Sierra Oncology (SRRA): Targeting Cancer via DNA Damage Response Network

Edward Kim  |

Regular readers will know that we have an affinity for the many biotech companies that once traded at lofty valuations but have since been orphaned because of clinical development failures and other operational obstacles. We research these companies in depth to find ones that we think are interesting, particularly at these depressed valuations. Once such company that has come to our attention is Sierra Oncology (NASDAQ: SRRA).

The company, then known as ProNAi Therapeutics, went public in July 2015, raising $158 million at a post-IPO valuation of over $500 million. The stock brushed up against a $1 billion market cap shortly thereafter, only to come back to earth dramatically in the ensuing nine months after disappointing clinical results with its lymphoma candidate - the only product candidate that the company had when it went public.

Today the stock is trading at a market cap of less than $65 million. The company has refocused and rebranded itself, and is currently working on the development of next generation therapies that target the DNA Damage Response (DDR) network. The DDR has been shown to be critical in maintaining the genomic integrity of cells, and its disruption is one of the known cancer markers. There is a proven pathway with the FDA for the approval of DDR-based therapies - notably in the battle against ovarian cancer with drugs such as AstraZeneca's (NYSE: AZN) Lymparza. These products belong to a category called PARP inhibitors, which block enzymes known as poly ADP ribose polymerase. PARP enzymes are involved in differentiation, proliferation and tumor transformation.

Source: Sierra Oncology Corporate Presentation, Q2 2017

The company is currently enrolling patients in two concurrent Phase 1 clinical trials in England at The Institute of Cancer Research and The Royal Marsden for its lead candidate, SRA737, for the treatment of advanced solid tumors. One trial will test SRA737 as a monotherapy, while the other will test the candidate in combination with chemotherapies. Sierra announced two weeks ago that it received clearance from UK regulators to amend the trials to include cohort expansions of prospectively selected patients with tumors identified to have genetic aberrations hypothesized to confer sensitivity to inhibition.

Between these two studies, Sierra will have the opportunity to evaluate preliminary efficacy across seven distinct cancer indications, and an initial update from these trials is anticipated in early 2018.

Sierra completed a $30 million follow-on equity offering in February 2017 and had $125 million on the balance sheet as of the end of March 2017. The company says that cash should last through the middle of 2019. The current $65 million market cap is a reflection of the market's wariness over the company's past disappointments in the clinic, but it seems overly punitive, even considering the early stage of the current trials. The stock is trading for half of its cash value, and you get the clinical trials thrown in for free. We'll be keeping close watch on Sierra Oncology.

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