Cereno Scientific — New SEK250m financing secures runway into 2026

Cereno Scientific (OMX: CRNO-B)

Last close As at 03/12/2024

SEK6.10

0.13 (2.18%)

Market capitalisation

SEK1,714m

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Research: Healthcare

Cereno Scientific — New SEK250m financing secures runway into 2026

Cereno Scientific has announced a new financing arrangement of at least SEK250m, with net proceeds expected to extend the runway into 2026, past several key clinical milestones. Secured from Fenja Capital and Arena Investors, the new financing includes a cash loan of SEK175m across two tranches and SEK75m in convertible debt. While the first cash tranche of SEK125m will be paid out on signing, the second SEK50m payout is conditional on lead asset CS1 receiving FDA approval for the next clinical phase. Tranche 1 will be partially used to repay the outstanding c SEK91m loan from Fenja Capital, raised in November 2023, and comes with a 3.87% set-up fee. Following the debt repayment and set-up fee, management expects net proceeds from Tranche 1 and the convertible debt of c SEK99m. The financing agreement will extend the cash runway into 2026, past key milestones such as FDA approval of the next CS1 study and completion of the Phase I trial and Phase II regulatory approval for CS014. We will present our updated estimates following the Q324 results.

Jyoti Prakash

Written by

Jyoti Prakash

Analyst, Healthcare

Healthcare

Cereno Scientific

New SEK250m financing secures runway into 2026

Financing update

Pipeline update

Pharma and biotech

12 November 2024

Price

SEK4.98

Market cap

SEK1,400m

SEK10.51/US$

Net cash (SEKm) at 30 June 2024

40.2

Shares in issue

281.0m

Free float

93%

Code

CRNO B

Primary exchange

First North Growth Market

Secondary exchange

N/A

Share price performance

Business description

Cereno Scientific is a clinical-stage biotech based in Sweden, focused on the development of innovative, effective and safe treatments for indications with high unmet needs. Lead asset CS1 is an HDAC inhibitor that acts as an epigenetic modulator. Cereno recently reported positive top-line results from the Phase IIa study in pulmonary arterial hypertension. Second asset CS014, a CS1 analogue, will be tested in idiopathic pulmonary fibrosis, and preclinical asset CS585 is likely to target rare thrombosis-related indications.

Analysts

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Cereno Scientific is a research client of Edison Investment Research Limited

Cereno Scientific has announced a new financing arrangement of at least SEK250m, with net proceeds expected to extend the runway into 2026, past several key clinical milestones. Secured from Fenja Capital and Arena Investors, the new financing includes a cash loan of SEK175m across two tranches and SEK75m in convertible debt. While the first cash tranche of SEK125m will be paid out on signing, the second SEK50m payout is conditional on lead asset CS1 receiving FDA approval for the next clinical phase. Tranche 1 will be partially used to repay the outstanding c SEK91m loan from Fenja Capital, raised in November 2023, and comes with a 3.87% set-up fee. Following the debt repayment and set-up fee, management expects net proceeds from Tranche 1 and the convertible debt of c SEK99m. The financing agreement will extend the cash runway into 2026, past key milestones such as FDA approval of the next CS1 study and completion of the Phase I trial and Phase II regulatory approval for CS014. We will present our updated estimates following the Q324 results.

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

(46.4)

(0.20)

0.0

N/A

N/A

12/24e

0.0

(58.9)

(0.21)

0.0

N/A

N/A

12/25e

0.0

(56.0)

(0.20)

0.0

N/A

N/A

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

The financing is split 55:45 between the US-based investor Arena Investors and Fenja Capital. The SEK75m convertible debt will be due for repayment on 30 April 2026 and can be converted into 12.3m company shares (at SEK6.09/share) during the term of the loan. Assuming full conversion, this would dilute existing shareholders by 4.2%. The agreement also mandates Cereno issuing 5,749,017 warrants to the financiers, which can be converted to shares at a subscription price of SEK6.82/warrant until 30 April 2029 (currently out of the money). This will lead to another 2% dilution to current shares outstanding, assuming 100% conversion (netting the company SEK39.2m in exchange).

While Tranche 1 of the cash loan and the convertible debt (SEK200m) is likely to be available to Cereno immediately, the second SEK50m payout is conditional on CS1 receiving FDA approval for the next clinical phase (expected in H125). Tranche1 will also be used to pay down the outstanding SEK91m debt from Fenja Capital, repayable in April 2026. Excluding the debt repayment and the set-up fee, Cereno will have c SEK99m in funds at hand to support its development activities.

We expect the SEK250m financing to de-risk the company’s development plans as it approaches key milestones related to its pipeline such as regulatory approval for the next development phase (either Phase IIb or a pivotal Phase II/III) for lead asset CS1 in pulmonary arterial hypertension and completion of the Phase I study for CS014, the second HDAC inhibitor in the company’s portfolio, both expected in 2025. We also believe that it provides Cereno with a stronger foundation to undertake business development or partnering discussions. Management expects the cash injection to support runway extension into 2026, by which time we foresee a possible licensing deal for CS1 and material clinical progress with CS014.

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.

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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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