CS1: First EPIMODE site active; focus on execution

While Q226 was characterised by trial preparations and supportive EAP data, the most significant development came post-period, with activation of the first site in the EPIMODE study. We expect investor focus to now be on the pace of patient recruitment and further site onboardings, particularly with the company maintaining its Q428 top-line guidance. A steady recruitment cadence should also strengthen partnering discussions, with management not ruling out a potential transaction during 2026. We retain our 50% probability of success (PoS) for CS1 for now.

CS014: PK readout the next de-risking step

With the FDA-aligned PK bridging study now complete, the upcoming top-line readout will be a key de-risking event for CS014. A supportive outcome would preserve the streamlined path directly into Phase IIb in PH-ILD by validating the intended PK bridge to VPA. While Phase IIb initiation has moved to Q327 from Q127 due to additional CMC requirements, we view the delay as operational rather than reflecting any emerging clinical concerns. We expect Phase IIb progression to underscore CS014’s potential as a meaningful second value driver alongside CS1.

Valuation: Adjusts to SEK7.0bn or SEK21.5/share

We update our near-term forecasts for higher R&D spend following Q226, while leaving our long-term assumptions unchanged. Reflecting the latest pro-forma net debt and model roll-forward, our valuation rises modestly to SEK7.0bn from SEK6.8bn, although the per share value declines to SEK21.5 from SEK21.7 due to dilution from the SEK60m raise. With R&D running ahead of expectations, we bring forward our assumed funding requirement to Q426 from Q127.

CS1: EPIMODE moves into clinical execution

We believe that the most important development for Cereno since our last update is the activation of the first clinical site in the global Phase IIb EPIMODE study, moving CS1 into crucial randomised, mid-stage clinical development. With the activated centre (in the US) now able to identify and screen potential participants, we expect patient randomisation and dosing to commence in September, alongside additional site activation, which we expect to accelerate with study clearance from the regulators in Europe and South America. The Phase IIb study plans to enrol c 126 patients across c 68 sites in 12 countries in North America, Europe and South America. We note that the Phase IIb programme has experienced a modest operational delay, with first-patient randomisation slipping beyond the initial June 2026 target. However, we do not see this as a cause for concern and believe that the pace of patient recruitment will ultimately be determined by the breadth and productivity of the full site network. The prior Q428 timeline for top-line readouts remains achievable therefore, in our opinion. With pulmonary arterial hypertension (PAH) being a rare disease, we understand that recruitment can be a challenge but note that with fewer than two patients required per site on average in the EPIMODE study, the enrolment burden does not appear onerous and we expect steady clinical progression.

A differentiated design

The EPIMODE design itself is notable, and remains differentiated from conventional mid-stage PAH studies (Exhibit 1). During the initial 36-week treatment period, patients will be randomised 1:1:1 to CS1 320mg once daily, CS1 640mg once daily or placebo, with 42 patients planned per arm. At week 36, participants will undergo a second randomisation for the 16-week extension: patients initially receiving CS1 may either continue treatment or switch to placebo, while placebo-treated patients transition to active treatment. We expect this two-stage design to provide more information than a conventional dose-finding study, allowing Cereno to assess dose response and efficacy while also examining the durability of any treatment effect following withdrawal or continued exposure. The 36-week primary assessment also provides a greater opportunity for structural or remodelling effects to emerge than the 24-week timeframe used in several other PAH trials. We see this as particularly relevant to establishing CS1's proposed disease-modifying profile.

The primary endpoint is change in pulmonary vascular resistance (PVR), measured by right-heart catheterisation after 36 weeks, supported by a broad range of secondary measures including right-heart function, functional capacity, risk scores, biomarkers, clinical worsening, patient-reported outcomes and pharmacokinetics. The choice of PVR also has relevant clinical precedent. Sotatercept's Phase II PULSAR study used change in PVR as its primary endpoint and demonstrated statistically significant reductions versus placebo before advancing into Phase III development. We therefore view EPIMODE as a robust dose-finding and proof-of-concept study, where consistency across the haemodynamic, functional and biomarker endpoints could be as important as the headline PVR result in shaping subsequent development and partnering discussions.

EAP adds confidence; EPIMODE the real test

In June 2026, Cereno presented further analyses from the expanded access programme (EAP) for CS1. The EAP enrolled 10 patients from the Phase IIa programme, of whom six completed 12 months of CS1 treatment. The programme met its primary objective of evaluating longer-term safety and tolerability, with no unexpected safety concerns or deaths and no discontinuations assessed as related to CS1. Among the six completers, five had stable or improved NYHA/WHO functional class, five had stable or improved NT-proBNP levels, three had an improved six-minute walk distance and three had a stable or improved REVEAL Risk Score 2.0. Three of five evaluable patients also had stable or reduced mean pulmonary arterial pressure.

While the completed EAP provides useful long-term safety context, we note that the small, open-label and uncontrolled design of the EAP means that conclusive and statistically significant efficacy conclusions cannot be drawn. The exploratory Fluidda imaging sub-study was also limited to three patients and produced no consistent findings. In our view, the key Phase IIb test will be whether the favourable tolerability profile and directional clinical signals observed in Phase IIa and the EAP can be replicated in a materially larger, randomised and placebo-controlled population. We therefore see EPIMODE as central to Cereno’s investment case and retain our 50% PoS for CS1 in PAH (peak sales potential of $2.8bn), pending further clinical progress.

The PAH landscape is evolving, but there is room for differentiation

The competitive landscape in PAH continues to evolve, with the strong uptake of Merck’s Winrevair (sotatercept) validating both the commercial opportunity and demand for therapies targeting the underlying disease biology. Winrevair generated global sales of $588m in Q226, up 75% y-o-y, taking H126 sales to c $1.1bn. Its US label has broadened following the ZENITH study and now covers adults with WHO Group 1 PAH to improve exercise capacity and WHO functional class and reduce the risk of clinical worsening events.

Despite this compelling profile, we note that sotatercept comes with several limitations. It is an injectable (administered subcutaneously every three weeks) and carries recognised safety considerations requiring haemoglobin and platelet monitoring, with risks including erythrocytosis, thrombocytopenia and serious bleeding, alongside adverse events such as epistaxis and telangiectasia. Access also remains uneven internationally despite regulatory approval. For example, Ireland’s National Centre for Pharmacoeconomics recently recommended that sotatercept should not be considered for reimbursement at the submitted economics, whereas France added Winrevair to its reimbursable medicines list only in June 2026.

We also note that Gossamer Bio’s seralutinib remains a potential new competitor despite the Phase III PROSERA study missing its prespecified statistical threshold on the primary endpoint (p=0.032, missing the prespecified 0.025 significance threshold). Following a Type B meeting with the FDA, Gossamer now plans to file a New Drug Application (NDA) in September 2026 using PROSERA as the controlled study alongside confirmatory evidence from TORREY and supportive analyses, with a potential FDA decision in Q327 if the application is accepted. More recently Gossamer secured an up to $250m structured private placement financing, including $150m of committed capital, to fund seralutinib through its potential regulatory process. We also note that in April 2026, GSK completed its $950m acquisition of 35Pharma, centred on activin-signalling candidate HS235, which has completed Phase I in PAH.

In our view, these developments raise the efficacy bar for CS1 but also validate the shift towards potentially disease-modifying treatments from traditional vasodilators. CS1's oral once-daily administration and differentiated HDAC-based mechanism could provide a meaningful positioning advantage if EPIMODE demonstrates durable effects across haemodynamic, functional and remodelling measures. Importantly, the EAP experience suggests CS1 can be administered alongside sotatercept and other baseline treatments, supporting potential add-on positioning alongside newer PAH therapies.

CS014: PK readout (September 2026) is the next catalyst

CS014 has also progressed materially since our Q126 update. CS014 is a proprietary, precision-deuterated HDAC inhibitor and new chemical entity, designed to target multiple disease-driving mechanisms including fibrosis, inflammation and vascular remodelling, with pulmonary hypertension associated with interstitial lung disease (PH-ILD) as its initial target indication. The FDA-aligned pharmacokinetic (PK) bridging study in healthy volunteers commenced in Q2, with all dosing and participant visits completed in July. Data management and analysis are now underway, with top-line results expected in September 2026. While this is not an efficacy readout, we view it as one of Cereno's more important near-term development events. The study compares steady-state exposure to CS014 with valproic acid (VPA), allowing Cereno to potentially leverage the extensive existing clinical knowledge around VPA. Subject to supportive PK findings and continued regulatory alignment, the strategy could allow CS014 to proceed directly into Phase IIb without an additional Phase IIa study or further non-clinical safety work. This has potentially meaningful implications for both time and capital efficiency.

There has, however, been a timing change. Cereno now expects Phase IIb initiation in Q327 versus its previous Q127 target. Management attributes this shift of around six months to additional chemistry, manufacturing and controls (CMC) activities required to ensure manufacturing and clinical-supply readiness rather than to a clinical or regulatory issue. We view the delay as manageable, particularly given that the intended direct-to-Phase-IIb development route remains intact, but successful PK bridging and an Investigational New Drug (IND) submission during H226 are now important milestones for maintaining confidence in the revised schedule.

The competitive backdrop in PH-ILD has also become somewhat more favourable. Gossamer paused enrolment in its Phase III SERANATA study of seralutinib in PH-ILD following the PROSERA results while it assesses the implications and engaged with regulators. While this does not remove seralutinib from PH-ILD development, it may reduce near-term competitive intensity for potentially disease-modifying approaches. With currently available PH-ILD therapy still largely centred on inhaled treprostinil, we continue to see a meaningful opportunity for a well-tolerated oral therapy with the potential to address both fibrosis and pulmonary vascular remodelling. We maintain our long-term assumptions for CS014, including c $2.4bn peak sales potential in PH-ILD and a 2033 launch. Our 15% PoS remains relatively conservative at this stage, leaving potential for meaningful upside as the programme progresses into Phase IIb.

CS585: Quietly building a third leg

Cereno’s third development asset, CS585, remains preclinical but continues to add useful pipeline breadth (Exhibit 2). CS585 is an oral, selective prostacyclin IP receptor agonist being developed for rare thrombotic diseases, with antiphospholipid syndrome (APS) selected as the initial indication. We understand that APS-focused disease-model work is underway, with Cereno targeting initiation of IND-enabling activities during H226. Preclinical studies have demonstrated antithrombotic activity without an observed increase in bleeding risk. We continue to exclude CS585 from our valuation pending greater clarity on the clinical development path, but successful progression towards first-in-human testing would add another source of pipeline optionality.

Partnering: Improving leverage

Cereno continues to report increasing pharmaceutical interest in its HDAC inhibitor portfolio, with management pursuing business-development opportunities across several geographies. The company has previously noted that it is open to global, regional or local licensing deals.

We believe the company’s strategic position is stronger today than at the beginning of 2026, given completion of the CS1 EAP, first site activation in EPIMODE and the approaching CS014 PK readout. According to the latest update, management continues to see potential for a partnering deal in 2026. That said, we remain cautious about assigning value to a partnering interest ahead of a transaction. Our assumptions continue to build in a later-stage, post Phase IIb licensing agreement for CS1 in 2029, with a total deal value of $2bn, including $150m upfront and a 15% royalty rate. Any earlier global, regional or local transaction would therefore warrant a revision of our forecasts. We therefore continue to consider access to capital as the primary operational sensitivity for Cereno, although Phase IIb execution and a successful CS014 PK bridge should strengthen Cereno's negotiating position with potential partners and alleviate the funding overhang.

Financials

R&D investment steps up as CS1 Phase IIb scales

The Q226 financials reflect the step-up in preparatory activity ahead of the Phase IIb EPIMODE study. This was driven primarily by external costs of SEK63.3m, versus SEK53.7m in Q126 and SEK15.1m in Q225, while personnel expenses increased to SEK7.9m. Capitalised development expenditure rose to SEK52.4m, from c SEK38.9m in Q126, consistent with increased investment in EPIMODE preparations and CS014 development.

Given the higher level of capitalisation, the reported operating loss remained relatively contained at SEK19.0m versus SEK21.9m in Q126. The net loss increased modestly to SEK30.5m from SEK28.6m, reflecting higher interest expense of SEK11.5m versus SEK6.7m in Q126. Free cash outflow nevertheless remained meaningful at c SEK31.5m, albeit improving from SEK58.7m in Q126. However, we caution against interpreting the SEK20.9m operating cash inflow as an improvement in underlying cash generation, as this was supported by a SEK47.1m increase in operating liabilities, while SEK52.4m was deployed into capitalised development activities.

Estimate revisions

We revise our FY26 and FY27 estimates to reflect the Q226 results and improved visibility on the expected clinical-development ramp. The principal change is higher R&D investment, reflecting the H126 run-rate and increasing activity expected for the Phase IIb EPIMODE study from H226. We now forecast R&D expenditure of SEK170m in FY26, from SEK150m previously, and SEK227.5m in FY27, from SEK157.5m. We make only modest changes to personnel costs. Overall, we now forecast operating losses of SEK84.6m in FY26 and SEK86.5m in FY27.

Funding a key sensitivity

Driven by the increased R&D, Cereno ended Q226 with gross cash of SEK39.0m (SEK70.9m at the end of Q126) and SEK175.0m of outstanding convertible debt (conversion price of SEK10/unit). The capital position was bolstered post-period by the completion of the SEK60m directed issue at the end of July. The financing was priced at SEK5.10/share, a 4.08% premium to the preceding close, and added 11.76m shares, equivalent to 3.63% dilution. On a gross basis, this takes pro-forma cash to approximately SEK99m before issue costs.

Based on our revised burn estimates, we calculate that the current funds would be sufficient to provide headroom to late Q426 (versus Q127 previously) and estimate the company needs to raise another c SEK50m before year-end to continue supporting its clinical efforts. We note that Cereno retains access to the SEK175m loan facility under the November 2025 agreement with Fenja Capital. However, drawdown is conditional on, among other requirements, conversion and divestment of the outstanding convertibles, with the SEK10/share conversion price materially above the current share price. We therefore do not treat the facility as fully secured and model the incremental SEK50m Q426 requirement as illustrative debt.

We also estimate that Cereno could require additional funding during FY27 to support continued progression of the CS1 and CS014 Phase IIb programmes. The company continues to benefit from strong investor backing and, as noted above, retains potential access to the November 2025 financing facility, which can be utlilised should the terms be successfully renegotiated.. A partnering or licensing transaction could materially reduce the external funding requirement, although our base case assumes a CS1 licensing deal only in 2029, following the EPIMODE top-line readout. As highlighted previously, we view financing as a key operational sensitivity for the investment case.

Valuation

Beyond the near-term estimate revisions outlined above, we leave our long-term assumptions for both CS1 and CS014 unchanged following the Q226 results and subsequent developments. While first-site activation in EPIMODE improves operational visibility, we keep CS1’s PoS at 50% pending further clinical progress. For CS014, we await the PK readout before reassessing our assumptions for the programme.

Reflecting the revised near-term forecasts, the latest pro forma net debt position and model roll-forward, our valuation increases modestly to SEK7.0bn, from SEK6.8bn previously (Exhibit 3). The per share valuation, however, reduces to SEK21.5/share from SEK21.7/share previously, reflecting the dilution from the higher share count following the SEK60m raise.

Looking ahead, first-patient dosing and the subsequent recruitment trajectory are the key near-term markers for CS1, while supportive September 2026 PK data for CS014 could validate its shortened and capital-efficient path into patient efficacy testing. Successful execution across both programmes would leave Cereno with two genuinely mid-stage clinical assets and, in our view, materially stronger strategic optionality.