8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 20, 2018

SIERRA ONCOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-37490	20-0138994
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

c/o 2150 – 885 West Georgia Street Vancouver, British Columbia, Canada	V6C 3E8
(Address of principal executive offices)	(Zip Code)

(604) 558-6536

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Item 1.01. Entry into a Material Definitive Agreement.

Purchase Agreement

On August 20, 2018, Sierra Oncology, Inc., a Delaware corporation (the “Company”), entered into an asset purchase agreement (the “Purchase Agreement”) and completed the acquisition with YM Biosciences Australia Pty Ltd (“Seller”) and Gilead Sciences, Inc. (“GSI”). Pursuant to the Purchase Agreement, the Company acquired all rights to the pharmaceutical product momelotinib, an investigational inhibitor of Janus kinase, together with all related intellectual property rights and certain other related assets (the “Purchased Assets”) from Seller, in exchange for the payment to the Seller of cash consideration of $3.0 million, the assumption by the Company of certain liabilities (the “Assumed Liabilities”), and the undertaking by the Company to pay certain milestone and royalty payments, in each case, pursuant to the terms and conditions of the Purchase Agreement. In connection therewith, the Company and the Seller, or the applicable affiliates thereof, have entered into an Assignment and Assumption Agreement substantially in the form attached as an exhibit to the Purchase Agreement, providing for the assumption by the Company of any and all clinical trial agreements as identified in the transition plan and more particularly described in the Purchase Agreement, and the Company shall assume responsibility for conducting and completing the five ongoing clinical trials as soon as reasonably practicable after the closing of the asset purchase (collectively, the “Transaction”).

Summary of the terms of the Purchase Agreement:

Consideration; Contingent Payments. At the closing of the Transaction, the Company will pay to Seller $3.0 million in cash. In addition, the Company has agreed to pay to Seller aggregate milestone payments of up to $195.0 million upon the achievement of certain development, regulatory and commercial milestones, as well as mid-teen to high twenty percent tiered royalties based upon net sales.

Indemnification and Right to Set-off. The Purchase Agreement provides that, following the closing, the Seller will indemnify the Company for breaches of the Seller’s representations and warranties and covenants and agreements as well as certain other specified matters, subject to certain limitations set forth therein, including, among other things, limitations on the amounts for which Seller may be liable. The Purchase Agreement further provides that, subject to certain limitations, the Company will be entitled to offset its indemnifiable losses against future contingent payments payable to the Seller under the Purchase Agreement.

The Purchase Agreement further provides that, following the closing, the Company will indemnify the Seller for breaches of the Company’s representations and warranties and covenants and agreements as well as certain other specified matters, subject to certain limitations set forth therein.

Representations, Warranties and Covenants. The Purchase Agreement contains customary representations, warranties and covenants of the Seller and the Company.

The foregoing summary of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement. The Company expects to file a copy of the Purchase Agreement as an exhibit to its Quarterly Report on Form 10-Q for its quarter ending September 30, 2018.

A copy of the press release announcing the execution of the Purchase Agreement is filed as Exhibit 99.1 to this Current Report on Form 8-K.

SVB Loan and Security Agreement

In connection with the Transaction, the Company has entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) dated as of August 21, 2018, pursuant to which the Company may obtain a loan of aggregate principal amount of up to $15.0 million, which becomes available in three tranches, each of an aggregate principal amount of up to $5.0 million, upon the terms and conditions set forth in the Loan and Security Agreement (the “Loan”). On August 21, 2018, contemporaneously with executing the Loan and Security Agreement, the Company drew down the first $5.0 million tranche to fund the Transaction. The second and third $5.0 million tranches may be drawn only upon the achievement of certain development milestones related to momelotinib.

As partial consideration for the Loan, the Company granted to SVB a warrant (the “Warrant”) to purchase up to the number of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), equal to (i) $137,500 divided by the Warrant Price (as defined below), plus (ii) additional shares (x) upon each draw of any Tranche B Growth Capital Advance (as defined in the Loan and Security Agreement), equal to the aggregate principal amount of each Tranche B Growth Capital Advance multiplied by 2.75% and (y) upon each draw of any Tranche C Growth Capital Advance (as defined in the Loan and Security Agreement), equal to the aggregate principal amount of each Tranche C Growth Capital Advance multiplied by 2.75%, in each case divided by the Warrant Price; and such Warrant shall have an exercise price equal to lesser of (1) the average closing price of Company’s Common Stock for the 10 trading days ending on the day before the issue date of the Warrant or (2) the ending price the day before the issue date of the Warrant (subject to adjustment as set forth in the Warrant) (the “Warrant Price”). The Warrant is exercisable for a period of 10 years after issuance.

The Loan matures on August 1, 2022, unless earlier accelerated upon an event of default. Borrowings under the Loan bear interest at a floating per annum rate equal to the greater of (i) one percentage point (1.0%) above the Prime Rate, or (ii) 6.0%, with interest only due and payable monthly, until March 1, 2020 (unless extended under the conditions set forth in the Loan and Security Agreement), at which time interest and principal will be due and payable monthly in equal monthly payments; are subject to a final payment fee equal to 6.75% of the aggregate principal amount of the borrowings (the “Final Payment”); and are secured by substantially all of the Company’s personal property (except for the intellectual property of the Company, and except for more than 65% of the Company’s issued and outstanding equity interests in any foreign subsidiaries which entitles the holder to vote, as set forth in the Loan and Security Agreement). After repayment, no Growth Capital Advance may be reborrowed.

In the event the Company elects to prepay the term loans prior to August 1, 2022, the Company is required to pay a fee in the amount of (i) 3.0% of the outstanding principal balance if such prepayment occurs prior to August 21, 2019, (ii) 2.0% of the outstanding principal balance if such prepayment occurs on or after August 21, 2019, but prior to August 21, 2020, or (iii) 1.0% of the outstanding principal balance if such prepayment occurs on August 21, 2020 or at any time thereafter prior to the August 1, 2022.

The Loan and Security Agreement contains customary covenants that include, among others, covenants that limit the Company’s and its subsidiaries’ ability to dispose of assets, enter into mergers or acquisitions, incur indebtedness, incur liens, pay dividends or make distributions on the Company’s capital stock, make investments or loans, and enter into certain affiliate transactions, in each case subject to customary exceptions for a credit facility of this size and type.

The Loan and Security Agreement contains customary events of default that include, among others, non-payment defaults, covenant defaults, a default in the event a material adverse change occurs, defaults in the event the Company’s assets are attached or the Company is enjoined from doing business, bankruptcy and insolvency defaults, cross-defaults to certain other material indebtedness, material judgment defaults, and inaccuracy of representations and warranties. The occurrence of an event of default could result in an increase to the applicable interest rate of 5.0%, acceleration of and present occurrence of the maturity date, and the consequent obligation for the Company to repay in full in cash all amounts outstanding under the Loan and Security Agreement, and a right by the Lender to exercise all remedies available to it under the Loan and Security Agreement and related agreements, including the right to dispose of the collateral as permitted under applicable law.

The foregoing summary of the Loan and Security Agreement does not purport to be complete and is qualified in its entirety by reference to the Loan and Security Agreement. The Company expects to file a copy of the Loan and Security Agreement as an exhibit to its Quarterly Report on Form 10-Q for its quarter ending September 30, 2018.

A copy of the press release announcing the execution of the Loan and Security Agreement is filed as Exhibit 99.2 to this Current Report on Form 8-K.

Item 2.01. Completion of Acquisition or Disposition of Assets.

The information set forth above under Item 1.01 is hereby incorporated by reference in its entirety into this Item 2.01.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01, “Entry into a Material Definitive Agreement—SVB Loan and Security Agreement” is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit Number	Description
99.1	Press release (Purchase Agreement) dated August 22, 2018.
99.2	Press release (Loan and Security Agreement) dated August 22, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SIERRA ONCOLOGY, INC.
Date: August 22, 2018	By:	/s/ Nick Glover
		Nick Glover
		President and Chief Executive Officer

EX-99.1

Exhibit 99.1

Sierra Oncology Acquires Momelotinib, an Investigational Janus Kinase (JAK) 1/2 and Activin Receptor Type 1 (ACVR1) Inhibitor for Myelofibrosis, from Gilead Sciences

- More than 1,200 patients treated to date with momelotinib, including in two Phase 3 trials; ongoing therapy for more than seven years in some patients -

- Demonstrated meaningful anemia-related benefits -

- Substantive spleen and symptom control in JAK inhibitor naïve myelofibrosis patients, and in patients previously treated with ruxolitinib -

- Momelotinib inhibits both JAK 1/2 as well as ACVR1, a TGFß receptor that regulates iron metabolism -

- Members of Sierra’s management involved in advancing momelotinib from discovery to Phase 3 -

VANCOUVER, August 22, 2018 - Sierra Oncology, Inc. (Nasdaq: SRRA), a clinical stage drug development company focused on advancing targeted therapeutics for the treatment of patients with significant unmet needs in hematology and oncology, today announced it has acquired the drug candidate momelotinib from Gilead Sciences. Momelotinib has been investigated in two completed Phase 3 trials for the treatment of myelofibrosis and has demonstrated a potentially differentiated therapeutic profile encompassing anemia-related benefits, as well as achieving substantive spleen and constitutional symptom control.

“The majority of myelofibrosis patients have anemia at diagnosis or develop it during treatment with other therapies, including ruxolitinib. Anemia is the most significant negative prognostic indicator in myelofibrosis patients and, as a result, one of the most important disease consequences to address,” said Dr. Srdan Verstovsek, Medical Oncologist and Professor in the Department of Leukemia at The University of Texas MD Anderson Cancer Center, Houston, Texas. “The therapeutic focus in myelofibrosis has traditionally been on treating the enlarged spleen and constitutional symptoms common to the disease. However, optimal drug therapy would also address disease-related cytopenias, including anemia and transfusion dependency, while also improving splenomegaly and symptoms. The Phase 3 clinical data for momelotinib demonstrate clinical benefits in all of these categories and I believe the drug candidate warrants further development. Given its anemia benefit, momelotinib could potentially become an important option for the treatment of myelofibrosis.”

“Opportunistically adding this compelling Phase 3 asset to our existing pipeline of next generation oncology drug candidates, SRA737 and SRA141, helps establish Sierra as a diversified late-stage drug development company with a commercial orientation,” said Dr. Nick Glover, President and CEO of Sierra Oncology. “The company is uniquely positioned to advance momelotinib towards potential registration with several members of the Sierra senior management team having played key roles in the development of momelotinib from its discovery through to Phase 3 clinical trials. The body of clinical data generated from more than 1,200 patients dosed to date will guide and support our momelotinib development strategy. We believe an additional clinical study likely will be required to consolidate these clinical data, and over the coming months we plan to engage with key opinion leaders and regulators to further define an expeditious regulatory path for momelotinib.”

“Unlike other JAK inhibitors, momelotinib addresses myelofibrosis-related anemia. The Phase 2 and Phase 3 data to date demonstrate that momelotinib consistently improves the anemia that frequently occurs in advanced myelofibrosis, postulated via ACVR1 inhibition. ACVR1 is a member of the TGFß superfamily of receptors that regulate the iron metabolism pathway. ACVR1 activates the transcription of hepcidin, which leads to decreased erythropoiesis. Demonstrable splenic responses and constitutional symptom control have also been achieved with momelotinib, suggesting that the compound is able to address a spectrum of unmet medical needs in myelofibrosis,” noted Dr. Barbara Klencke, Chief Development Officer for Sierra Oncology. “Momelotinib also has a well-defined, predictable safety profile, with more than 180 patients still remaining on active long-term therapy, some benefitting from treatment for more than seven years, reinforcing its potential durable efficacy and favorable long-term tolerability.”

Deal terms

Sierra will pay Gilead a $3 million upfront fee for momelotinib and potential aggregate milestone payments of up to $195 million, which are largely associated with commercial sales of the drug. Sierra will also pay Gilead royalties on any sales of momelotinib, which will be tiered based on commercial success and range from mid-teens to high-twenties. Sierra will assume all currently ongoing clinical studies with momelotinib following a transition period.

Fenwick & West LLP served as legal counsel to Sierra in connection with the transaction. Mizuho Securities USA LLC served as exclusive financial advisor to Gilead. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel to Gilead.

Analyst & Investor Call Thursday, August 23^st at 4:00 p.m. Eastern Time (1:00 p.m. Pacific Time)

Sierra will host an Analyst and Investor conference call on Thursday, August 23^st at 4:00 p.m. ET where the company will introduce momelotinib and respond to questions. Members of the professional investment community may participate by phone by calling (866) 548-4713 (Toll-free in North America) or (323) 794-2093 (International Dial-in) and enter the Conference ID number: 6356543. The call will be webcast live and will be accessible through the company’s website at www.sierraoncology.com. An archived replay of the webcast will also be available.

About momelotinib

Momelotinib is a potent, selective and orally-bioavailable JAK1, JAK2 & ACVR1 inhibitor with a differentiated therapeutic profile in myelofibrosis encompassing a range of meaningful anemia benefits, including eliminating or reducing the need for frequent blood transfusions, as well as achieving substantive spleen and constitutional symptom control. More than 1,200 subjects have received momelotinib since clinical studies began in 2009. Momelotinib is covered by patents anticipated to provide exclusivity to 2035 in the U.S. and 2033 in the EU.

Momelotinib was discovered and initially developed at Cytopia Ltd., an Australian biotechnology company whose CSO, Dr. Andrew Wilks, discovered the JAK1 and JAK2 kinases while at the Ludwig Institute for Cancer Research. Cytopia was acquired in 2011 by YM BioSciences Inc. (YM), a drug development company. Dr. Nick Glover, President & CEO of Sierra Oncology, previously led YM where he and his team advanced momelotinib through Phase 1/2 studies that first identified momelotinib’s unique anemia benefit. YM was acquired by Gilead in 2013. Current members of Sierra’s management team have prior experience developing momelotinib while at Cytopia, YM and Gilead.

About Sierra Oncology

Sierra Oncology is a clinical stage drug development company advancing targeted therapeutics for the treatment of patients with unmet medical needs in hematology and oncology. Our lead drug candidate, momelotinib, is a potent, selective and orally-bioavailable JAK1, JAK2 & ACVR1 inhibitor with a differentiated therapeutic profile in myelofibrosis encompassing a range of meaningful anemia benefits, including eliminating or reducing the need for frequent blood transfusions, as well as achieving substantive spleen and constitutional symptom control. Momelotinib has been investigated in two completed Phase 3 trials for the treatment of myelofibrosis demonstrating robust clinical activity. More than 1,200 subjects have received momelotinib since clinical studies began in 2009.

Sierra is also advancing SRA737 and SRA141. SRA737 is a potent, highly selective, orally bioavailable small molecule inhibitor of Checkpoint kinase 1 (Chk1), a key regulator of cell cycle progression and the DNA Damage Response (DDR). SRA737 is currently being investigated in two Phase 1/2 clinical trials primarily focused on patients with ovarian cancer: SRA737-01, a monotherapy study, and SRA737-02, a drug combination study evaluating SRA737 potentiated by low dose gemcitabine. Sierra is also preparing for potential clinical studies of SRA737 in combination with a PARP inhibitor. SRA141 is a potent, selective, orally bioavailable small molecule inhibitor of Cell division cycle 7 kinase (Cdc7). Cdc7 is a key regulator of DNA replication and is involved in the DDR network, making it a compelling emerging target for the potential treatment of a broad range of tumor types.

For more information, please visit www.sierraoncology.com.

Cautionary Note on Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding Sierra Oncology’s business strategy, planned clinical development activities, and potential benefits of Sierra Oncology’s product candidates. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, including, among others, the risk that Sierra Oncology may be unable to successfully develop and commercialize product candidates, product candidates may not demonstrate safety and efficacy or otherwise produce positive results, Sierra Oncology may experience delays in the preclinical and anticipated clinical development of its product candidates, Sierra Oncology may be unable to acquire additional assets to build a pipeline of additional product candidates, Sierra Oncology’s third-party manufacturers may cause its supply of materials to become limited or interrupted or fail to be of satisfactory quantity or quality, Sierra Oncology’s cash resources may be insufficient to fund its current operating plans and it may be unable to raise additional capital when needed, Sierra Oncology may be unable to obtain and enforce intellectual property protection for its technologies and product candidates and the other factors described under the heading “Risk Factors” set forth in Sierra Oncology’s filings with the Securities and Exchange Commission from time to time. Sierra Oncology undertakes no obligation to update the forward-looking statements contained herein or to reflect events or circumstances occurring after the date hereof, other than as may be required by applicable law.

Contact:

James Smith

Vice President, Corporate Affairs

Sierra Oncology

604.558.6536

investors@sierraoncology.com

EX-99.2

Exhibit 99.2

Sierra Oncology Obtains Debt Facility from Silicon Valley Bank to Acquire and Advance Momelotinib

- Up to $15 million available in three $5 million tranches; additional $25 million potentially available -

VANCOUVER, August 22, 2018—Sierra Oncology, Inc. (Nasdaq: SRRA), a clinical stage drug development company focused on advancing targeted therapeutics for the treatment of patients with significant unmet needs in hematology and oncology, today announced that it has obtained a debt facility from Silicon Valley Bank to support the advancement of its drug development programs, including to acquire and advance its Phase 3 drug candidate, momelotinib, for the treatment of myelofibrosis.

“This credit facility provides us with the option to access minimally dilutive capital rapidly and incrementally as needed to advance momelotinib, while helping to ensure we remain well capitalized to prosecute our robust development program for SRA737 and commence the clinical program for SRA141,” said Dr. Nick Glover, President and CEO of Sierra Oncology. “With this facility, combined with our cash position of approximately $125 million as at June 30, 2018, we believe we have sufficient resources to deliver on key milestones across all three programs.”

Under the terms of the debt facility with Silicon Valley Bank, Sierra can borrow up to $15 million in three $5 million tranches, the first of which was drawn by the company on loan closing. The subsequent tranches may be drawn upon the achievement of certain business and clinical milestones associated with the advancement of momelotinib. An additional $25 million is potentially available in an uncommitted incremental facility subject to lender approval.

About Sierra Oncology

Sierra Oncology is a clinical stage drug development company advancing targeted therapeutics for the treatment of patients with unmet medical needs in hematology and oncology. Our lead drug candidate, momelotinib, is a potent, selective and orally-bioavailable JAK1, JAK2 & ACVR1 inhibitor with a differentiated therapeutic profile in myelofibrosis encompassing a range of meaningful anemia benefits, including eliminating or reducing the need for frequent blood transfusions, as well as achieving substantive spleen and constitutional symptom control. Momelotinib has been investigated in two completed Phase 3 trials for the treatment of myelofibrosis demonstrating robust clinical activity. More than 1,200 subjects have received momelotinib since clinical studies began in 2009.

Sierra is also advancing SRA737 and SRA141. SRA737 is a potent, highly selective, orally bioavailable small molecule inhibitor of Checkpoint kinase 1 (Chk1), a key regulator of cell cycle progression and the DNA Damage Response (DDR). SRA737 is currently being investigated in two Phase 1/2 clinical trials primarily focused on patients with ovarian cancer: SRA737-01, a monotherapy study, and SRA737-02, a drug combination study evaluating SRA737 potentiated by low dose gemcitabine. Sierra is also preparing for potential clinical studies of SRA737 in combination with a PARP inhibitor. SRA141 is a potent, selective, orally bioavailable small molecule inhibitor of Cell division cycle 7 kinase (Cdc7). Cdc7 is a key regulator of DNA replication and is involved in the DDR network, making it a compelling emerging target for the potential treatment of a broad range of tumor types.

For more information, please visit www.sierraoncology.com.

About Silicon Valley Bank

For 35 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.

Cautionary Note on Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding Sierra Oncology’s business strategy, use and adequacy of existing capital, ability to make future draws under the debt facility, and potential benefits of Sierra Oncology’s product candidates. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, including, among others, the risk that Sierra Oncology may be unable to successfully develop and commercialize product candidates, product candidates may not demonstrate safety and efficacy or otherwise produce positive results, Sierra Oncology may experience delays in the preclinical and anticipated clinical development of its product candidates, Sierra Oncology may be unable to acquire additional assets to build a pipeline of additional product candidates, Sierra Oncology’s third-party manufacturers may cause its supply of materials to become limited or interrupted or fail to be of satisfactory quantity or quality, Sierra Oncology’s cash resources may be insufficient to fund its current operating plans and it may be unable to raise additional capital when needed, Sierra Oncology may be unable to obtain and enforce intellectual property protection for its technologies and product candidates and the other factors described under the heading “Risk Factors” set forth in Sierra Oncology’s filings with the Securities and Exchange Commission from time to time. Sierra Oncology undertakes no obligation to update the forward-looking statements contained herein or to reflect events or circumstances occurring after the date hereof, other than as may be required by applicable law.

Contact:

James Smith

Vice President, Corporate Affairs

Sierra Oncology

604.558.6536

investors@sierraoncology.com