Cereno Scientific — Differentiated approach in CVD with potential

Cereno Scientific (OMX: CRNO-B)

Last close As at 24/04/2024

SEK4.07

−0.06 (−1.45%)

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SEK1,143m

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Research: Healthcare

Cereno Scientific — Differentiated approach in CVD with potential

Cereno Scientific is a clinical-stage biotech, developing treatments for cardiovascular diseases (CVDs) using novel approaches. Its focus on disease-modifying therapies and a collaboration with Abbott set it apart from peers. Lead asset CS1, a delayed immediate release formulation of VPA, is an HDAC inhibitor, aiming to deliver disease-modifying results in pulmonary arterial hypertension (PAH). Preclinical candidates include CS014, for thrombosis prevention without increased risk of bleeding (seen with current antithrombotics), and CS585 for CVD (specific indication not yet determined). 2024 will be a period of inflection, with top-line readouts from the Phase II CS1 study and expected clinical entry of CS014. We initiate coverage with a valuation of SEK2.32bn (SEK9.9/share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Cereno Scientific

Differentiated approach in CVD with potential

Initiation of coverage

Pharma and biotech

22 February 2024

Price

SEK4.50

Market cap

SEK1,052m

SEK10.52/US$

Net cash (SEKm) at end-December 2023

41.7

Shares in issue

233.8m

Free float

93%

Code

CRNO B

Primary exchange

First North Growth Market

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.7)

(1.3)

103.5

Rel (local)

(18.4)

(10.5)

91.7

52-week high/low

SEK5.4

SEK0.5

Business description

Cereno Scientific is a Sweden-based clinical-stage biotech company focused on the development of innovative, effective and safe treatments for cardiovascular diseases with unmet medical needs. Lead asset CS1 is an HDAC inhibitor that acts as an epigenetic modulator. It is currently being investigated in a Phase II clinical trial for the treatment of pulmonary arterial hypertension (PAH).

Next events

CS1: Phase II top-line data

Q324

CS014: Phase I trial launch

H124

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Jitisha Malhotra

+44 (0)20 3077 5700

Cereno Scientific is a research client of Edison Investment Research Limited

Cereno Scientific is a clinical-stage biotech, developing treatments for cardiovascular diseases (CVDs) using novel approaches. Its focus on disease-modifying therapies and a collaboration with Abbott set it apart from peers. Lead asset CS1, a delayed immediate release formulation of VPA, is an HDAC inhibitor, aiming to deliver disease-modifying results in pulmonary arterial hypertension (PAH). Preclinical candidates include CS014, for thrombosis prevention without increased risk of bleeding (seen with current antithrombotics), and CS585 for CVD (specific indication not yet determined). 2024 will be a period of inflection, with top-line readouts from the Phase II CS1 study and expected clinical entry of CS014. We initiate coverage with a valuation of SEK2.32bn (SEK9.9/share).

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/22

0.0

(27.6)

(0.20)

0.0

N/A

N/A

12/23

0.0

(48.2)

(0.23)

0.0

N/A

N/A

12/24e

0.0

(51.2)

(0.19)

0.0

N/A

N/A

12/25e

0.0

(48.6)

(0.17)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

CS1: A rare, disease-modifying opportunity

Disease-modifying therapies continue to be the holy grail for PAH, a rare, complex and progressive disease prevalent in c 100,000 people in the US and Europe combined. In a market dominated by vasodilators primarily offering symptomatic relief, CS1 claims disease-modifying potential underpinned by its epigenetic modulation properties as an HDAC inhibitor (HDACi). A Phase II study, leveraging Abbott’s CardioMEMS technology, is due to present topline results in Q324 (previously Q224) and is a key near-term catalyst. The FDA’s acceptance (in January 2024) of an Expanded Access Programme is expected to fortify the data package for an IND submission. Given the unmet need, we estimate blockbuster potential for CS1 (backed by an orphan drug designation), contingent on successful clinical progress.

A promising preclinical pipeline

CS014, an HDACi, has been optimised for thrombosis prevention without increased risk of bleeding. CS585 is a selective, potent, and oral prostacyclin receptor (IP) agonist, being developed for CVD. The antithrombotics segment accounts for the biggest share (c 51%) of the $138bn global CVD market, indicative of the sizeable commercial opportunity for novel drugs with improved profiles.

Valuation: SEK2.32bn or SEK9.9 per share

Our valuation (using a risk-adjusted net present value model) is almost entirely driven by CS1 in PAH, to which we attribute a 25% probability of success, a 2029 launch and peak sales of c $2.1bn. While we include CS014 in our model, the very early stage of development leads to limited valuation uptick, although this may change with clinical progression. CS585 has been excluded from our valuation for now. Gross cash of SEK87.1m at end-FY23, an expected SEK77m from warrant conversion and a SEK45m committed loan should be sufficient to fund operations into Q225. We model a partnership agreement for CS1 in 2026.

Investment summary

Company description: Finding the sweet spot in CVD treatment

Cereno Scientific is clinical-stage biotech focused on developing treatments for CVD with unmet medical needs. Cereno was listed on the Spotlight Stock Market in 2016 before moving its listing to the Nasdaq First North Growth Market in June 2023. The company’s portfolio comprises one clinical and two preclinical programmes. Lead candidate CS1 is in Phase II for the treatment of PAH, which is believed to be prevalent in c 100,000 people in the US and Europe. CS1 is a delayed immediate release formulation of VPA, a histone deacetylase inhibitor (HDACi) that has shown epigenetic modulation properties, indicating potentially disease-modifying capability in PAH. Top-line readouts from this study are expected in Q324 (previously in Q224). An Expanded Access Programme for patients on the Phase II trial was accepted by the FDA in January 2024. The current preclinical pipeline has been developed through research collaborations with the University of Michigan and includes CS014, also an HDACi, initially being developed for the treatment of thrombosis without increased risk of bleeding (a key limitation of the current standard-of-care antithrombotics). With preclinical studies completed in 2023, the drug is set to commence a Phase I study in H124. The other preclinical asset, CS585, is an IP agonist, currently under evaluation for different CVD indications backed by preclinical evidence of its potential in thrombosis without increased risk of bleeding.

Financials: Cash runway into Q225 with warrants exercise

Cereno is a pre-revenue company and has funded its operations through capital-raising. Following its IPO in 2016 (SEK32m in pre-IPO and IPO gross proceeds), the company has raised another c SEK350m net proceeds through three equity issuances (in 2019, 2020 and 2023) and warrant conversions (TO1 and TO2). In 2024, we expect SEK77m to flow in from conversion of the TO3 warrants and another SEK45m through a loan from Formue Nord Fokus (SEK45m received in 2023). Based on our estimated pro-forma (ie inclusive of the SEK45m loan and SEK77m warrant conversion) gross cash balance (c SEK209m), we expect the company to be funded into Q225 (not including repayment of the SEK90m loan due in May 2025) with an FY24e cash burn of c SEK130m.

Valuation: SEK9.9/share, indicating value to be unlocked

We value Cereno at SEK2.32bn or SEK9.9 per share using a risk-adjusted NPV model (discount rate of 12.5%), reflecting contributions from its Phase II clinical candidate CS1 and the Phase I-ready asset CS014. We attribute a 25% probability of success to CS1 in PAH and estimate non-risk-adjusted peak sales of $2.1bn for the target indication and patient population. In 2026, we model the company seeking partnership opportunities and include an upfront payment of $150m (risk-adjusted) during the year. For CS014, we apply a 5% probability of success, assuming the target indications will be deep vein thrombosis (DVT), pulmonary embolism (PE) and stroke prevention in atrial fibrillation (SPAF) with an estimated peak sales potential of $1.9bn. If a partnership deal does not materialise, we estimate the company would need to raise a total of SEK750m from FY25–FY28 before becoming self-sustainable in FY29 following CS1’s launch.

Sensitivities: Usual biotech risks dialled down by good safety

Cereno is exposed to clinical, regulatory and financing risks typical of all biopharma companies. A key sensitivity, in our opinion, is the reliance on a single clinical asset (CS1) to drive the valuation (90% in our model). Phase II readouts are expected in 2024 and will direct the company’s plans. The indication targeted by CS1 (PAH) is a competitive space, with multiple approved drugs and several others in clinical development. A key differentiator of CS1 is its safety profile to date and positioning as a potentially disease-modifying agent. Approval, if received, would likely be for a combination treatment, and the company will have to prove compatibility with existing treatments to receive regulatory support. Another key risk for Cereno will be access to funding. Pivotal trials in PAH may be difficult to recruit and are likely to be costly (given the need for frequent follow-ups and testing), which may be challenging for a small biotech like Cereno to fund independently. The company will have to seek external funding, likely in the form of a partnership or out-licensing. If financings are achieved through equity issuances, the pricing may not be favourable for current shareholders and could lead to significant dilution.

Active pipeline aiming to transform the CVD landscape

Cereno’s clinical pipeline is focused on the development of innovative, effective and safe therapies for CVD (Exhibit 1). The company’s lead asset is CS1, a delayed immediate release formulation of VPA, an HDACi that has shown epigenetic modulation properties that could be beneficial for the treatment of CVD. CS1 is being developed for the treatment of PAH, an orphan indication characterised by high blood pressure in the lungs. CS1 is in a Phase II trial, supported by Abbott’s CardioMEMS Heart Failure (HF) System for continuous insights into pulmonary pressure and hemodynamics. Interim updates have included a review of the first 16 patients enrolled in the study, with encouraging results, in our view. Notably, the first patient completing the study demonstrated a material improvement in PAH symptoms and was reclassified to functional class I from functional class II as per the WHO classification of PAH patients, indicating disease reversal/modification. These results have led to an Expanded Access Programme (‘compassionate use’), which was accepted by the FDA in January 2024. While these updates may be a positive sign of things to come, top-line data for the trial is expected in Q324, and we believe this represents a major inflection point for Cereno.

The company’s second asset, CS014, also an HDACi, shows potential for the prevention of thrombosis, without increased risk of bleeding. The drug is backed by strong preclinical data, and Cereno is preparing to launch a Phase I clinical trial within H124. Cereno’s third asset, CS585, is in the earlier stages of preclinical development. It is a selective, potent and oral IP agonist, which management believes could be a best-in-class oral treatment in CVD. The positioning of CS585 within the company’s portfolio will be determined once preclinical studies are complete (expected by end-2024). We highlight that the potential of CS585 in CVD has been recognised with publication in Blood, discussion in Blood Podcast and a mention in the Journal of Thrombosis and Haemostasis (review article), which collectively suggests that there is interest within the scientific community in CS585’s potential promise for the next generation of CVD therapies.

Exhibit 1: Cereno’s portfolio of programmes

Source: Cereno Q3 2023 report

Cardiovascular disease: Addressing the world’s biggest killer

CVD encompass various conditions that affect the structure or function of the heart and blood vessels. Despite a growing repertoire of treatments, CVD remains the most common cause of death worldwide, with 17.9 million people dying from CVD in 2019 (32% of global deaths). Thrombosis is a major complication of CVD, which is a leading cause of heart attack and stroke, which account for 85% of all CVD deaths. The World Health Organization (WHO) forecasts 22.2 million deaths in 2030 due to CVD (as cited by the World Heart Federation), double the mortality figures predicted for cancer (11.9 million). In the US, CVD is the cause of one in three deaths, with a related healthcare burden of $216bn annually. The bestselling CVD drugs belong to a category of drugs called direct oral anticoagulants, which are aimed at thrombosis (blood clots in the blood vessels), a key therapeutic area of focus for Cereno.

PAH: Rare form of a not so rare disease

PAH is a rare form of pulmonary hypertension (PH), which although a well-recognised cardiovascular disease, has its roots in the lungs. While PH can originate from various pathophysiologic conditions, the underlying characterisation remains the same: higher than-normal blood pressure in the lungs or mean pulmonary artery pressure (mPAP) >20 mmHg at rest, pulmonary artery wedge pressure <15 mmHg and a pulmonary vascular resistance (PVR) ≥3 Wood units as measured by right heart catheterisation, the gold standard diagnostic for PH.

According to available estimates, PH affects 1% of the global population (c 80 million people), highlighting the significant disease burden. The World Symposium on Pulmonary Hypertension (WSPH) categorises pulmonary hypertension into five distinct groups, based on the underlying aetiology:

Group 1: pulmonary arterial hypertension (PAH) – underlying cause can be idiopathic (unknown cause), genetic (called heritable PAH), related to drug usage or disease specific.

Group 2: pulmonary hypertension caused by left-sided heart disease – most common form of pulmonary hypertension. Causes include left heart failure and left-sided heart valve conditions such as mitral valve or aortic valve disease.

Group 3: pulmonary hypertension caused by lung disease – causes include pulmonary fibrosis, chronic obstructive pulmonary disease and sleep apnoea.

Group 4: pulmonary hypertension caused by chronic blood clots – causes include chronic blood clots in the lungs (pulmonary embolism) and tumours blocking the pulmonary artery.

Group 5: pulmonary hypertension triggered by other conditions – causes include blood disorders, inflammatory disorders such as sarcoidosis, metabolic disorders and kidney disease.

PAH: A debilitating, progressive disorder…

PAH is a complex and aggressive form of PH, where the arteries leading from the right side of the heart to the lungs become stiff, damaged or narrow, making it difficult for blood to flow to the lungs, forcing the right heart ventricle to pump harder, leading to right heart enlargement, damage and eventual failure. PAH is characterised by increasing vasoconstriction (narrowing) and vasculature remodelling (structural changes to the blood vessel wall) of the distal pulmonary arteries, which makes the disease progressive in nature. Common disease symptoms include shortness of breath, fatigue, dizziness and chest pain, which are associated with poor quality of life and significant morbidity and mortality as the disease progresses.

Studies have identified endothelial cell (cells lining the walls of arteries) dysfunction as having a crucial role in the initiation and progression of PAH. Endothelial cell proliferation leads to thickening and remodelling of the arteries, angiogenesis results in the formation of plexiform lesions and alternation in various endothelial mediators causes vasoconstriction.

A clear cause of PAH remains unknown. As noted, PAH can be idiopathic (c 50% of all cases), due to inherited genetic mutations (1520% of the cases), caused by exposure to drugs or toxins, or because of congenital heart disease or other systemic diseases. PAH is most often diagnosed in women aged 30 to 60, and women are at least twice as likely as men to have PAH. While there is no clear reason for this predisposition, certain theories suggest the role of estrogen and relation to autoimmune conditions, also more prevalent in women.

PAH has an estimated prevalence of 10 people per 100,000 in the worldwide population. Available data indicate that there are c 100,000 PAH cases in the US and Europe. The condition has been classified across four functional classes (FC) by the New York Heart Association (NYHA) and the WHO, based on limitations to physical activity, which is a key element in assessing patients with PAH and an important driver of treatment choice. The two classification systems are similar and used interchangeably (Exhibit 2).

Exhibit 2: Functional assessment of PAH

WHO classification

NYHA classification

Class I

Patients with PH but without resulting limitation of physical activity. Ordinary physical activity does not cause undue dyspnea (shortness of breath) or fatigue, chest pain, or near syncope (fainting).

Class 1

No symptoms with ordinary physical activity.

Class II

Patients with PH resulting in slight limitation of physical activity. They are comfortable at rest. Ordinary physical activity causes undue dyspnea or fatigue, chest pain or near syncope.

Class 2

Symptoms with ordinary activity. Slight limitation of activity.

Class III

Patients with PH resulting in marked limitation of physical activity. They are comfortable at rest. Less than ordinary activity causes undue dyspnea or fatigue, chest pain or near syncope.

Class 3

Symptoms with less than ordinary activity. Marked limitation of activity.

Class IV

Patients with PH with inability to carry out any physical activity without symptoms. These patients manifest signs of right-heart failure. Dyspnea and/or fatigue may even be present at rest. Discomfort is increased by any physical activity.

Class 4

Symptoms with any activity or even at rest.

Given the non-specific symptoms at the initial stages of the disease, diagnosis is difficult, with a mean time to diagnosis of 2.33.9 years with most patients classified as FC II and III (c 80%). Despite treatment, prognosis for PAH remains poor, with an estimated survival of 70% and 50% at three and five years of diagnosis. The healthcare burden of PAH remains high, with reports citing direct healthcare costs per patient per month varying from $2,476 to $11,875. The need for efficacious treatment options continues to be felt strongly.

…with available treatments unable to stop disease progression

There are no curative treatments for PAH, with available options only addressing symptoms or slowing disease progression rather than treating the underlying cellular proliferation causing progression. The current standard of care is a category of drugs termed vasodilators, which widen blood vessels, allowing blood to flow more easily. These drugs target one of the three pathways contributing to pathogenesis of PAH (the endothelin pathway, the nitric oxide (NO) pathway and the prostacyclin pathway) and are classified under four distinct categories: endothelin receptor antagonists (ERA), phosphodiesterase type 5 inhibitors (PDE-5i), soluble guanylate cyclase (sGC) stimulators and prostacyclin analogues or prostacyclin receptor (IP) agonists.

The endothelial cells are implicated in the pathogenesis of PAH. When functioning normally, they release a range of molecules (endothelin, NO, prostacyclin) into the bloodstream, regulating pressure and flow in the arteries by either dilating/vasodilation (using NO and prostacyclin) or constricting/vasoconstriction (using endothelin) of the blood vessels. In PAH, these activities are disrupted (either reduced production of the vasodilators or increased production of vasoconstrictors). Drugs targeting these pathways focus on either inhibiting endothelin activity or stimulating the activity of NO and prostacyclin, to keep the blood vessels open to keep the blood flowing through and the pressure in check (Exhibit 3).

Exhibit 3: Common disease pathways in PAH

Source: Cereno capital markets day (CMD) presentation (August 2023). Graphic adapted from: Humbert, et al. N Engl J Med. 2004

Options aplenty but respite likely temporary

A total of 13 PAH-focused drugs have been approved by the FDA, all of which target one of the three pathways. The current market for PAH-targeting drugs is dominated by two companies, Janssen and United Therapeutics. Of the 13 drugs, five (one ERA, one sGC and three targeting the prostacyclin pathway) currently have market exclusivity. Exhibit 4 presents a snapshot of the available treatments for PAH.

Exhibit 4: Available treatments for PAH

Source: EvaluatePharma, Edison Investment Research. Note: Drugs with current market exclusivity are in bold.

The treatment algorithm has evolved over time from monotherapy to combinations, following real-world evidence suggesting improved outcomes using a combination of drugs. Data from two meta-analyses confirmed that combination therapy leads to a c 35% reduction in the relative risk of clinical worsening.

The latest treatment guidelines by the WSPH recommend treatments to be tailored on risk and patient status, established using validated risk assessment tools such as the WHO-FC stratification, the six-minute walk distance (6MWD) test and N-terminal pro-brain natriuretic peptide (NT-proBNP) levels. In addition, the Registry to Evaluate Early and Long-Term PAH Disease Management (REVEAL 2.0) risk scores and patient reported outcomes are also accepted as measurements in PAH

While low- and intermediate-risk patients are treated with a combination of oral non-prostacyclin therapies, high-risk patients (typically FC IV) are recommended triple combination therapy. Note that while prostanoids/prostacyclin analogues are considered to be potent vasodilators, they are often prescribed only on disease progression or in advanced cases (FC IV) due to their difficult side effect profile (nausea, vomiting, diarrhoea, dizziness, headache) and complex administration (IV, multiple daily dosing may be required).

Available treatment options have allowed the median survival in PAH to increase to seven years (post diagnosis) from 2.8 years without treatment. However, the lack of curative or disease-modifying options means that despite treatment, PAH remains a progressive condition with lung or lung-heart transplant as the eventual option. We believe that if novel therapies under development, such as Cereno’s CS1, display disease-modifying properties, they may usher in a shift in the treatment paradigm in PAH. The commensurate commercial potential is likely to be sizeable, in our opinion.

A growing opportunity for HDAC inhibition in CVD

Two of Cereno’s three assets operate by an epigenetic mechanism of action. Epigenetics refers to the study of changes in how genes are expressed, without alteration of the underlying DNA. Epigenetic modifications influence how certain genes (sequences of DNA) are turned on or off, and can be caused by various external stimuli.

In the nuclei of cells, DNA is packed and organised into 23 pairs of chromosomes. These structures are comprised of DNA wrapped around histones (protein complexes), which compact the genes. The resultant structures, nucleosomes (DNA-wrapped histones), are the building blocks that make up chromatin, which in turn makes up chromosomes. Epigenetic modifications can disrupt the spatial organisation within these structures, changing which genes are accessible for transcription (expression) or inaccessible (silenced). Epigenetic regulation is a natural biological process, but can also be aberrant, contributing to the pathogenesis of various diseases. The term epigenetics encompasses three main types of modification: DNA methylation, histone modification and non-coding RNA.

While epigenetics is a relatively nascent field, the discovery, and approval, of HDACi mark a step toward validating the approach. Just as certain genetic mutations can make people more susceptible to cancer, certain epigenetic changes can also increase the risk of cancer. As such, the four HDACi drugs that have been approved by the FDA are focused on oncology, targeting rare forms of blood cancer.

While HDACi drugs have found utility in oncology, they may also be beneficial in CVD. In cancer, uncontrolled cell proliferation is an essential characteristic, and similarly, endothelial cell proliferation plays a role in the cause of PAH, leading to thickening and remodelling of arteries. VPA, approved by the FDA for the treatment of certain forms of epilepsy, has been shown to cause downregulation of cell proliferation, preventing and partly reversing the progression of PAH in animal models. There is a growing body of evidence to suggest that HDACi drugs may also exert antithrombotic and antifibrotic effects. As discussed in The Lancet Healthy Longevity, VPA has also shown promise in reducing blood pressure by epigenetic regulation, alongside myriad related conditions encompassed by CVD, with the potential for disease-modifying effects. With the pleotropic properties of Cereno’s two leading assets, we believe this may enable a host of possible applications, not necessarily limited to the primary indications being explored (Exhibit 5).

Exhibit 5: Potential of Cereno’s HDACi pipeline

Source: Cereno CMD presentation (August 2022). Notes: VTE, venous thromboembolism; AF, atrial fibrillation; SPAF, stroke prevention in arterial hypertension; HFpEF, heart failure with preserved ejection fraction; HFrEF, heart failure with reduced ejection fraction; post-MI, post myocardial infractions; IPF, idiopathic pulmonary fibrosis.

CS1: A potentially disease-modifying treatment for PAH

Teaching an old drug new tricks

CS1 is a delayed-release oral formulation of VPA, which was approved by the FDA for the treatment of a form of epilepsy in 1978. VPA is also used off-label for the treatment of bipolar disorder and to prevent migraine headaches.

Given that VPA has FDA approval for the treatment of epileptic seizures, we believe this somewhat de-risks the clinical development of CS1 for Cereno as VPA has already demonstrated a desirable long-term safety and tolerability profile. This leads to key advantages for further clinical development efforts, including a potentially faster, and hence less costly, route to market, and a greater probability of success. To further corroborate the potential safety and tolerability of CS1 in PAH, we note that the range of doses being explored in the ongoing Phase II trial (480–1,920mg) is less than what is typically prescribed for the treatment of epilepsy and bipolar disorder (c 2,000mg per day, but if required, the dose may be increased to c 4,000mg per day). However, extrapolating VPA’s safety profile to CS1 is not assured, as CS1 is an optimised formulation of VPA, and may have different pharmacokinetic (PK)/pharmacodynamic properties.

Clinical and preclinical research supports utility…

In preclinical studies, CS1 demonstrated an improvement in the endogenous fibrinolytic system, supporting thrombolysis at sites of injury, without increased risk of bleeding. This side effect represents a key challenge in this field, as it is generally difficult to improve the fibrinolytic system without increasing the risk of bleeding, and the next generation of therapies are focused on finding this sweet spot. CS1 is believed to have a dual mechanism of action, as an HDACi that increases levels of tissue plasminogen activator (tPA) and reduces levels of plasminogen activator inhibitor 1 (PAI-1).

While CS1 was initially focused on thrombotic indications, its trajectory shifted to PAH. This was based on third-party research that demonstrated the ability of VPA to reduce pulmonary pressure by mitigating pulmonary vascular remodelling, also referred to as reverse-remodelling, through its effects on lung endothelial cells and vascular smooth muscle cells:

In a study involving rats, treatment with VPA and vorinostat (a HDACi drug) was found to mitigate the development of PAH. As part of this research, VPA and vorinostat also inhibited the growth of human vascular muscle cells in culture (Exhibit 6, top).

In a rat model of PAH, VPA has been shown to prevent and partially reverse disease progression by decreasing inflammation and proliferation of remodelled pulmonary arteries (Exhibit 6, bottom).

Using a mouse model, VPA demonstrated therapeutic potential to delay the development of atrial remodelling, as well as the onset of atrial fibrillation.

With a supportive body of evidence, we believe that CS1 has a promising multitargeted mechanism of action which may be advantageous as a novel treatment option for PAH.

Exhibit 6: Selected preclinical data highlighting important mechanisms for VPA in PAH

Source: Cereno CMD presentation (August 2022). Note: 8top: from Zhao et al. Circulation. 2012; 9bottom: from Lan et al. PLoS ONE. 2015.

…with receipt of ODD from regulators

The FDA has granted orphan drug designation (ODD) to CS1 for the treatment of PAH (awarded March 2020), which we believe provides some recognition of the drug’s plausible utility in this indication. In our view, this regulatory designation should help the company reap greater rewards for developing the drug in terms of drug pricing, tax benefits and lower overall costs of commercialisation, as well as providing a minimum assured period (seven years) of market exclusivity.

Innovative Phase II with CardioMEMS to maximise insights

The Phase II trial for CS1 in PAH is a randomised, open-label, blinded endpoint, multi-centre study, with 10 specialist clinics in the US and one additional site currently in the late-stage start-up process. The trial, which aims to enrol 30 patients, is designed to evaluate the safety and tolerability of CS1 (primary endpoint), as well as PK, and exploratory efficacy of the drug across three doses (480mg, 960mg and 1,920mg) (see Exhibit 7). We note that patients continue taking their standard-of-care treatment in addition to CS1 as part of the study. A key feature of this trial is the collaboration with Abbott. Abbott’s CardioMEMS HF System is implanted in patients and will continuously monitor pulmonary pressure, alongside other measures of cardiopulmonary function.

First patient dosing took place in August 2022, and as of the latest update (February 2024), 25 evaluable patients had received CardioMEMS (in addition to two patients who already had CardioMEMS fitted), 23 patients were randomised and 19 had completed the 12-week treatment period. While a slower-than-expected recruitment pace was observed across recent months, management has communicated that top-line readouts are now expected in Q324 (previously Q224). In our view, these clinical trial results could represent the most significant upcoming catalyst for Cereno.

Exhibit 7: CS1 Phase II clinical trial design and overview (as of February 2024)

Source: Cereno press release, February 2024. Note: *Nine patients did not (after consent) meet all study criteria to continue in the study. **Two patients already had CardioMEMS. ***One patient terminated early (due to a non-CS1-related adverse event).

The innovative design for the Phase II CS1 clinical trial was recognised with a publication in Pulmonary Circulation, highlighting the comprehensive primary and secondary endpoints built into the design. This includes primary goals of safety and tolerability, alongside various functional, hemodynamic and structural measures and biomarkers, as well as patient-reported outcomes to inform on treatment effects and disease progression. Abbott’s CardioMEMS HF System is also an important component of the study (Exhibit 8). CardioMEMS is implanted in the pulmonary artery of every participant, whereby they can be remotely monitored each day for pulmonary hemodynamics and right heart ventricle function. The benefits of CardioMEMS in the trial include: unique efficacy data points, use of a relatively smaller patient population due to the insights and data sensitivity provided by the technology, and support in the determination of an optimal dose range for further clinical studies. We believe that the CardioMEMS HF System can provide valuable insights demonstrating safe and effective monitoring of pulmonary pressure over time.

Exhibit 8: Abbott’s CardioMEMS HF System

Source: Cereno CMD presentation (August 2023)

Patient case study highlights CS1 benefit

Interim updates for this Phase II trial have been positive. In June 2023, Cereno reported a patient case study, initiated by a trial investigator. This focused on the first patient completing the treatment protocol, and was conducted to monitor the utility of the CardioMEMS HF System used in the trial. The patient (a 51-year-old female) had symptomatic PAH for three years (NYHA/WHO FC II) prior to enrolment. She was randomised to receive CS1 at the highest tested dose (1,920mg).

The outcome, based on measures across the 12-week treatment protocol, indicated a positive result in terms of pulmonary arterial pressure (PAP) and cardiac function (Exhibit 9). Mean PAP (mPAP, measured in mmHg) decreased by 30%, while cardiac output (measured in L/min) increased by 19%. Right ventricular stroke volume also increased with CS1 treatment, alongside stroke volume index and right ventricular efficiency. These changes were associated with reduced right ventricular stroke work, and a 43% reduction in total pulmonary resistance (measured in dynes.sec.cm-5). Importantly, these observations were not accompanied by any adverse events related to the CardioMEMS device or CS1 treatment. To further corroborate these signs of efficacy, the patient’s status improved from NYHA/WHO FC II to FC I at the end of the 12-week treatment period.

While encouraging, we acknowledge that this case study represents the outcome for just one patient, and is not representative of the full population.

Exhibit 9: Encouraging patient case study from ongoing Phase II trial

Source: Cereno CMD presentation (August 2023)

Further interim updates: Promising signs of things to come?

In September 2023, a Data Quality Control Review (DQCR) was conducted (analysis released in October 2023), which focused on the data collected by CardioMEMS from the first 16 patients enrolled in the study. According to the DCQR, CardioMEMS measurements were deemed satisfactory, adhering to the protocol with the timely transfer of data from patient to clinic. Importantly, an early indicator of efficacy was also realised, whereby several patients included in the DQCR saw a clinically meaningful reduction in pulmonary pressure after three weeks of treatment, measured with the CardioMEMS HF System over time (evaluated by area under curve of mean PAP, AUC mPAP, mmHg days – an efficacy indicator in PAH). These improvements were either of a similar or greater magnitude as seen in the patient case study. The DQCR did not identify any concerning issues with the study. Other key insights included: >60% of patients (across all doses of CS1) showed a sustained reduction in mPAP; efficacy responses showed signs of following a dose-response pattern; an early onset of action was observed after week three for several patients; and a sustained reduction in mPAP was observed in the two-week follow-up period after treatment discontinuation (thus after the 12 weeks of treatment). In our view, these observations support the clinically meaningful efficacy of CS1, including potentially disease-modifying effects, in PAH patients in addition to the current standard-of-care treatment. However, more detailed conclusions cannot be drawn until the trial has been completed and an analysis is conducted on the full data.

In January 2024, the FDA granted Expanded Access (or ‘compassionate use’) to CS1 for PAH. This enables an Expanded Access Programme, making CS1 available for patients in an extension of the Phase II trial. It was requested following the positive interim updates from the case study and DQCR, alongside prompts from multiple investigators. The programme also allows Cereno to collect longer-term safety and efficacy data, which may facilitate future discussions with the FDA regarding fast track or breakthrough therapy designations, and even an application for pivotal trials. We also note that Cereno has signed an agreement with CordenPharma to manufacture CS1 for the EAP, as well as for future clinical trials, securing long-term availability of the drug. The granting of Expanded Access for CS1 marks a key milestone for Cereno, in our view. Attention now turns to the Phase II trial readouts, expected in Q324, and given the promising interim updates we are confident there is a high likelihood of positive efficacy findings.

Competitive landscape: Hunt for a disease-modifying treatment

While several PAH-specific drugs have entered the market in the last two decades, they all target the same three pathways (endothelial, NO and prostacyclin). With growing interest on targeting the underlying cause of PAH, research has intensified towards developing potentially disease-modifying treatments. Some of the targeted mechanisms of action include bone morphogenetic protein (BMPR2) signalling, tyrosine kinase receptors, epigenetics, serotonin metabolism, estrogen metabolism, extracellular matrix and angiogenesis. Exhibit 10 presents a selection of treatments in development for PAH, seeking disease modification.

Exhibit 10: Potential disease-modifying treatments under development for PAH

Source: Edison Investment Research, company websites. Note: *DPI stands for dry powder inhaler.

Leading the category of potentially disease-modifying PAH treatments is Merck’s sotatercept, an activin signalling inhibitor monoclonal antibody, currently undergoing the FDA regulatory review process (PDUFA set for 26 March 2024). Sotatercept works by decreasing the proliferation of cells in the pulmonary artery walls, targeting the underlying arterial stiffening that causes PAH. Merck presented encouraging data for its pivotal Phase III STELLAR trial, a randomised, double-blind, placebo-controlled study with 324 FC II and FC III PAH patients, meeting the primary endpoint (improvement in 6MWD from baseline at 24 weeks) and eight of the nine secondary endpoints with statistical significance.

The second most advanced asset is the inhaled platelet-derived growth factor receptor (PDGFRα and PDGFRβ) inhibitor/tyrosine kinase inhibitor seralutinib (Gossamer Bio). In December 2022, Gossamer Bio reported top-line data from its Phase II trial, TORREY (n=86), which met its primary endpoint, reporting a 14.3% improvement in PVR from baseline to week 24. However, it did not meet the secondary endpoint, the 6MWD, where the improvement from baseline was not statistically significant. Management attributed this to the trial not being sufficiently powered and balanced for disease severity. Results for the subset of FC III patients were more promising (21% reduction in PVR and 37 metre improvement in 6MWD). In December 2023, the company initiated a Phase III study (PROSERA) with a modified design influenced by the Phase II results (enrolling patients categorised as FC II or FC III with higher risk scores, and lower 6MWD and higher PVR at baseline).

Given the current phase of clinical development and strength of data, we expect sotatercept and potentially seralutinib to enter the market before CS1. However, we believe that CS1’s favourable safety profile to date and its convenient dosing could be a key differentiator if disease modification is proved. Moreover, the given the heterogeneity of PAH and the different mechanism of actions of all three drugs, they could complement rather than compete with one another. The benefit of combination treatments is already evident in PAH and may hold true for other mechanisms of actions as well, in our opinion.

CS1: Differentiated profile to peers

In the previous section, we alluded to the different mechanism of action and profile of CS1 compared to other disease-modifying drugs in development. Based on internal analyses conducted by Cereno, we present a relative comparison of CS1 versus other selected disease-modifying treatments in development for PAH (Exhibit 11). We note that these comparisons are based on available and observable data and not on direct head-to-head analysis. We highlight that CS1 has been designed to be dosed orally, offering advantages compared to the majority of competitors focused on injection- or inhaler-based therapies, most notably due to patient compliance.

Exhibit 11: Comparative analysis of CS1 versus other selected disease-modifying treatments

Drug

Administration

Use patent

ODD (Y/N)

Reverse-remodelling

Pulmonary pressure reduction

Anti-fibrotic

Anti-inflammatory

Anti-thrombotic

CS1

Oral formulation (delayed immediate release, once-daily dosing)

2038

Y

+++

+++

+++

++

+++

Sotatercept

Subcutaneous injection (every three weeks)

2036

Y

+++

+++

++

++

?

Seralutinib

Inhaled formulation (twice-daily dosage)

2039

Y

++

+++

+

+

+*

Apabetalone

Oral formulation (twice-daily dosage)

2039/40

N

+++

++

++

+++

0

Source: Edison Investment Research; analysis conducted by Cereno in 2022. *Note: Candidates (other than CS1) with any anti-thrombotic effects only curb platelet aggregation, which, unlike thrombofibrotic remodelling, plays a minor role in thrombus resolution (Bochenek et al Thomb Heamost 2017).

Preclinical assets on route to the clinic

CS014: HDAC inhibitor focused on thrombosis prevention

CS014 was developed as part of a preclinical HDACi programme focused on epigenetic modulation. It was acquired from Emeriti Bio in March 2019 and has since been in development as part of a collaboration between Cereno and Emeriti Bio. CS014 is being developed as a potential treatment for thrombosis (protection against blood clots).

The global antithrombotic market was valued at c $29bn in 2022, and is projected to reach c $46bn by 2028. However, an ongoing challenge with the current standard of care in thrombosis is the risk of bleeding, as approved antithrombotic therapies target systemic inhibition of coagulation/platelet function. This may lead to an insufficient preventative effect with current treatment, potentially due to under dosing to avoid this side effect. We therefore see an opportunity for novel preventative approaches, with improved efficacy and reduced risk of bleeding.

Preclinical studies with CS014 have demonstrated its ability to prevent thrombosis (both venous and arterial thrombosis) through inhibition of platelet activity (reducing platelet accumulation and clotting) and increasing fibrinolytic capacity (removal of fibrin), without increased risk of bleeding. In one study, this was exemplified using an animal model (cremaster mouse model), whereby mice were either treated for five days with CS014 (at 100mg/kg), or saline as a control, and then subjected to a laser-induced vascular injury. Through in vivo intravital microscopy (Exhibit 12, left), the control shows significant clotting (platelets shown in green, fibrin shown in red). However, the animal treated with HDACi CS014 showed an inability to induce a significant clot following injury, with a notable reduction in platelets and fibrin. Inhibition of thrombosis was also confirmed to attenuate platelet activation and fibrin formation with high reproducibility (up to 40 experiments for each condition, Exhibit 12, right).

Exhibit 12: CS014 preclinical data demonstrating antithrombotic activity

Source: Cereno CMD presentation (August 2023)

In a separate study focused on a low shear venous system, mice were subject to puncture injuries in the saphenous vein. As part of this re-bleeding injury experiment, the injury was repeated at 0, five and 10 minutes. In the control condition, significant spikes in platelet accumulation and fibrin formation were observed at the site of the injury, whereas in the animals treated with CS014, there was no clot formation (Exhibit 13, left and middle). Finally, a tail vein bleeding assay was performed to assess whether treatment with CS014 causes increased risk of bleeding. The results showed negligible difference in bleeding time, regardless of treatment with either control or CS014 (Exhibit 13, right).

Exhibit 13: CS014 antithrombotic activity without increased risk of bleeding

Source: Cereno CMD presentation (August 2023)

Given the data published to date, we believe that CS014 has the potential to be an effective treatment option for both venous thrombosis and arterial thrombosis. We understand that management is in the process of finalising preclinical research that will guide which of these two indications will be pursued as a priority. The safety programme for CS014 has been successfully completed, and Cereno is now preparing to initiate Phase I studies for CS014 in H124; we plan to publish a more detailed analysis on this asset on its entry into the clinic.

IP receptor agonist CS585: Earlier stage, but promising in CVD

CS585 was in-licensed from the University of Michigan in 2023 and, albeit in earlier stages in development, it has shown promise as a potential treatment for thrombosis prevention without increased risk of bleeding in preclinical research. CS585 is a novel IP receptor agonist. It is being developed for the treatment of CVD, and we note that the precise indication to be targeted has not yet been determined. However, data from preclinical studies have been encouraging, and some of this research has been recognised with publication in Blood. We highlight a key preclinical study demonstrating the potential of CS585 as a selective, potent and oral drug for thrombosis prevention without increased risk of bleeding (Exhibit 14). In human blood (ex-vivo), the data provide a visual representation of the effect of CS585 treatment in reducing platelet activation in a concentration-dependent manner. Preclinical studies are expected to continue throughout 2024.

Exhibit 14: CS585 preclinical data showing inhibition of platelet activation and thrombosis

Source: Cereno CMD presentation (August 2023); from Stanger, et al. Blood. 2023. Note: Representative images of platelet adhesion and accumulation in human whole blood.

Sensitivities

Cereno is exposed to clinical, regulatory and financing risks typical of all biopharma companies. A key sensitivity, in our opinion, is the reliance on a single clinical asset (CS1) to drive the valuation (c 90% in our model). Phase II readouts are expected in Q324 and will direct the company’s plans. The indication targeted by CS1 (PAH) is a very competitive space, with multiple approved drugs and several others in clinical development. A key differentiator of CS1 is its strong safety profile to date, convenient oral dosing and positioning as a potentially disease-modifying agent. However, we believe the clinical results will have to display added benefits over the standard of care to unlock full commercial potential. Approval, if received, will likely be for an add-on combination treatment, and the company will have to prove compatibility with existing treatments (no drug-drug interaction) to receive regulatory support. The clinical pipeline for PAH has two other potentially disease-modifying treatments ahead of CS1 in clinical development, in particular sotatercept, which has a March 2024 PDUFA date. Another key risk for Cereno will be access to funding. Pivotal trials in PAH may be difficult to recruit and are likely to be costly, which may be challenging for a small biotech like Cereno to fund independently. The company will have to seek external funding, likely in the form of partnership or out-licensing, to progress the clinical development of CS1. If financings are achieved through equity issuances, the pricing may not be favourable for current shareholders and could lead to significant dilution.

Valuation

We value Cereno at SEK2.32bn or SEK9.9 per share using a risk-adjusted NPV model (discount rate of 12.5%), reflecting contributions from its Phase II clinical candidate CS1 and the late-stage preclinical asset CS014. We also incorporate the latest available net cash position of SEK41.7m (as of 31 December 2023).

For CS1, we expect the Phase III development to commence in 2026. We believe that following the expected Phase II data readout in 2024, it will take another 12–15 months for the company to have a pre-Investigational New Drug meeting with the FDA, prepare the data package and subsequently file for and receive regulatory approval for the Phase III trial. We note that Cereno has faced delays in patient recruitment in the past, which resulted in the Phase II readout time being extended on three occasions. We have therefore conservatively embedded the possibility of further readout delays in our estimates. We believe, however, that the recent approval by the FDA in granting Expanded Access (although initially limited to patients who have completed the trial) will offset any impact from the delay given the additional longer-term data gathered, which should support building a stronger data package. We also note the possibility of the regulators asking for another Phase II study given the small patient cohort (n=30) of the current trial, although we acknowledge that utilising the CardioMEMS technology for continuous reading makes the data more sensitive, which could compensate for the need for a larger patient pool. For our model, we do not factor in a requirement for an additional Phase II trial before the initiation of a pivotal Phase III programme.

We model the company seeking partnership opportunities prior to commencement of Phase III studies in 2026. We estimate a deal value of $1.5bn with an upfront payment of $150m (risk-adjusted) during that year. We also assume that the remaining milestone payments of $1.35bn will be split 30:70 between development and sales milestone payments, which we have accounted for over the course of clinical development and subsequent commercialisation of CS1. We also include royalty payments on commercial scales assuming a flat 15% royalty rate. We note that the assumed deal value is higher than the average licensing deals in the space (see Exhibit 15) but highlight that these largely related to vasodilators. We believe that the disease-modifying potential of CS1 justifies a premium. For reference, the parent company for sotatercept, Acceleron Pharma, was acquired by Merck in 2021 for a $11.5bn consideration, with sotatercept described as a lead asset as part of this deal. We also highlight that the assumed deal dynamics are subject to revision and potentially upgrades, based on the strength of the data presented by the company on CS1 as clinical development progresses.

Exhibit 15: Recent licensing and M&A deals in PAH

Source: EvaluatePharma, Edison Investment Research. Note: Most deals related to vasodilators, the current standard of care.

Based on the recent Phase III trial for sotatercept and the ongoing Phase III study for seralutinib, we assume that CS1 will also be targeting the patient cohort characterised as FC II and FC III as an add-on treatment for patients who progress on baseline therapy. We model for the US launch to happen in 2029 followed by Europe (EU and the UK) in 2030. We forecast sales to the end of exclusivity period (2040 expected), with peak sales estimated to be achieved in 2038. We attribute a 25% probability of success to CS1 in PAH and estimate non-risk-adjusted peak sales of $2.1bn for the target indication and patient population. This is based on an assumed list price of $250,000/patient/annum in the US, adjusted for a gross-to-net discount of 30%. The pricing is in line with the expected price for sotatercept and a premium to the c $125,000–200,000 price tag for the approved IP agonists. If successful, we highlight the possibility of label expansion to treatment for all functional classes (including FC I and FC IV), as well as related PH conditions, such as PH associated with interstitial lung disease, which would add to the upside potential.

For CS014, we apply a 5% probability of success, assuming the initial target indications will be DVT and PE (prevalence of 0.1% of global population) as well as SPAF (0.5% of global population), in line with the initial conditions targeted by antithrombotics. We restrict our geographic focus to the US and Europe for now. Note that these assumptions may change with clinical progression and further clarity on target areas. We estimate a peak sales potential of $1.9bn for CS014. As CS585 is still early in its preclinical journey, it is excluded from our valuation, but could further add to the upside on successful clinical transition.

Specific modelling related assumptions are detailed in Exhibit 16.

Exhibit 16: Assumptions for rNPV valuation for Cereno

Indication

Assumptions

CS1

Target population: PAH prevalence rate of 15 per 100,000 people, with 90% of patients seeking treatment (which translates to c 45,000 patients in the US and c 70,000 in Europe). CS1 will target FC II and FC III patients, which together make up c 80% of all patients. 35% of all patients are estimated to have limited treatment effect from baseline therapy with vasodilators and will be administered triple therapy, and 50% of these patients will still not have adequate response. These will be the initial targets for CS1. Peak penetration of 20% in the second-line treatment setting and 40% in third-line setting.

Pricing: list price of $250,000 in the US (gross/net discount of 30%) and $50,000 in Europe (no discount to list price). 5% price growth in the US and 3% in Europe.

Trial timeline and cost assumptions: Phase III to commence in 2026 with a cohort size of c 300 patients. US launch in 2029 and Europe in 2030. Phase III clinical trial expenses to be borne by out-licensing partner. Total deal value of $1.5bn, with an upfront payment of $150m and the rest in regulatory and sales milestones (30:70 split). Flat royalty rate of 15%. Peak sales of c $2.1bn achieved in 2038.

CS014

Target population: initial target indications of venous thromboembolism (prevalence of 0.1%) and stroke prevention in atrial fibrillation (prevalence of 0.5%). Target population of around four million people across the US and Europe. CS014 to be positioned as first-line treatment. Peak penetration of 10%.

Pricing: list price of $6,000 per patient in the US (gross/net discount of 50%) and $1,500 in Europe (no discount to list price).

Trial timeline and R&D costs: Phase I trial to commence in H124. Cereno would fund clinical development to end of Phase II trial, estimated to be in 2024. Phase III trial to be undertaken under an out-licensing partnership from 2027. US launch in 2031 and Europe in 2032. Total R&D expenses expected to be c $10m for Phase I and Phase II studies. Peak sales of c $1.9bn achieved in 2042.

Indication

CS1

CS014

Assumptions

Target population: PAH prevalence rate of 15 per 100,000 people, with 90% of patients seeking treatment (which translates to c 45,000 patients in the US and c 70,000 in Europe). CS1 will target FC II and FC III patients, which together make up c 80% of all patients. 35% of all patients are estimated to have limited treatment effect from baseline therapy with vasodilators and will be administered triple therapy, and 50% of these patients will still not have adequate response. These will be the initial targets for CS1. Peak penetration of 20% in the second-line treatment setting and 40% in third-line setting.

Pricing: list price of $250,000 in the US (gross/net discount of 30%) and $50,000 in Europe (no discount to list price). 5% price growth in the US and 3% in Europe.

Trial timeline and cost assumptions: Phase III to commence in 2026 with a cohort size of c 300 patients. US launch in 2029 and Europe in 2030. Phase III clinical trial expenses to be borne by out-licensing partner. Total deal value of $1.5bn, with an upfront payment of $150m and the rest in regulatory and sales milestones (30:70 split). Flat royalty rate of 15%. Peak sales of c $2.1bn achieved in 2038.

Target population: initial target indications of venous thromboembolism (prevalence of 0.1%) and stroke prevention in atrial fibrillation (prevalence of 0.5%). Target population of around four million people across the US and Europe. CS014 to be positioned as first-line treatment. Peak penetration of 10%.

Pricing: list price of $6,000 per patient in the US (gross/net discount of 50%) and $1,500 in Europe (no discount to list price).

Trial timeline and R&D costs: Phase I trial to commence in H124. Cereno would fund clinical development to end of Phase II trial, estimated to be in 2024. Phase III trial to be undertaken under an out-licensing partnership from 2027. US launch in 2031 and Europe in 2032. Total R&D expenses expected to be c $10m for Phase I and Phase II studies. Peak sales of c $1.9bn achieved in 2042.

Source: Edison Investment Research

Our valuation for Cereno, detailed by assets, is presented in Exhibit 17.

Exhibit 17: Cereno valuation

Asset

Indication

Development phase

Launch

Peak sales ($m)

Peak sales year

NPV (SEKm)

Probability

rNPV
(SEKm)

rNPV/share (SEK)

CS1

PAH

Phase II

2029

2,113

2038

8,377.3

25%

2,094.3

9.0

CS014

Thrombosis

Phase I-ready

2031

1,863

2042

3,677.4

5%

183.9

0.8

Total

12,054.7

2,278.2

9.7

Net cash at 31 December 2023

41.7

0.2

Valuation

2,319.9

9.9

Source: Edison Investment Research

Financials

Cereno is a pre-revenue company and has, until now, funded its operations through capital-raising. Following its 2016 IPO, which netted a total of SEK32m in pre-IPO and IPO gross proceeds, the company has raised further equity capital three times (in 2019, 2020 and 2023), along with additional capital from the exercise of related warrants. According to our calculations, the three raises and warrant conversions (TO1 and TO2) have netted the company an additional c SEK350m in funds. The most recent equity raise was a rights issue in May 2023, whereby Cereno raised SEK77m in funding. We expect another SEK77m to flow in from the expected conversion of the attached TO3 warrants (available for exercise between 19 February and 1 March 2024), which have a maximum exercise price of SEK1.6 (significantly lower than the current trading price of SEK4.50/share). In addition, the company has raised another SEK100m through loan issues to date (SEK10m raised in September 2020 and subsequently repaid), including a SEK90m loan raised from Formue Nord Fokus in November 2023. The loan can be drawn down in two equal tranches. The first was utilised immediately and the second tranche can be drawn down at the company’s discretion until August 2024. The loan is subject to a 5% set-up fee (recognised as interest expense in Q423) and carries an interest rate of the 3M Stibor+10% (equivalent to c 14%). The loan matures in May 2025.

In FY23, Cereno reported an operating loss of SEK44.7m, up 62.6% y-o-y from the FY22 figure of SEK27.5m. This was primarily driven by a 150% increase in personnel costs to SEK18.7m (due to the implementation of an incentive program in Q423 – 2023/2026 warrants), from SEK7.5m in the previous year. The company capitalises its R&D but we understand from the disclosed P&L figures that the amount is also shown as income (capitalised work for own account), offset by being included as part of other external costs. Based on these disclosures, we calculate the FY23 R&D expense to be SEK49.3m, down from SEK57.5m in FY22. The net loss for the period was SEK48.2m versus SEK27.6m in FY22. The FY23 free cash outflow was SEK82.2m, up 9.3% from the comparative figure of SEK75.3m. We expect R&D and other operating costs to continue to rise over the explicit forecast period (FY24 and FY25) as clinical work on CS1 continues and the preclinical pipeline transitions to the clinic (CS014 in H124). We estimate R&D expenses of SEK79.6m in FY24 and SEK87.0m in FY25 and operating losses of SEK42.7m and SEK44.9m for the two years, respectively. We note that the R&D costs are capitalised and will start amortising once the assets are commercialised. We project cash burn of SEK128.9m in FY24 and SEK135.0m in FY25.

The company exited FY23 with a gross cash balance of SEK87.1m, which included contributions from the equity issue as well as the debt raise during the year. We expect the series TO3 warrants to be converted if the current trading performance continues, bringing another SEK77m in funds. If the remaining SEK45m tranche from the SEK90m debt facility is drawn down, we expect the pro forma cash balance (c SEK209m, inclusive of the SEK77m and SEK45m amounts discussed above) to be sufficient to fund operations into Q225. We estimate the company needs to raise SEK150m by Q225 to fund operations for the year as well as service the SEK90m debt repayment due in May 2025, which we reflect as illustrative debt in our model. We assume a licensing deal in 2026, with the partner taking over development activity. However, should such a deal not materialise, and the company takes up self-development of its clinical programmes, we estimate the need to raise SEK200m per year starting in FY26, until the commercial launch of CS1 in 2029 (total of SEK750m between FY25 and FY28). If the company uses equity issues for this funding, we estimate the company would need to issue 166.7m shares (assuming the current share price of SEK4.50), which would result in our per-share valuation diluting to SEK5.7 per share, from SEK9.9 per share currently.

Exhibit 18: Financial summary

Accounts: IFRS, year end 31 December, SEK000s

 

2021

2022

2023

2024e

2025e

PROFIT & LOSS

 

 

 

 

 

 

Net sales

 

0

0

0

0

0

Capitalised work for own account

 

44,805

57,538

49,277

79,615

87,007

Total revenues

 

44,805

57,538

49,277

79,615

87,007

Cost of sales

 

0

0

0

0

0

Gross profit

 

44,805

57,538

49,277

79,615

87,007

Total operating expenses

 

(59,811)

(85,037)

(94,002)

(122,364)

(131,879)

R&D and other expenses

 

(57,797)

(76,620)

(71,228)

(102,664)

(111,208)

Of which - R&D expenses

 

(44,805)

(57,538)

(49,277)

(79,615)

(87,007)

Of which - other expenses

 

(12,815)

(18,899)

(21,951)

(23,048)

(24,201)

Personnel costs

 

(1,789)

(7,514)

(18,763)

(19,700)

(20,670)

Other operating items

 

(226)

(903)

(4,012)

0

0

Operating income (reported)

 

(15,006)

(27,499)

(44,725)

(42,749)

(44,871)

EBITDA (normalized)

 

(14,992)

(27,485)

(44,711)

(42,734)

(44,871)

Finance income/(expense)

 

(1,245)

(149)

(3,456)

(8,498)

(3,767)

Exceptionals and adjustments

 

0

0

0

0

0

Profit before tax (reported)

 

(16,251)

(27,649)

(48,182)

(51,247)

(48,638)

Profit before tax (normalised)

 

(16,251)

(27,649)

(48,182)

(51,247)

(48,638)

Income tax expense (includes exceptionals)

 

(4)

(6)

0

0

0

Net income (reported)

 

(16,255)

(27,654)

(48,182)

(51,247)

(48,638)

Net income (normalised)

 

(16,255)

(27,654)

(48,182)

(51,247)

(48,638)

EOP shares, '000

 

105,262

137,515

233,775

281,905

281,905

Basic EPS (SEK)

 

(0.15)

(0.20)

(0.21)

(0.18)

(0.17)

Adjusted EPS (SEK)

 

(0.15)

(0.20)

(0.23)

(0.19)

(0.17)

BALANCE SHEET

 

 

 

 

 

 

Intangible Assets

 

89,449

146,987

196,264

275,879

362,886

Fixtures, tools and installation

 

43

29

14

0

0

Other long-term receivables

 

8

10

1

1

1

Total non-current assets

 

89,500

147,025

196,279

275,880

362,887

Other receivables

 

1,363

1,248

1,169

1,330

1,374

Prepaid expenses and accrued income

 

240

335

407

407

407

Cash and bank balance

 

89,635

67,046

87,103

80,185

5,197

Total current assets

 

91,238

68,629

88,678

81,922

6,978

Accounts Payable

 

2,884

9,411

6,930

9,021

9,723

Other Current Liabilities

 

2,589

4,331

16,320

16,320

16,320

Short-term Debt

 

4,800

0

0

0

0

Total current liabilities

 

10,273

13,742

23,251

25,342

26,043

Long-term Debt

 

0

0

45,000

90,000

150,000

Other debt

 

400

400

400

400

400

Total non-current liabilities

 

400

400

45,400

90,400

150,400

Equity attributable to company

 

170,065

201,511

216,307

242,060

193,422

CASH FLOW STATEMENT

 

 

 

 

 

 

Net profit

 

(16,255)

(27,654)

(48,182)

(51,247)

(48,638)

Depreciation

 

14

14

14

14

0

Translation difference

 

(321)

(90)

1,671

0

0

Accrued costs

 

1,230

450

777

0

0

Share based payments

 

0

0

0

0

0

Taxes paid

 

(1)

(4)

0

0

0

Movements in working capital

 

2,196

8,669

8,772

1,931

657

Cash from operations (CFO)

 

(13,137)

(18,615)

(36,948)

(49,302)

(47,981)

Purchase of intangible assets

 

(44,805)

(57,538)

(49,277)

(79,615)

(87,007)

Purchase of PPE

 

0

0

0

0

0

Other investing activities

 

0

0

0

0

0

Cash used in investing activities (CFIA)

 

(44,805)

(57,538)

(49,277)

(79,615)

(87,007)

Loans received

 

0

0

45,000

45,000

150,000

Loan repayments

 

(5,000)

(5,000)

0

0

(90,000)

Equity issued

 

91,398

58,791

61,315

77,000

0

Other Financing Cash Flows

 

(4,825)

(226)

0

0

0

Cash from financing activities (CFF)

 

81,573

53,564

106,315

122,000

60,000

Cash and equivalents at beginning of period

 

66,004

89,635

67,046

87,103

80,185

Increase/(decrease) in cash and equivalents

 

23,630

(22,589)

20,090

(6,917)

(74,988)

Effect of FX on cash and equivalents

 

0

0

(33)

0

0

Cash and equivalents at end of period

 

89,635

67,046

87,103

80,185

5,197

Net (debt)/cash

 

84,435

66,646

41,703

(10,215)

(145,203)

Source: Company reports, Edison Investment Research

Contact details

Revenue by geography

Cereno Scientific AB

BioVentureHub

Pepparedsleden 1

431 83 Mölndal, Sverige

Gothenburg, Sweden

https://cerenoscientific.com/

N/A

Contact details

Cereno Scientific AB

BioVentureHub

Pepparedsleden 1

431 83 Mölndal, Sverige

Gothenburg, Sweden

https://cerenoscientific.com/

Revenue by geography

N/A

Management team

CEO: Sten R Sörensen

CFO: Eva Jagenheim

Sten has extensive leadership experience in the pharmaceutical and biotech industries spanning over 30 years. He is currently CEO of the clinical stage biotech company Cereno Scientific, a company he joined as a board member in 2014 and assumed the CEO role in 2015 when Cereno was still an early project stage. Under Sten’s leadership, the company has been propelled into a promising three candidate drug pipeline, all potentially groundbreaking therapies in rare and common cardiovascular diseases with high unmet needs. Prior to Cereno, Sten has held senior positions in major pharma including head of international marketing operations for SEK10bn pharma portfolio at Monsanto (GD Searle, Chicago, US) and global marketing director for the SEK4bn portfolio of Secondary Prevention Products, Cardiovasculars at AstraZeneca (Gbg, Sweden). He has, during his career at Monsanto and AstraZeneca, initiated two groundbreaking preventive survival studies in heart failure. Sten is chairman of SARomics Biostructure since 2013. Sten holds a bachelor’s degree in chemistry from Lund University.

Eva joined Cereno Scientific in 2023 from RLS Global, a medtech company listed on Nasdaq First North Growth Market, where she was the CFO. She has broad experience of various roles within finance, including working as an accountant at PWC, a consultant at accounting firm Arthur Andersen and at companies of varying sizes across several different industries. Eva has an MSc in business and economics from Växjö University and an MBA from Gothenburg Business School.

CSO: Dr Björn Dahlöf

CMO and head of R&D: Dr Rahul Agrawal

Björn joined Cereno Scientific in 2018. He has for many years been an adviser to small and large pharmaceutical companies regarding drug development in all phases, from preclinical development to larger lifecycle management studies after registration. He has extensive experience in cardiovascular research, pharmacology, drug development and clinical trials (all phases) and has lectured in these areas internationally. He has also initiated and led several major national and multinational mortality and morbidity studies that have had significance for guidelines in cardiovascular prevention and has authored over 400 scientific publications.

Rahul joined Cereno Scientific in 2024 as chief medical officer and head of R&D. Prior to joining Cereno he served as CMO at a gene therapy focused biotech, Cardior, and was previously the VP and global medicines leader at AstraZeneca. His expertise encompasses the entire value chain including R&D, medical affairs, commercial and strategy experience across various therapeutic areas such as cardiovascular, renal, respiratory, and rare/orphan drugs and he has launched seven drugs globally.

Head of preclinical development: Nicholas Oakes

Director business development: Julia Fransson

Nicholas has been the head of preclinical development at Cereno Scientific since 2022. He has more than 20 years of experience working in the pharmaceutical industry with both efficacy and safety-related aspects of preclinical research to discover and develop new effective and safe medicines in metabolic, cardiovascular and renal disease areas. He holds a PhD in cardiovascular and metabolic research from the University of New South Wales, Sydney, Australia.

Julia joined Cereno Scientific in 2024 and is an experienced business development professional in the life science industry. She is skilled in crafting strong and focused strategies, translating key scientific and market insights toward investors and partners as well as business modelling market analysis and biotech asset valuation. Previous roles include management positions within developing technology companies as well as, most recently, heading up a boutique life science strategy advisory firm.

Management team

CEO: Sten R Sörensen

Sten has extensive leadership experience in the pharmaceutical and biotech industries spanning over 30 years. He is currently CEO of the clinical stage biotech company Cereno Scientific, a company he joined as a board member in 2014 and assumed the CEO role in 2015 when Cereno was still an early project stage. Under Sten’s leadership, the company has been propelled into a promising three candidate drug pipeline, all potentially groundbreaking therapies in rare and common cardiovascular diseases with high unmet needs. Prior to Cereno, Sten has held senior positions in major pharma including head of international marketing operations for SEK10bn pharma portfolio at Monsanto (GD Searle, Chicago, US) and global marketing director for the SEK4bn portfolio of Secondary Prevention Products, Cardiovasculars at AstraZeneca (Gbg, Sweden). He has, during his career at Monsanto and AstraZeneca, initiated two groundbreaking preventive survival studies in heart failure. Sten is chairman of SARomics Biostructure since 2013. Sten holds a bachelor’s degree in chemistry from Lund University.

CFO: Eva Jagenheim

Eva joined Cereno Scientific in 2023 from RLS Global, a medtech company listed on Nasdaq First North Growth Market, where she was the CFO. She has broad experience of various roles within finance, including working as an accountant at PWC, a consultant at accounting firm Arthur Andersen and at companies of varying sizes across several different industries. Eva has an MSc in business and economics from Växjö University and an MBA from Gothenburg Business School.

CSO: Dr Björn Dahlöf

Björn joined Cereno Scientific in 2018. He has for many years been an adviser to small and large pharmaceutical companies regarding drug development in all phases, from preclinical development to larger lifecycle management studies after registration. He has extensive experience in cardiovascular research, pharmacology, drug development and clinical trials (all phases) and has lectured in these areas internationally. He has also initiated and led several major national and multinational mortality and morbidity studies that have had significance for guidelines in cardiovascular prevention and has authored over 400 scientific publications.

CMO and head of R&D: Dr Rahul Agrawal

Rahul joined Cereno Scientific in 2024 as chief medical officer and head of R&D. Prior to joining Cereno he served as CMO at a gene therapy focused biotech, Cardior, and was previously the VP and global medicines leader at AstraZeneca. His expertise encompasses the entire value chain including R&D, medical affairs, commercial and strategy experience across various therapeutic areas such as cardiovascular, renal, respiratory, and rare/orphan drugs and he has launched seven drugs globally.

Head of preclinical development: Nicholas Oakes

Nicholas has been the head of preclinical development at Cereno Scientific since 2022. He has more than 20 years of experience working in the pharmaceutical industry with both efficacy and safety-related aspects of preclinical research to discover and develop new effective and safe medicines in metabolic, cardiovascular and renal disease areas. He holds a PhD in cardiovascular and metabolic research from the University of New South Wales, Sydney, Australia.

Director business development: Julia Fransson

Julia joined Cereno Scientific in 2024 and is an experienced business development professional in the life science industry. She is skilled in crafting strong and focused strategies, translating key scientific and market insights toward investors and partners as well as business modelling market analysis and biotech asset valuation. Previous roles include management positions within developing technology companies as well as, most recently, heading up a boutique life science strategy advisory firm.

Principal shareholders

(%)

Avanza Pension

23.90%

Pareto Securities

3.10%

Butt Jan

1.40%

Gevryie Dory

1.40%

Borgquist, Niklas

1.20%

Ejlegard, Andreas

1.20%

Nordnet Pensionsförsäkring

1.00%

Lundberg Mårten

0.90%

Jern Claes Sverker

0.70%

Bergh, Olof Niklas

0.50%

General disclaimer and copyright

This report has been commissioned by Cereno Scientific and prepared and issued by Edison, in consideration of a fee payable by Cereno Scientific. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Cereno Scientific and prepared and issued by Edison, in consideration of a fee payable by Cereno Scientific. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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