.

R&D increased in 2024 due to the increased clinical trial activity.

Increased loss reflects the investment in clinical R&D in 2024.

Cash is required to advance Sareum's pipeline and for working capital purposes.

• Generate short and potential long-term revenues through upfront and milestone payments and royalties
• Validate research and define value of assets
• Progress drug candidates through clinical development and commercialisation

2024 updates

Through our ongoing business development activities, potential partners continue to be kept informed of our progress with a view to securing commercial licences for our TYK2/JAK1 programmes that balance cost and risk with maximising shareholder value.

2025 objectives

With the completion of the clinical trial, we believe we will have a comprehensive clinical data package that should be attractive to potential licence partners.

For SRA737, the Company may receive its 27.5% share of an additional fee of up to US$1.0 million cash and 500,000 shares in the Licensee Company, subject to certain commercial and financing objectives being achieved.

• Increase potential success rate
• Mitigate development risk

2024 updates

The management team is convinced of the potential benefits that dual inhibition of both TYK2 and JAK1 can offer to patients with autoimmune disease in terms of superior efficacy in comparison to other small molecule approaches. With this goal in mind, the Group has been primarily focused on the clinical development of its lead TYK2/JAK1 inhibitor, SDC- 1801.

Although SDC-1801 is the Group's primary focus, translational studies are also continuing on SDC-1802, an immunomodulating molecule that has demonstrated good efficacy in preclinical models of cancer. With the signing of the out-licence agreement during the period, SRA737 has moved forward and the Company is confident of its potential.

2025 objectives

Sareum intends to position SDC-1801 as a best-in-class TYK2/JAK1 inhibitor for autoimmune diseases, with an initial focus on psoriasis, a condition affecting over 60 million adults worldwide, with a market opportunity exceeding US$30 billion. We will continue to work on the translational studies for SDC-1802 needed to define the optimal cancer applications and, if the results are positive, advance into toxicology and manufacturing studies.

Gold bars indicate work done by Sareum, Green represents work done by former licence partner Sierra Oncology

Principal risks and uncertainties

The Board has primary responsibility for ensuring the Group's risks are properly understood, quantified, and appropriately managed, though it looks to the Audit and Risk Committee to provide recommendations on risk management processes and controls. The Audit and Risk Committee and the Board regularly review the Group's risk register. The actions proposed and taken by management to mitigate risk and to reduce the likelihood and impact of the risks faced by the business have been reviewed and are deemed satisfactory.

The Audit and Risk Committee is chaired by Non-executive Director Clive Birch, who joined the Board in November 2018. Clive is a retired partner of PricewaterhouseCoopers where his role was that of an auditor and reporting accountant with an industry specialism in early- stage technology and healthcare companies.

The principal risks and uncertainties of the business and how they are managed are set out in the table below.

Risk management framework

BOARD

Responsible for risk management

Audit and Risk Committee

Link to strategy

1, 2, 3, 4

Research and development

There are a number of risks in developing drug candidates due to a long and complex development process. Any programme must undergo extensive research to get to preclinical or clinical stage. This process takes several years and is very costly. R&D programmes can fail at any point. We undertake extensive early research and create a dossier of information that enables us and our advisers to evaluate the potential of a candidate before we seek to progress to preclinical or clinical phases. We also seek collaboration partners whose own due diligence reaffirms our assessment of a candidate's potential.

>

The successful completion of the clinical trial for SDC-1801 has further mitigated this risk.

1, 2, 3, 4

Collaboration

Working with third parties carries a risk of loss of control on progress and can lead to research delays. This can increase Sareum's own financial commitment as a result of continued spend on fixed costs during a delay and potential additional financial contributions required in order to progress a programme. We collaborate closely with our partners to anticipate and plan around any likely delays. Collaboration contracts clearly outline responsibilities and key milestones as well as cost, licensing, and revenue sharing.

-

We have not seen any particular issues affecting our business partners.

1, 2

Competition

There always remains the possibility that a similar drug is being developed by a competitor that demonstrates greater efficacy or a better safety profile. Alternatively, a similar drug in development may conclude a licensing deal or reach a later stage of development before we are able to, thus reducing the likelihood of Sareum securing a licensing agreement. The management and advisory boards gather as much information as possible on competitive products and programmes. Progress and

key milestones are monitored to understand how these may affect our own programmes. Sareum also pursues more than one development programme in order to mitigate the overall risk to the Group.

-

The increased preclinical and clinical activity in the TYK2 and TYK2/ JAK1 space increases the competition in this area and hence also increases our risk. However, we believe the recent preclinical trial data from SDC- 1801 positively differentiates it from its competitors and therefore mitigates this risk.

1, 3, 4

Biography

Dr Stephen Parker, aged 66, has a career in the healthcare and pharma sector that spans over 35 years, including 10 years in the City in advisory roles. He has sector corporate finance experience having been an investment banker focusing on pharma and biotechnology with Barings, Warburg and Apax Partners and has previously held roles as a partner at Celtic Pharma and chief financial officer of Oxford GlycoSciences.

Committee responsibilities

Audit and Risk, Remuneration,

Nominations

Other appointments

Stephen is chairman of BioDexa Pharmaceuticals plc and Drishti Discoveries Limited, and a director of sp2 Consulting Limited and sp2 Asset Management Limited.

Biography

Dr Tim Mitchell, aged 64, has over 35 years' experience in the industry with key management and business expertise gained from his positions at Cambridge Discovery Chemistry Ltd and his roles at Millennium Pharmaceuticals Research and Development Ltd as a member

of the management team and in forming the integrated Structure- Based Discovery department. As director of the Millennium Structure- Based Discovery department, Tim was responsible for global provision of protein structure and high throughput chemical synthesis for Millennium as well as for local computational chemistry, informatics, and automation capabilities. Prior to that, he was director of computational chemistry at Cambridge Discovery Chemistry Ltd and a team leader in the Computational and Structural Sciences department at SmithKline Beecham Pharmaceuticals. Tim has a PhD in computational chemistry and a BSc in chemistry.

Committee responsibilities

None

Other appointments

None

Biography

Dr John Reader, aged 57, has over 25 years' experience within the industry and was formerly associate director, chemical technologies at Millennium Pharmaceuticals Research and Development Ltd, prior to which he worked with Pharmacopeia Inc. and Cambridge Discovery Chemistry Ltd in the provision of high throughput chemistry services to external and internal clients. John has extensive experience of leading large research teams and in the invention and application of new technologies to the drug discovery process, with an excellent track record of delivering successful projects to clients and has authored or co-authored many patents and publications. The majority of patents granted to John cover composition

of matter discovered in the multiple projects in which he has worked, with further patents covering technological innovations in the field. John is a member of the EPSRC Peer Review College and has a PhD in chemistry and a BSc in applied chemistry.

Committee responsibilities

None

Other appointments

None