Organization

3 Months Ended

Mar. 31, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization

1. Organization

Description of Business

Sierra Oncology, Inc. (together with its subsidiaries, collectively referred to as the “Company”), a Delaware corporation, is a late-stage biopharmaceutical company focused on the potential commercialization of momelotinib, an investigational agent for the treatment in myelofibrosis. Momelotinib is a selective and orally bioavailable JAK1 (Janus kinase 1), JAK2 (Janus kinase 2) and ACVR1 (Activin A receptor type 1) / activin receptor-like kinase-2 (ALK2) inhibitor with a differentiated mechanism of action. In January 2022, the Company announced positive topline results from its global Phase 3 clinical trial, called MOMENTUM, for patients with myelofibrosis who are symptomatic and anemic and previously treated with an approved JAK inhibitor. Momelotinib achieved a statistically significant benefit on symptoms, anemia and splenic size. The MOMENTUM data, combined with data from earlier clinical trials, will be the basis for a New Drug Application (NDA) that the Company plans to submit in the second quarter of 2022. Approximately 1,000 myelofibrosis patients have received momelotinib through clinical trials at different stages of clinical development, and several of these patients remain on treatment for more than 11 years.

In August 2021, the Company acquired an exclusive global license from AstraZeneca AB (AstraZeneca) for SRA515 (formerly AZD5153), a potent and selective bromodomain-containing protein 4 (BRD4) bromodomain and extraterminal (BET) inhibitor with a novel bivalent binding mode (See Note 8).

The Company’s portfolio also includes SRA737, a selective, orally bioavailable small molecule inhibitor of Checkpoint kinase 1 (Chk1), an emerging target for the treatment of cancer which has a key role in the DNA Damage Response (DDR).

The Company’s primary activities since inception have been conducting research and development activities, conducting preclinical and clinical testing, recruiting personnel, preparing for potential commercialization, performing business and financial planning, identifying and evaluating additional drug candidates for potential in-licensing or acquisition, and raising capital to support development activities.

 As of March 31, 2022, the Company had $274.0 million of cash and cash equivalents. The Company believes that its balance of cash and cash equivalents as of the date of the issuance of these consolidated financial statements is sufficient to fund its current operational plan for at least the next twelve months.

Proposed Merger with GlaxoSmithKline

On April 12, 2022, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with GlaxoSmithKline plc, a public limited company organized under the laws of England and Wales (GSK) and Orikum Acquisition Inc., a Delaware corporation and wholly owned subsidiary of GSK (Acquisition Sub). The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into the Company (the Merger), with the Company surviving the Merger as an indirect wholly owned subsidiary of GSK.

Treatment of Capital Stock - Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (other than shares (1) held by the Company as treasury stock; (2) owned by GSK, Acquisition Sub or any of their respective subsidiaries; or (3) held by stockholders who have neither voted in favor of the adoption of the Merger Agreement nor consented thereto in writing and properly and validly exercised their statutory rights of appraisal under Delaware law) will be cancelled and extinguished and automatically converted into the right to receive $55.00 in cash, without interest (Per Share Price).

Treatment of Equity Awards - At the effective time of the Merger, each of the Company’s outstanding and unexercised stock options will accelerate vesting in full and be cancelled and converted into a right to receive an amount in cash, without interest, equal to the product obtained by multiplying (1) the amount of the Per Share Price (less the exercise price per share attributable to such stock option) by (2) the total number of shares of the Company’s common stock issuable upon exercise in full of such stock option. To the extent any stock options have performance-based vesting pursuant to a performance period that is still outstanding after the effective time of the Merger, the performance requirement will be deemed to be satisfied to the maximum achievement of performance criteria. Any stock option with an exercise price per share equal to or greater than the Per Share Price will be cancelled without any cash payment being made in respect thereof.

Treatment of Warrants - In connection with the completion of the Merger, the Company’s outstanding warrants will be treated in accordance with their respective terms. At the effective time of the Merger, (1) any of the Company’s outstanding Series A warrants will be cancelled and represent only the right to receive an amount in cash, without interest, equal to the Black Scholes Value (as

defined in the Series A Warrants) and (2) any of the Company’s outstanding pre-funded warrants will be deemed exercised in full as a “cashless exercise” (as described in the Pre-Funded Warrants), and the holder thereof will be entitled to receive an amount in cash, without interest, equal to the product obtained by multiplying (1) the amount of the Per Share Price by (2) the number of shares of the Company’s common stock deemed to be issuable upon exercise in full of the pre-funded warrant as a “cashless exercise.”

Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including: (1) the approval of the Merger Agreement by holders of a majority of the outstanding shares of the Company’s common stock (Requisite Stockholder Approval); (2) the expiration or termination of the waiting period under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act); and (3) the absence of any order, law or legal restraint preventing or materially impairing the consummation of the Merger.

The Merger Agreement contains customary representations, warranties and covenants made by each of the Company, GSK and Acquisition Sub, including, among others, covenants by the Company regarding the conduct of its business prior to the closing of the Merger. Beginning on the date of the Merger Agreement, the Company is subject to customary “no-shop” restrictions pursuant to which the Company is required, among other things, (i) not to solicit, initiate, propose or induce the making or knowingly encourage any Acquisition Proposals (as defined in the Merger Agreement) and (ii) subject to certain exceptions, not to engage in discussions or negotiations regarding, or furnish to any third party any non-public information with respect to, any Acquisition Proposal. In addition, the Company has agreed that, subject to certain exceptions, the Company Board will not withdraw its recommendation that the Company’s stockholders vote to adopt and approve the Merger Agreement. The Company has also agreed that the Company will file with the SEC a proxy statement in preliminary form relating to the adoption of the Merger Agreement by the Company’s stockholders as promptly as reasonably practicable after the date of the Merger Agreement, and the Company will convene and hold a special meeting of the Company’s stockholders for the purpose of seeking the adoption of the Merger Agreement as promptly as reasonably practicable following the mailing of the definitive proxy statement to the Company’s stockholders.

Either the Company or GSK may terminate the Merger Agreement if, among certain other circumstances, (i) the Merger has not been consummated on or before October 10, 2022 or (ii) the Company’s stockholders fail to adopt the Merger Agreement at the special meeting. The Company may terminate the Merger Agreement in certain additional limited circumstances, including to allow the Company to enter into a definitive agreement for an alternative acquisition proposal that constitutes a Superior Proposal (as defined in the Merger Agreement). GSK may terminate the Merger Agreement in certain additional limited circumstances, including if the Company Board withdraws its recommendation that the Company’s stockholders vote to adopt and approve the Merger Agreement, if the Company enters into an agreement relating to an Acquisition Proposal or if the “no shop” provisions of the Merger Agreement are willfully and materially breached.

Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay GSK a termination fee of $70.0 million. Specifically, this termination fee is payable by the Company to GSK if the Merger Agreement is terminated by (1) GSK because (A) the Company Board withdraws its recommendation that the Company’s stockholders vote to adopt and approve the Merger Agreement, (B) the Company enters into an agreement relating to an Acquisition Proposal or (C) the “no shop” provisions of the Merger Agreement are willfully and materially breached; or (2) prior to receiving the Requisite Stockholder Approval, the Company in order to enter into a definitive agreement for an alternative acquisition proposal that constitutes a Superior Proposal. The termination fee will also be payable in certain circumstances if (1) the Merger Agreement is terminated under certain circumstances; (2) prior to such termination a proposal to acquire at least 50 percent of the Company’s stock or assets is made and not withdrawn; and (3) within one year of such termination, the Company subsequently enters into a definitive agreement providing for the acquisition of at least 50 percent of its stock or assets and such transaction is ultimately consummated.

For additional information regarding the Merger, please refer to the Merger Agreement, which was filed with the SEC on April 13, 2022, as an exhibit to a Current Report on Form 8-K.