Mendus — No surprises in Q3 as DCP-001 readout nears

Mendus (OMX: IMMU)

Currency in SEK

Last close As at 04/02/2023

SEK2.38

−0.19 (−7.39%)

Market capitalisation

SEK512m

Research: Healthcare

Mendus — No surprises in Q3 as DCP-001 readout nears

In its Q322 report, Mendus highlighted key developments in the period, and some significant post-period events, as the company prepares to present key survival and immunomonitoring data from its cancer relapse vaccine, DCP-001, at the American Society of Hematology (ASH) 2022 conference in December. This data will be important in framing DCP-001’s clinical utility versus (and in combination with) the main competitor in acute myeloid leukaemia (AML) maintenance, azacitidine. Mendus’s Q322 financials held no surprises, therefore our forecasts for FY22 and FY23 are largely unchanged. With SEK250m of debt financing secured and a net cash position of SEK15.7m at end-Q322, we expect Mendus’s operations to be sufficiently funded into H224. We value Mendus at SEK1.8bn or SEK9.1 per share (previously SEK1.87bn or SEK9.35 per share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Mendus

No surprises in Q3 as DCP-001 readout nears

Q322 update

Pharma and biotech

14 November 2022

Price

SEK2.29

Market cap

SEK457m

SEK10.76/US$

Net cash (SEKm) at 30 September 2022 (excl. lease liabilities)

15.7

Shares in issue

199.4m

Free float

37%

Code

IMMU

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

19.4

(8.2)

(48.5)

Rel (local)

2.2

(8.2)

(36.2)

52-week high/low

SEK5.9

SEK1.8

Business description

Mendus (formerly Immunicum) is a clinical-stage immunoncology company based in Sweden and the Netherlands. The company specialises in allogeneic dendritic cell (DC) biology and currently has two lead cell-based, off-the-shelf therapies for haematological and solid tumours.

Next events

DCP-001 median relapse-free and overall survival data

December 2022

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

Mendus is a research client of Edison Investment Research Limited

In its Q322 report, Mendus highlighted key developments in the period, and some significant post-period events, as the company prepares to present key survival and immunomonitoring data from its cancer relapse vaccine, DCP-001, at the American Society of Hematology (ASH) 2022 conference in December. This data will be important in framing DCP-001’s clinical utility versus (and in combination with) the main competitor in acute myeloid leukaemia (AML) maintenance, azacitidine. Mendus’s Q322 financials held no surprises, therefore our forecasts for FY22 and FY23 are largely unchanged. With SEK250m of debt financing secured and a net cash position of SEK15.7m at end-Q322, we expect Mendus’s operations to be sufficiently funded into H224. We value Mendus at SEK1.8bn or SEK9.1 per share (previously SEK1.87bn or SEK9.35 per share).

Year

end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/20

0.0

(89.2)

(1.17)

0.0

N/A

N/A

12/21

0.0

(133.4)

(0.73)

0.0

N/A

N/A

12/22e

3.2

(130.9)

(0.66)

0.0

N/A

N/A

12/23e

0.0

(138.5)

(0.69)

0.0

N/A

N/A

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

Key data readout for DCP-001 in December

Positive safety and recent efficacy data from the ongoing ADVANCE II study indicate that DCP-001 could be a significant competitor in the AML maintenance market, in our view. Key to DCP-001’s impact will be relapse-free and overall survival data, which Mendus will present at the ASH 2022 conference on 12 December 2022. In Q322, the company secured a development and manufacturing partnership for DCP-001, an important step towards potentially pivotal stage trails, in our view.

Expenses under control, runway extended

Mendus’s Q322 results gave no surprises, with expenses largely within our estimates. A key financial development over the period was the securing of SEK250m in shareholder loans and convertible bonds by the company. Assuming Mendus fully exercises the committed financing, we expect this to fund the company’s operations into H224, past key readouts from the pipeline in FY22/23.

Valuation: SEK1.8bn or SEK9.1 per share

We value Mendus at SEK1.8bn or SEK9.1 per share (previously SEK1.87bn or SEK9.35 per share). Our valuation includes a net cash position of SEK15.7m at end-Q322. We have rolled our model forward three months and updated our foreign exchange rate assumptions. Our slightly reduced valuation is due completely to the reduction in net cash over Q322.

Financials

As expected, Mendus reported no revenues in Q322, however, other income relating to foreign exchange gains on accounts payable amounted to SEK1.14m. As the company continues to focus on the development of DCP-001, ilixadencel and the DCOne platform, total operating expenses in Q322 increased to SEK38.54m from SEK26.05m in Q321. Operating costs for the period comprised R&D-related expenses (SEK21.60m) and administration costs (SEK16.86m). However, total operating costs for 9M22 (SEK95.44m) were slightly reduced from 9M21 (SEK98.38m), largely due to lower clinical trials and Chemistry, Manufacturing and Controls costs. A cash outflow from operations of SEK27.82m was recorded in Q322, bringing the total operating cash outflow for 9M22 to SEK87.99m, lower than the same period a year previously (9M21: SEK112.41m) due to prepaid costs. The reported financials are within our estimates and, as a result, our forecasts are largely unchanged, bar a small increase in FY22e administration expenses to SEK45.34m from SEK43.49m previously.

Importantly, in Q322, Mendus secured financing commitments of up to SEK250m, comprising a shareholder loan of SEK50k from Van Herk Investments and up to SEK200m in convertible bonds from Negma Group. Post-Q322, the company drew down the first portion of the shareholder loan commitment to a value of SEK10m. We see this flexible financing commitment as a positive step for Mendus, as it secures the next stages of its development strategy. At end-Q322, Mendus reported a net cash position of SEK15.7m (excluding lease liabilities), which we expect to fund the company to Q123. However, given the SEK10m withdrawn already in Q422 and the remaining SEK240m committed, we have extended our cash runway estimate into H224, assuming the company exercises SEK10m in FY22, SEK140m in FY23 and the remainder of committed capital in FY24.

Exhibit 1: Financial summary

Accounts: IFRS, Yr end: December, SEK: Thousands

2019

2020

2021

2022e

2023e

Income statement

 

 

 

 

 

Total revenue

0

0

31

3,212

0

Cost of sales

0

0

0

0

0

Gross profit

0

0

31

3,212

0

SG&A (expenses)

(11,734)

(37,193)

(43,490)

(45,342)

(46,702)

R&D costs

(48,980)

(47,883)

(85,796)

(82,727)

(82,727)

Other income/(expense)

16,689

(64)

(845)

(1,007)

0

Exceptionals and adjustments

0

0

0

0

0

Reported EBITDA

(44,025)

(85,140)

(130,100)

(125,865)

(129,430)

Depreciation and amortisation

(831)

(887)

0

(842)

(4,185)

Reported Operating Profit/(loss)

(44,856)

(86,027)

(130,100)

(126,707)

(133,615)

Finance income/(expense)

(2,915)

(3,220)

(3,310)

(4,200)

(4,894)

Other income/(expense)

0

(1)

0

0

0

Exceptionals and adjustments

0

0

0

0

0

Reported PBT

(47,771)

(89,248)

(133,410)

(130,907)

(138,509)

Adjusted PBT

(47,771)

(89,248)

(133,410)

(130,907)

(138,509)

Income tax expense

0

0

0

0

0

Reported net income

(47,771)

(89,248)

(133,410)

(130,907)

(138,509)

 

 

 

 

 

 

Basic average number of shares, m

73.9

76.2

182.8

199.4

199.4

Basic EPS (SEK)

(0.65)

(1.17)

(0.73)

(0.66)

(0.69)

Diluted EPS (SEK)

(0.65)

(1.17)

(0.73)

(0.66)

(0.69)

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

Property, plant and equipment

4,328

2,909

2,470

12,274

8,966

Intangible assets

0

532,441

532,441

533,859

533,859

Right of use assets

0

0

0

26,177

26,177

Other non-current assets

442

678

843

0

0

Total non-current assets

4,770

536,028

535,754

572,310

569,002

Cash and equivalents

14,032

167,643

155,313

23,874

28,672

Prepaid expenses and accrued income

422

4,760

10,215

10,215

10,215

Other current assets

18,695

20,230

19,702

20,506

20,506

Total current assets

33,150

192,633

185,230

54,595

59,393

Non-current loans and borrowings*

31,062

18,982

36,666

49,752

189,752

Other non-current liabilities

1,230

303

0

24,148

24,148

Total non-current liabilities

32,292

19,285

36,666

73,900

213,900

Trade and other payables

1,898

10,365

11,610

3,112

3,112

Other current liabilities

8,537

22,158

15,657

21,719

21,719

Total current liabilities

11,306

48,282

27,576

27,169

27,169

Equity attributable to company

(5,677)

661,094

656,742

525,835

387,326

 

 

 

 

 

 

Cashflow statement

 

 

 

 

 

Operating Profit/(loss)

(44,856)

(86,027)

(130,100)

(126,707)

(133,615)

Depreciation and amortisation

831

887

992

842

4,185

Other adjustments

0

0

0

0

0

Movements in working capital

(14,186)

27,731

(10,089)

(3,240)

0

Interest paid / received

(166)

(103)

(140)

(4,200)

(4,894)

Income taxes paid

0

0

0

0

0

Cash from operations (CFO)

(57,569)

(56,626)

(138,031)

(132,462)

(134,324)

Capex

(809)

(464)

(1,361)

(12,064)

(878)

Acquisitions & disposals net

0

0

0

0

0

Other investing activities

0

0

0

0

0

Cash used in investing activities (CFIA)

(809)

157,298

(1,361)

(12,064)

(878)

Net proceeds from issue of shares

0

0

128,949

0

0

Movements in debt

(760)

(725)

(1,922)

13,086

140,000

Other financing activities

67,818

51,629

0

0

0

Cash flow from financing activities

67,058

50,904

127,027

13,086

140,000

Increase/(decrease) in cash and equivalents

9,627

153,611

(12,330)

(131,439)

4,798

Cash and equivalents at beginning of period

4,405

14,032

167,643

155,313

23,874

Cash and equivalents at end of period

14,032

167,643

155,313

23,874

28,672

Net (debt) cash

(17,030)

133,782

118,647

(25,878)

(161,080)

Source: Company accounts, Edison Investment Research


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This report has been commissioned by Mendus and prepared and issued by Edison, in consideration of a fee payable by Mendus. 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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Frankfurt +49 (0)69 78 8076 960

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Mendus and prepared and issued by Edison, in consideration of a fee payable by Mendus. 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 2022 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Tinexta — Management confident of rebound in Q422

Tinexta’s Q322 results highlighted the consistent strong growth of Digital Trust (DT) and contributions from M&A (seven acquisitions), offset by the typical lower seasonal contribution from its other divisions, which management believes were accentuated by the phasing of demand for certain products and services. Despite the more challenging macroeconomic backdrop, management re-iterated its FY22 guidance. This will require a greater profit contribution by Q4 than is typical, which management believes is supported by revenue backlogs and more positive phasing than Q322. We have increased our DCF-based valuation to €39/share (€38 previously).

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