Mendus — Gearing up for the pivotal stages of development

Mendus is a clinical-stage immuno-oncology company focused on developing innovative therapies to address tumour recurrence and improve long-term survival in cancers underserved by immunotherapies. It aims to utilise its proprietary dendritic cell biology capabilities to create a pipeline combining clinical efficacy with favourable safety profiles. Management recognises the successes that immune checkpoint inhibitors (ICIs) have had in the field of immunotherapy, but also acknowledges the challenges associated with proving incremental efficacy benefits when combining such treatments with other therapies. As such, its strategy focuses on indications where ICIs have been less successful. Primarily, this is blood-borne tumours, with AML as the target indication for lead asset vididencel, an allogenic off-the-shelf cancer vaccine. Mendus is gearing up for pivotal studies in this indication. Vididencel is also being developed as a maintenance therapy for ovarian cancer (OC), with the programme in the earlier stages of development. Second asset ilixadencel is an intratumoural immune primer being explored in soft tissue sarcoma (STS).

We value Mendus at SEK2.0bn or SEK40.3/share, using an rNPV model (discount rate of 12.5%) reflecting contributions for its three clinical-stage programmes. The primary contributor to our valuation (57%) is vididencel in AML, the company’s most advanced development programme. Following the latest data from the ADVANCE II trial, we attribute a 30% PoS, a 2029 launch and estimate non-risk-adjusted peak sales of US$930m to the indication. We estimate a 21% contribution to the valuation from vididencel in OC (a 15% PoS, a 2031 launch and peak sales of US$720m), for which Phase I top-line data are expected before year-end 2024. We model a licensing deal for vididencel in 2026 worth US$850m. For ilixadencel, we expand our assessment to include the broader category of STS (attributing a 10% PoS, peak sales of US$400m and launch in 2032) and estimate a US$350m out-licensing deal in 2028. If a vididencel partnership deal does not materialise, we estimate the company would need to raise a total of SEK650m from FY25–28.

Being pre-revenue, Mendus has relied on external capital to fund its development programmes. In Q324, Mendus reported an operating loss of SEK22.7m, of which R&D expenses contributed c 70% of opex, which was reported as SEK23.6m. This was materially lower than the Q224 opex figure of SEK38.6m, which we believe was due to lower costs related to the technology transfer of the vididencel manufacturing process to NorthX Biologics. The operating loss for the first nine months of the year (9M24) was SEK96.0m, versus SEK83.2m in 9M23. In July 2023, Mendus raised SEK317m through a private placement and rights issue and this was bolstered further by another SEK69m in proceeds from exercise of the associated warrants in April 2024. The company ended Q324 with a net cash balance of SEK108.5m, which we estimate provides a runway through 2025.

Mendus is subject to typical biotech risks, such as the unpredictable outcome of trials, regulatory discussions, the success of competitors, as well as financing and commercial risks. We assume that a licensing deal will be secured for vididencel in 2026, and for ilixadencel in 2028, but we acknowledge the underlying imprecisions and variability in anticipating the timing and terms of potential licensing deals. Proof-of-concept has been established with vididencel in AML and, therefore, the medium-term R&D sensitivities are the expected commencement and outcomes from the upcoming registrational trial in AML, as well as the exploratory trials to broaden the addressable patient population, including the ongoing CADENCE trial. For ilixadencel, while preclinical and early clinical data show promise in terms of safety and efficacy, proof-of-concept data from the Phase I REGOMUNE trial will represent an important inflection point.

ADVANCE II is an international, multi-centre, open-label, proof-of-concept Phase II trial to evaluate vididencel as a potential monotherapy to prolong survival for AML patients as a maintenance treatment. The study includes 20 participants who had previously responded to induction chemotherapy and achieved complete remission (CR), but still had measurable residual disease (ie MRD+, which is associated with higher relapse rates); all patients were ineligible for hematopoietic stem cell transplantation (HSCT). The previous update from the trial was at ASH 2023 (long-term survival data with a median follow-up of 31.6 months and a range of 6.6–60 months), which showed that 14 out of 20 patients were still alive and 11 were in CR. Mendus has now presented extended long-term survival data at ASH 2024 (7–10 December 2024).

As of 4 November 2024, the median follow-up for all patients was 41.8 months. According to this extended survival data, median relapse-free survival (RFS) and overall survival (OS) had not been reached, since the majority of patients were alive and free of disease (Exhibits 1 and 2). The results showed that 13 of 20 patients were still alive and 11 were still in CR as of the cut-off date. In our view, the updated data demonstrate the durable effect of vididencel on this patient population. At the follow-up date the three-year OS rate for ADVANCE II was 71% and the estimated five-year OS rate was 58%.

The current standard of care for AML maintenance is oral azacitidine (brand name Onureg), and we note that the registrational trial for the drug (QUAZAR AML-001, a placebo-controlled and double-blind Phase III study involving 463 patients randomised to receive either oral azacitidine or placebo) included both MRD+ and MRD- AML patients. For the MRD+ sub-population in QUAZAR AML-001, median RFS was reported as 7.1 months versus 2.7 months for placebo, and median OS was 14.6 months for oral azacitidine versus 10.4 months for placebo. At the median follow-up of 55.5 months the three-year OS for the overall population (MRD+ and MRD-) was estimated at 37.4%, and the five-year OS at 26.5%. In our view, the ADVANCE II data for vididencel compare favourably, in particular as it relates to MRD+ patients, a cohort with lower RFS and OS probabilities, as seen in the QUAZAR AML-001 trial.

Mendus also published updated immunomonitoring data at ASH 2024, bolstering the data package supporting vididencel’s unique mechanism of action. Patients were evaluated for sustained vaccine-induced T-cell responses (VIRs). The results showed that 17 out of 20 patients displayed VIRs, with nine patients showing sustained VIRs. Importantly, the patients with sustained VIRs showed notably higher OS compared to those without sustained VIRs (Exhibit 3). Furthermore, this group had a greater number of MRD responses, with six out of nine patients showing an MRD response (MRD clearance or a >10-fold reduction in MRD). The immunomonitoring results also demonstrated distinctions between patient groups at baseline, with high levels of B-cells and low levels of inhibitory CD8LAG3 central memory (CD8LAG3CM) T-cells correlating with improved long-term survival (Exhibit 4). The majority of these patients (six out of eight) showed sustained VIRs. We believe that similar immunomonitoring data focused on pre-specified sub-groups in pivotal studies could support the data package for the candidate and discussions with regulators. Collectively, the data support vididencel as an active immunotherapy agent against residual cancer cells, in our view, with the potential to provide durable responses in this AML population.

Mendus presented two further abstracts at ASH 2024. The key takeaway from these was that preclinical data supported the potential synergy between vididencel, azacitidine and venetoclax in AML, as well as a possible further application to chronic myeloid leukaemia. While we recognise that this is early-stage data, this might represent the opportunity to expand vididencel to additional patient populations. We await further updates from the company as to whether plans to explore these possibilities, such as with new clinical studies, come to fruition.

For management, next steps for the AML vididencel programme have been a significant focus throughout 2024 and have mainly included preparations for a subsequent registration trial to assess the potential synergy between vididencel and oral azacitidine, a sensible strategic decision given the data, in our view. Vididencel is also being assessed as part of a Phase II investigator-sponsored trial in combination with oral azacitidine. For this trial, Mendus entered into a collaboration with the Australasian Leukaemia & Lymphoma Group (ALLG) in December 2023. The trial, which is sponsored by the ALLG, is titled the ALLG AMLM22 ‘CADENCE’ study. Mendus aims to leverage the ALLG’s experience in the AML space while utilising its extensive clinical trial network to facilitate the progress of the study. CADENCE (expected n=140) is an adaptive, randomised, multi-centre Phase II clinical trial investigating vididencel in combination with oral azacitidine. It will consist of two stages, the first of which will assess safety in c 40 patients, and the second will assess efficacy in c 100 patients. Importantly, CADENCE will include both MRD+ and MRD- patients, making it more similar in terms of eligibility to QUAZAR AML-001 as well as the upcoming registrational study by Mendus. According to the company’s Q324 update, the first participating sites for CADENCE have been activated and are open for patient recruitment.

Initial safety data from the first stage of the CADENCE trial, expected from H225, will contribute to the safety dossier of vididencel, as well as regulatory discussions for the global registration trial, which, while separate from CADENCE, will also assess vididencel in combination with oral azacitidine in a similar post-induction chemotherapy patient population. Mendus’s primary objective is to be pivotal-stage ready by H225 and we expect this to be followed by a registrational trial, likely in 2026 (although the exact timing can vary based on additional financing raised and/or signing a partnering agreement). We note that the company is not reliant on the CADENCE trial data before starting the registration trial, as it expects to be in a position to progress to the pivotal stages of development regardless. To facilitate the advancement to the pivotal study stage, Mendus is engaged in a manufacturing alliance with NorthX Biologics, and the companies have co-established a manufacturing facility dedicated to the production of the candidate (discussed in more detail below). The technology transfer is on track to be completed by end-H125, and the facility should be ready to support large-scale manufacturing by mid-2025.

For the remainder of this note, we focus on Mendus’s pipeline as a whole, covering other activities for vididencel, as well as the company’s second asset, ilixadencel. We also discuss key themes associated with Mendus’s strategy, including the immuno-oncology landscape, as well as the importance of access to precise and scalable manufacturing in this sub-sector.

Mendus’s clinical development pipeline has been designed to utilise the company’s capabilities and experience in allogenic cell therapies and dendritic cell (DC) biology with the intention of improving survival outcomes for patients with cancer (Exhibit 5). We note that lead asset vididencel is derived from Mendus’s proprietary DCOne cell line platform and the company is also exploring the use of the platform to expand the therapeutic quantities of memory natural killer (NK) cells, which could provide the basis for novel NK cell-based therapies. We expect an update on this programme as material progress is made, though we do not include it in our valuation and focus only the clinical-stage candidates (vididencel and ilixadencel) for the remainder of this note.

Lead asset vididencel is an off-the-shelf cellular immunotherapy, primarily being developed as a maintenance therapy in AML. The ADVANCE II trial is evaluating vididencel as a monotherapy in the AML maintenance setting. Positive survival data were previously presented in December 2022 and December 2023, and a further long-term follow-up readout was recently presented at the 66th ASH conference in December 2024. Vididencel is subsequently being assessed in combination with the current standard of care, oral azacitidine, in the CADENCE trial, in collaboration with the ALLG; the first participating sites for CADENCE were activated during Q324 and are open for patient recruitment. We note that Mendus has been granted FDA Fast Track and Orphan Drug designations for vididencel as a potential maintenance therapy for AML, providing a robust foundation for the pivotal stages of development, in our view.

Vididencel comprises irradiated leukemic-derived dendritic cells that are administered via intradermal injection. Upon injection, the product triggers a local immune response and is phagocytosed by skin-resident antigen-presenting cells (APC), which subsequently migrate out of the skin and towards the lymph nodes to trigger immune responses against the antigens carried by vididencel. Vididencel is manufactured based on the proprietary DCOne leukemic cell line, which has been selected for stable growth in cell culture, making it suitable for scalable production. During manufacturing, the DCOne leukemic cells undergo a cytokine-induced phenotypic shift and as a result express dendritic cell surface markers. This renders them highly immunogenic and suitable as the basis for vaccination. Because the cells contain a full spectrum of tumour-associated antigens, vididencel treatment triggers a broad immune response, including T-cell responses against common leukemic antigens such as WT-1, RHAMM and PRAME. (Exhibit 6).

Vididencel is also being explored as a potential maintenance therapy for OC and is currently involved in the ongoing Phase I ALISON trial. The trial completed patient recruitment in December 2023 and management presented interim data at the European Society for Medical Oncology (ESMO) conference in June 2024. This update revealed that all 17 patients had completed their planned treatment regimens, and 10 of the 15 evaluated patients had shown a VIR against typical OC-related tumour antigens, meeting the primary objective of the trial. The ESMO update also confirmed the desirable safety profile of vididencel, with the only product-related side effects being typical injection site responses. At week 22, 10 patients had stable disease.

Long-term follow-up is ongoing and a readout on top-line safety and feasibility data based on all 17 treated patients is expected within Q424.

Second asset ilixadencel’s safety and potential efficacy in solid tumours is supported by preclinical and clinical data. Mendus is working collaboratively with Institut Bergonié to test the vaccine in patients with STS as part of an ongoing Phase I/II basket trial (REGOMUNE). Management has rationalised the choice of this indication by its lack of response to ICIs. The REGOMUNE trial is a multi-centre, prospective, open-label study assessing the combination of regorafenib and avelumab in multiple solid tumours. It is currently in the Phase I dose-escalation phase, based across seven hospitals in France, and will be followed by a Phase II portion involving 17 separate cohorts. As part of the collaboration, Mendus will provide ilixadencel for one of these cohorts (n=43), where it will be tested alongside the regorafenib and avelumab combination. First patient data are currently guided for H126. We believe this is a sensible strategy for ilixadencel, as a cost-efficient approach to gain proof-of-concept data, somewhat de-risking the programme since Mendus’s costs for participation in the trial are limited to providing the candidate. We note that Mendus has been granted FDA Fast Track and Orphan Drug designations for ilixadencel in the indication of STS.

We note that ilixadencel was previously being assessed in the MERECA trial, evaluating ilixadencel in metastatic renal cell carcinoma (mRCC). However, in late 2023, Mendus announced that the long-term follow-up data for the trial had confirmed previously reported observations that there was no significant survival benefit with ilixadencel plus standard of care sunitinib versus sunitinib alone. Management concluded at that stage that the data did not support continued development in mRCC.

The candidate is an intratumoural immune primer, comprising pro-inflammatory activated allogeneic DCs, intended for intratumoural administration. Ilixadencel has been designed such that, when injected into a tumour, the administered DCs are expected to cause local recruitment and activation of the patient’s immature DCs, NK cells and T-cells, which are projected to drive an anti-cancer response (Exhibit 7).

In November 2024, Mendus presented preclinical data at the Society for Immunotherapy of Cancer conference, showcasing immune-priming synergies between ilixadencel and avelumab. The data highlighted that addition of the checkpoint inhibitor avelumab resulted in stronger NK cell activation by ilixadencel, improved production of proinflammatory cytokines and chemokines, and an enhanced pro-inflammatory tumour microenvironment, leading to more effective anti-tumour immune responses.

Broadly speaking, immunotherapy is a method for treating cancer that relies on priming a patient’s immune system to combat the disease by strengthening its ability to recognise and attack cancer cells. The field is recognised as the dominant pillar of innovation and for improvements to overall treatment outcomes in most cancer indications over the past decade. The three primary forms of cancer immunotherapy currently on the market are: immune checkpoint inhibitors (ICIs), chimeric antigen receptor T-cell therapies (CAR-Ts) and cancer vaccines (the treatment class that Mendus’s technology is directed towards).

The two leading commercial-stage immunotherapy strategies, ICIs and CAR-Ts, vary in terms of which cancer types they target most effectively. CAR-Ts’ development origins and the therapies’ first and ongoing commercial and regulatory successes have been in the treatment of blood cancers, such as acute lymphoblastic leukaemia, relapsed or refractory multiple myeloma and B-cell lymphoma. However, CAR-Ts have not been nearly as efficacious in attacking solid tumours and, to our knowledge, no CAR-T treatment has yet received approval for the treatment of solid tumours. There are multiple reasons why CAR-Ts have not been as effective in treating these types of cancers:

Interestingly, for ICI therapy, the opposite is true, as ICIs have been approved for a much wider range of solid cancers (compared to blood cancers), and there is more extensive clinical data supporting their use in such cancers.

One reason why ICIs have been effective in many solid tumours is that these cancers tend to exhibit higher expression of checkpoint proteins than most haematological malignancies. Solid tumours often seek to evade immune attack by secreting immuno-suppressive cytokines, such as transforming growth factor-β, into their TME, and over-expressing immune checkpoint proteins such as PD-1.

Furthermore, solid tumours tend to have a much higher tumour mutation burden (TMB) than blood cancers. The TMB is a quantifiable characteristic of cancerous tissue and it refers to the number of (non-inherited) genetic mutations per million bases of an evaluated genetic sequence. Tumours with a high TMB are believed to express more (immunogenic) neoantigens on their cell surface. This means that they are more likely to present unique protein sequences on these surfaces, which would then trigger an immune response by the host after ICI treatment. Hence, tumours with a high TMB are more likely to be recognised as ‘foreign’ by the immune system and respond to ICI immunotherapy.

One form of blood cancer where ICIs have had clinical success is in the treatment of certain lymphomas, with pembrolizumab approved for relapsed or refractory classic Hodgkin’s lymphoma (cHL) and nivolumab approved for cHL that has relapsed or progressed after autologous HSCT. Pembrolizumab is also approved for refractory primary mediastinal large B-cell lymphoma, an aggressive form of non-Hodgkin lymphoma. We also note that while ICI treatment as a monotherapy has had limited success in other blood cancers, an emerging area of ongoing development is the evaluation of combined or sequential treatment of CAR-Ts and ICIs for several haematological cancers.

AML is a highly aggressive form of blood cancer. Patients diagnosed with AML first go through induction chemotherapy, which aims to kill as many leukaemia cells in the blood and bone marrow as possible. A 3+7 regimen is typically employed, which involves three days of the chemotherapy drug anthracycline and seven days of cytarabine chemotherapy. Patients who are deemed unfit for chemotherapy are treated with venetoclax and azacitidine. While many patients see initial signs of success with such treatments, relapse rates remain high for AML patients even after achieving CR. According to the National Cancer Institute, the five-year survival rate of AML remains poor at 31.9% and this figure is even lower for transplant-ineligible patients. This is highlighted by the long-term survival data from QUAZAR AML-001 trial, which included only transplant-ineligible patients, and reported five-year survival rates of 26.5%, versus 20% for placebo. This study included both MRD+ and MRD- patients and, as noted previously, relapse rates for MRD+ patients are likely to be even higher. As all AML patients carry the risk of relapse, maintenance therapies aim to eradicate residual cancerous cells to reduce the probability of relapse.

An important concept in AML maintenance is that of MRD. MRD refers to the presence of cancer cells at trace levels that conventional testing methods generally cannot detect, and only more modern sensitive methods can (eg flow cytometry or polymerase chain reaction-based methods). Therefore, a patient could be classified as in CR while still being MRD positive. As a result, MRD serves as a prognostic biomarker, and hence is a key relapse risk factor for AML patients. As exemplified in the registrational QUAZAR AML-001 trial for oral azacitidine, MRD positivity was associated with inferior RFS and OS; this was the case in both the treatment arm and the placebo arm.

There are currently limited treatment options for AML maintenance:

With these treatment options, safety remains a key concern and many patients continue to experience disease progression despite ongoing treatment. Mendus is developing vididencel to address this clinical dilemma, aiming to provide a safe and effective treatment option as an active ongoing immunotherapy to prolong RFS (Exhibit 8).

As a generalisation, the overall process involved in the manufacturing of cell therapy products typically involves three main steps:

A key challenge developers of cell therapy products or large-molecule biological materials face is ensuring product consistency and quality during large-scale production runs, as these products are much more sensitive than small-molecule drugs to temperature fluctuations and/or changes in the manufacturing process. Preparing for commercial-scale production that is GMP compliant is therefore a particularly complex and time-consuming process for biological products and cell therapies. Regulators (eg the FDA and the European Medicines Agency) recognise the susceptibility of biological products to potential degradation (which would affect their therapeutic viability), and tightly scrutinise the manufacturing process surrounding these products. It is critical for a developer of a complex cell therapy product (such as Mendus) to not only demonstrate clinical efficacy and safety of a product candidate in pivotal studies, but also convince regulators of safe and repeatable commercial production capabilities of consistent product quality, and purity, supported by a robust logistics platform that tightly controls product temperatures at all stages of the supply chain and delivery timing.

The manufacturing and supply chains of autologous cell therapy products (ie those relying on patient materials) are notoriously challenging due to the complexity of the biological product, as well as the logistics involved with production and transport to the patient (and maintaining thermal and environmental stability throughout, as discussed above). All current approved CAR-Ts, for instance, are ‘personalised’, in that they require biological material to be drawn from the patient and then incorporated into the end-product before its administration as a therapy to the patient. These personalised therapies require strict controls and careful alignment of the production logistics with patient therapy. Such logistic and production challenges contribute to the high cost of current CAR-Ts, estimated at over US$400k and sometimes over US$1m per patient, which itself can cause significant financial challenges for CAR-T treatment centres.

Vididencel, an ‘off-the-shelf’ product (comprising irradiated leukaemic-derived dendritic immune cells) derived from Mendus’s DCOne cell line, does not require a patient’s own biological material for the end-product (since it is an allogeneic cell therapy, meaning the required genetic material is derived from Mendus’s proprietary cell line). As a result, the vididencel cell therapy product offers a notable potential advantage compared to patient-derived (autologous) cell therapy products (such as the currently approved CAR-Ts) in that this end-product can be produced in large batches, offering much improved scalability (and the resulting potential for improved COGS) and the possibility for tighter control in the supply chain, and less susceptibility to external logistical shocks and challenges than for products dependent on sourcing input material from patients. The final vididencel end-product is stored frozen and is ‘off-the-shelf’. It can be stored in local hospitals and provided to patients on as needed (ie without requiring the complex and potentially vulnerable logistic and transportation process associated with personalised cell therapies).

In mid-2023, Mendus announced that it had entered into a strategic cell therapy manufacturing alliance with NorthX Biologics to co-establish a dedicated large-scale cell manufacturing facility in Sweden with a production process that could reliably produce the precise biologically active vididencel product needed for upcoming late-stage pivotal trials and for eventual commercialisation. NorthX Biologics is a contract development and manufacturing organisation and has GMP capability for the production of biologics used in vaccines, gene therapy and other advanced therapy medicinal products. Mendus indicates that prior to this alliance with NorthX Biologics, it had invested years in optimising its internal production process at its Leiden facilities (through its DCOne production cell line), and it is now transferring the required technology and know-how to the new facility under the NorthX Biologics collaboration.

The companies are targeting an H225 timeline for when the facility will be able to reliably and consistently produce the active product in the large batch quantities needed for the pivotal trials, while meeting GMP guidelines. Mendus and NorthX Biologics started the required technology transfer for the large-scale manufacturing process in H124. Mendus reported in its Q324 results that it is on track to meet the target of releasing the necessary material for late-stage development in H225. The company reported the successful training of NorthX Biologics staff and the completion of the production facility, which has also completed two successful large-scale production runs in 2024 to date. Mendus expects the next production runs will more closely represent the full GMP process, which it expects should enable it to start actual GMP production of material for clinical use by mid-2025. A GMP production run refers to a manufacturing process that meets GMP guidelines for a production method that is very tightly controlled and documented carefully across all stages to ensure consistent quality and safety in the end-product.

Mendus also asserts that its existing in-house cell therapy process development expertise, working in collaboration with the dedicated partners at NorthX Biologics, will help it maintain control over the production process. It brings comprehensive internal knowledge and know-how of the manufacturing control and quality aspects involved with the vididencel regulatory dossier. Hence, the company believes that, along with NorthX Biologics, it will be well positioned to satisfy the strict requirements needed for regulatory approval of the commercial-scale vididencel manufacturing process. Further, having a reliable and validated large-scale production process on hand and co-owned with NorthX Biologics helps reduce the non-clinical risk (ie commercial and execution risk) associated with vididencel, in our view, making it potentially more attractive to would-be commercial partners.

In conjunction with the NorthX Biologics collaboration, Mendus entered into an agreement with Flerie Invest (Flerie), an established Swedish investment firm, whereby Flerie invested SEK90m in Mendus to support the NorthX Biologics alliance. Flerie’s investment was intended to cover all necessary activities until Q225, including adjustments to the current NorthX Biologics facilities, the technology transfer of the vididencel manufacturing process and manufacturing of vididencel batches for the pivotal stages of development.

As with all biotechs, Mendus is subject to risks associated with the unpredictable outcome of clinical trials, regulatory discussions, successes of competitors, as well as financing and commercial risks. For the purposes of our model, we assume that Mendus will secure a licensing deal for vididencel in 2026, and for ilixadencel in 2028, making our valuation sensitive to the precise timing of such deals and actual deal terms; the forecasting of licensing deals is a common challenge in this sector. While proof-of-concept for vididencel has been established with the ADVANCE II data, near-term R&D sensitivities will be mostly associated with the upcoming pivotal registrational trial in AML, as well as the exploratory trials to broaden the addressable patient population, including the ongoing CADENCE trial. An interim safety readout from the first stage of CADENCE is anticipated in H225, and we expect it to support preparatory activities for the registrational trial. For ilixadencel, a slight setback in terms of R&D came in late 2023, when it was announced that the MERCA trial (in mRCC) showed no significant survival difference between the ilixadencel plus sunitinib treatment arm and the sunitinib-only control arm. In spite of this, preclinical and early clinical data support the potential of the candidate in terms of safety and efficacy in solid tumours, and we believe the choice to assess ilixadencel in STS through the REGOMUNE trial is a sensible strategy. Proof-of-concept data from this trial will represent an important inflection point for the candidate, expected in H126.

The net cash position remains strong at SEK108.5m, as reported in the company’s Q324 results, providing a runway to the end of 2025, past key milestones for lead asset vididencel. The necessity for further funding will be contingent on the company’s ambitions to broaden its clinical programmes for the two assets and potential partner interest, which may alleviate the need for dilutive financing.

We value Mendus at SEK2.0bn or SEK40.3 per share (SEK2.0bn or SEK39.8/share previously) using an rNPV model (discount rate of 12.5%), including net cash of SEK108.5m at end-Q324. Our valuation includes contributions from the company’s clinical-stage programmes, including vididencel in AML and OC, and ilixadencel in STS. We highlight that we had previously considered only gastrointestinal stromal tumours (GIST) as the target indication for ilixadencel in our valuation, but we have now expanded our assessment to cover the broader therapeutic indication of STS, of which GIST is a sub-form. We use a bottom-up approach to calculate the market sizes and industry and market research data for the basis of our other assumptions, such as PoS, eligible patient populations and pricing (discussed in further detail below). For both assets, we assume the more advanced-stage clinical studies to be undertaken under licensing agreements.

For vididencel as a maintenance treatment for AML (the primary therapeutic target for Mendus, driving c 57% of our valuation of the company), we expect the pivotal Phase III trial to commence in 2026. This is based on our understanding that Mendus, in partnership with NorthX Biologics, will be ready to manufacture GMP material for the trial by mid-2025 (with the first GMP batch for pivotal studies expected to be completed by Q325). As noted previously, manufacturing of cell therapies is complex and challenging, and we believe that having large-scale manufacturing in place provides a robust foundation for Mendus going into the pivotal stages of development. Based on our estimate of a 2026 trial initiation, we expect a market launch for vididencel as a maintenance treatment for AML in 2029 (versus 2028 previously).

Given that vididencel is being evaluated in combination with the standard of care, oral azacitidine, in the Phase II CADENCE trial, as well as the planned global registrational study, we assume the same target population for vididencel as oral azacitidine. Our valuation currently incorporates the market potential in the US and Europe, as these make up the majority of the commercial opportunity for the company. Our valuation reflects an AML incidence of 20,800 patients in the US and 24,300 in Europe, of whom 50% are eligible for induction chemotherapy as a first-line treatment (10,400 and 12,150 patients in the US and Europe, respectively). Of these induction chemotherapy patients, we estimate 30% to opt for HSCT (based on annual HSCT numbers in AML in the US – c 3,000 patients). We therefore assume that the remaining 70% of patients with induction chemotherapy (c 7,000 patients in the US, 8,500 in Europe) will be the target population for vididencel. We estimate a per patient realisable price of US$150k in the US (based on a 40% discount to a US$250k list price for the treatment) and US$75k in Europe (drug pricing in Europe is typically 50% of the US pricing). This is based on the US$250k annualised (c US$20k treatment cost per month) list price for Onureg (oral azacitidine). We assume peak penetration of 30% for vididencel in AML, which translates to sales of US$930m across the US and Europe, which we expect would be achieved in 2035, six years post-launch. We note that vididencel holds Orphan Drug designation in the US and Europe, which provides seven and 10 years of market exclusivity, respectively. Following the latest long-term survival data presented at ASH 2024, we have raised our PoS for the indication to 30%, from 20% previously, giving an rNPV valuation of SEK1.16bn or SEK23.1/share for the asset in this indication.

We note that Mendus is also assessing vididencel’s potential in post-HSCT and ‘chemo-unfit’ patients (c 50% of the newly diagnosed AML population) as a combination treatment with azacitidine and venetoclax, and also in chronic myeloid leukaemia (currently in the preclinical stage). We currently do not reflect these opportunities in our valuation, but note the potential upside on successful clinical progression.

For vididencel as a maintenance treatment in OC, we model for the Phase II study to commence in 2025, following the expected top-line safety and feasibility data in December 2024 from the Phase I ALISON trial. We note that the Phase II study initiation will be contingent on the company seeing sufficiently encouraging signals from the Phase I data. In terms of the target population, we assume Mendus focuses on high-grade serous ovarian cancer (HGSOC), which makes up c 75% of all diagnosed OC cases. Within HGSOC, we expect stage 3 and stage 4 HGSOC patients (c 70% of all HGSOC cases) to be the target population. This translates to 10,000 and 12,000 eligible patients per year in the US and Europe, respectively. We assume peak penetration of 20% for vididencel in the indication, with peak sales of US$720m globally, which we expect would be achieved in 2037, six years post-launch in 2031. Our PoS remains unchanged at 15%. Overall, our rNPV for vididencel in OC stands at SEK422m or SEK8.4/share.

Our valuation assumes that Mendus will seek an out-licensing deal for vididencel, prior to the commencement of the Phase III pivotal study in 2026. We note that partnering deals can vary widely from co-development and co-commercialisation to full out-licensing globally or for specific territories, with deal valuations spanning a broad range, depending on the quality of the clinical data. Based on past licensing deals in the AML space for Phase II assets (Exhibit 9), we assume Mendus signs a global licensing agreement in H126 for a total deal value of US$825m. This includes an upfront payment of US$75m and milestones of US$750m. We also assume that the milestone payments 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 vididencel. We have also included tiered royalty payments on commercial sales, ranging from 10–13.5%. The royalty and milestone payments have been split between the AML and OC programmes, based on sales and other parameters.

While we previously valued ilixadencel as a potential treatment for GIST, we have now broadened the target indication in our valuation to include all STS. Accordingly, we have adjusted our estimates for the market potential, peak sales and launch timelines. The American Cancer Society estimates 13,590 new cases of STS will be diagnosed in the US in 2024. We expect the target patient population to be those with metastatic or advanced disease, which is 45% of all patients diagnosed. While we have limited clarity on the specific intended treatment setting, we also assume ilixadencel is used as a targeted combination treatment in the second- or third-line setting. Management communicated that it expects preparations for the ilixadencel combination arm of the REGOMUNE trial to be completed before end-2024 and initial clinical data to be available in H126. Based on this, we expect a launch to take place in 2032, versus 2030 for the GIST indication previously. We assume a treatment cost of US$90k in the US (US$45k in Europe) and a peak penetration rate of 50%, given the limited treatment options available in later lines. This translates to peak sales of US$400m, which we estimate would be achieved in 2038. Given the early stage of development, we use a PoS of 10% for ilixadencel in STS, resulting in a rNPV of SEK336m or SEK6.7/share.

We expect Medus to undertake the Phase II study for ilixadencel independently, but similarly to vididencel, we assume a licensing deal thereafter (in 2028) for subsequent clinical and pivotal-stage development efforts. For ilixadencel, we model a total deal value of US$350m, including US$50m in upfront payment. We assume tiered royalties, ranging from 12% to 15% of sales.

Our rNPV valuation for Mendus, detailed by assets, is presented in Exhibit 10.

Mendus recently announced its Q324 results, reporting materially lower operating expenses (SEK23.6m) compared with the last few quarters (SEK26.1m in Q323; SEK38.6m in Q224). This was largely attributed to lower R&D (SEK16.2m vs SEK28.9m in Q224) and administrative (SEK7.4m vs SEK9.2m in Q224) expenses during the period. We note that a significant portion of the R&D expenses in the past two quarters (Q1 and Q224) were related to the technology transfer of the vididencel manufacturing process to NorthX Biologics (we estimate this to be between SEK10m and SEK15m) and we believe that no/limited expenses related to this were recognised during Q324. We note that costs related to the technology transfer to NorthX were pre-paid by the company in Q323 (c SEK90m) and therefore the impact of these expenses is not reflected in the cash flow statements. For reference, despite lower opex, the Q324 operating cash outflow was only slightly lower than the previous quarter (SEK20.1m vs SEK22.4m in Q224). Since SEK45m of pre-paid expenses remain outstanding at end-Q324 and are likely to be expensed in the coming quarters, we expect R&D expenses to trend up again in Q424 and H125. Management also highlighted its efforts towards implementing efficiency improvements in Q324, which we believe supported the lower administrative expenses during the quarter. Other operating income was recorded at SEK0.9m (SEK0.6m in Q224) and was primarily related to patent transfer revenue and a research grant from Oncode-PACT. Overall, Mendus reported an operating loss of SEK22.7m, down c 12% y-o-y and materially lower than Q224 (down c 40%).

Based on the 9M24 performance, we have made certain adjustments to our FY24 and FY25 estimates. While we expect R&D expenses to rise in Q424 quarter-on-quarter (to be more in line with the Q124 and Q224 figures), we have revised our FY24 estimate slightly downward (SEK105.2m vs SEK108.1m previously) to reflect the Q324 figure. For FY25, we have raised our R&D expense estimate to SEK87.0m, from SEK85.1m previously. We have also reduced our estimates for administrative expenses for FY24 (SEK27.7m excluding D&A vs SEK31.7m previously) and FY25 (SEK28.5m vs SEK32.6m previously) to reflect expected benefits from the operational streamlining implemented by the company. We have raised our FY24 estimate for total income to SEK5.2m, from SEK4.2m previously. Overall, we now expect operating losses of SEK134.7m in FY24 (previously SEK141.8m) and SEK122.0m in FY25 (previously SEK124.0m).

Mendus closed Q324 with a net cash position of SEK108.5m (gross cash of SEK109.3m adjusted for SEK0.9m in long-term liabilities – conditional credits from Region Västra Götaland). Based on our revised opex and lower cash burn estimates, we estimate the company to now be funded to the end of 2025, in line with the revised management guidance. Since we forecast a partnering deal for vididencel to come through only in 2026, we expect the company to pre-emptively seek to raise further funds in H225. For our model, we assume this to be SEK50m (previously SEK75m). As an added sensitivity, should a partnering deal not materialise, we estimate Mendus would need to raise c SEK200m per year between FY26 and FY28, prior to the market launch of vididencel in FY29. If the company were to raise these funds (total SEK650m between FY25 and FY28), it would need to issue c 74.7m shares (at the current share price of SEK8.7), which would reduce our per-share valuation to SEK21.4 (shares outstanding would increase to 125.1m).