Mendus — Successful SEK317m equity raise

Mendus (OMX: IMMU)

Last close As at 18/05/2024

SEK0.45

0.00 (0.00%)

Market capitalisation

SEK451m

More on this equity

Research: Healthcare

Mendus — Successful SEK317m equity raise

Following its previous announcement of secured financing commitments, Mendus has raised SEK227m through a rights issue and SEK90m through a directed issue to Flerie Invest. Post shareholders’ approval at the extraordinary general meeting (held 10 July 2023) and completion of the fund-raise (announced 28 July 2023), Mendus’ total outstanding shares will increase from 202.7m to 863.1m, from 10 August 2023. Mendus intends to utilise the proceeds from the issue to finance crucial inflection points, providing a cash runway to at least Q424. Incorporating the fund-raise and share dilution, we now value Mendus at SEK2,183m or SEK2.53 per share versus SEK1,851m or SEK9.19 per share previously.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Mendus_resized

Healthcare

Mendus

Successful SEK317m equity raise

Fund-raising update

Pharma and biotech

1 August 2023

Price

SEK0.48

Market cap

SEK97m

SEK10.4/US$

Pro forma net cash (SEKm) at 31 March 2023 (including fundraise announced July 2023)

286

Pro forma shares in issue

863.1m

Free float

37%

Code

IMMU

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(27.9)

(29.7)

(45.1)

Rel (local)

(28.6)

(30.2)

(47.9)

52-week high/low

SEK3.40

SEK1.08

Business description

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

Next events

Vididencel Phase II combination study initiation

H223

Vididencel mRFS data in ADVANCE II

Q423

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Mendus is a research client of Edison Investment Research Limited

Following its previous announcement of secured financing commitments, Mendus has raised SEK227m through a rights issue and SEK90m through a directed issue to Flerie Invest. Post shareholders’ approval at the extraordinary general meeting (held 10 July 2023) and completion of the fund-raise (announced 28 July 2023), Mendus’ total outstanding shares will increase from 202.7m to 863.1m, from 10 August 2023. Mendus intends to utilise the proceeds from the issue to finance crucial inflection points, providing a cash runway to at least Q424. Incorporating the fund-raise and share dilution, we now value Mendus at SEK2,183m or SEK2.53 per share versus SEK1,851m or SEK9.19 per share previously.

Year
end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/21

0.0

(133.4)

(0.73)

0.0

N/A

N/A

12/22

3.4

(138.8)

(0.70)

0.0

N/A

N/A

12/23e

0.0

(133.6)

(0.25)

0.0

N/A

N/A

12/24e

0.0

(137.6)

(0.16)

0.0

N/A

N/A

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

Equity raise completed to fund past catalysts

Post the successful completion of its proposed equity raise, Mendus will issue 67,564,837 units through a rights issue, increasing the number of shares by 473m. At the subscription price of SEK3.36 per unit (or SEK0.48/share), this gives a capital raise of SEK227m. For the directed issue, Mendus has issued 187.5m shares at SEK0.48 per share. Both issues are accompanied by free warrants of TO3 series, which if fully exercised, might generate additional proceeds of around SEK91m. Management believes total gross proceeds of SEK317m should provide a cash runway to Q424, or Q325 if the warrants are exercised.

Multiple inflection points on the horizon

For vididencel, the Phase II trial (ADVANCE II) in acute myeloid leukaemia (AML) is in the long-term follow-up stage and Mendus is preparing for an additional Phase II trial assessing vididencel in combination with Onureg. Vididencel is also being assessed in an ongoing Phase I trial (ALISON) for ovarian cancer (OC). Further, Mendus is preparing for a Phase II proof-of-concept study to assess ilixadencel for the treatment of gastrointestinal stromal tumours (GIST) and other indications within the broader group of soft tissue sarcomas. While we recognise that the equity raise is dilutive in nature, the funding enables operations to proceed through key events, which may represent significant catalysts for Mendus and ultimately advance its pipeline.

Valuation: SEK2,183m or SEK2.53 per share

Our valuation for Mendus improves to SEK2,183m from SEK1,851m with the increase in net cash (balance) of SEK286m (vs net debt of SEK46m at end March 2023), reflecting the impact of the SEK317m fund-raise, along with a SEK15m loan from Van Herk in May 2023. Our per share valuation decreases to SEK2.53 from SEK9.19 previously with the increase in total shares outstanding (863.1m from 202.7m).

Financials and valuation

In May 2023 Mendus drew down the remaining SEK15.0m shareholder loan (6% interest) from Van Herk Investments, utilising the full SEK50m financing facility. As part of the new loan agreement, the end dates of the previous loans (the initial SEK10.0m two-year loan and subsequent SEK25.0m one-year loan), have been amended and the entirety of the SEK50m loan is now due by end-FY23. For further financing requirements, Mendus recently completed a SEK317m fund-raise through a rights issue and a directed issue, and we have therefore adjusted our estimates for future fund requirements. As the new fund-raise has extended the company’s cash runway to Q424, we do not expect Mendus to require additional funds until 2024, so we have reduced our illustrative debt estimates to SEK40m and zero for FY23 and FY24 respectively (previously SEK165m and SEK195m). Post FY24, we expect Mendus to raise an additional SEK150m and SEK100m in FY25 and FY26 respectively via other sources (currently shown as illustrative debt).

While our long-term forecasts remain unchanged, our valuation increases to SEK2,183m from SEK1,851m due to a material increase in the net cash balance to SEK286m as a result of the latest equity issue of SEK317m (versus net debt of SEK46m at end-March 2023). We have also incorporated the SEK15m loan raised from Van Herk in May 2023. As a result, our per share valuation drops to SEK2.53 from SEK9.19 as the total number of shares outstanding will increase by over 4x to 863.1m from 202.7m.

Exhibit 1: Mendus rNPV valuation

Product

Indication

Launch

Peak sales (US$m)

NPV
(SEKm)

Probability of success

rNPV
(SEKm)

rNPV/share
(SEK/share)

Vididencel (DCP-001)

AML

2027

680

3,296

20.0%

936

1.08

OC

2031

760

2,104

15.0%

726

0.84

Ilixadencel

GIST

2029

230

1,564

15.0%

235

0.27

Pro forma net cash as on 28 July 2023

286.0

100.0%

286.0

0.33

Valuation

 

 

 

7,251

 

2,183

2.53

Source: Edison Investment Research


Exhibit 2: Financial summary

Accounts: IFRS, year-end 31 December (SEK000s)

2021

2022

2023e

2024e

Income statement

 

 

 

 

Total revenue

31

3,375

0

0

Cost of sales

0

0

0

0

Gross profit

31

3,375

0

0

SG&A (expenses)

(42,498)

(44,737)

(45,184)

(46,540)

R&D costs

(85,796)

(87,049)

(82,270)

(84,373)

Other income/(expense)

(845)

(1,134)

0

0

Exceptionals and adjustments

0

0

0

0

Reported EBITDA

(129,108)

(129,545)

(127,455)

(130,913)

Depreciation and amortisation

(992)

(4,139)

(4,131)

(4,939)

Reported Operating Profit/(loss)

(130,100)

(133,684)

(131,586)

(135,851)

Finance income/(expense)

(3,310)

(5,101)

(2,026)

(1,732)

Other income/(expense)

0

0

0

0

Exceptionals and adjustments

0

0

0

0

Reported PBT

(133,410)

(138,785)

(133,611)

(137,583)

Adjusted PBT

(133,410)

(138,785)

(133,611)

(137,583)

Income tax expense

0

0

0

0

Reported net income

(133,410)

(138,785)

(133,611)

(137,583)

 

 

 

 

 

Basic average number of shares (m)

184.0

198.3

531.3

863.1

Basic EPS (SEK)

(0.73)

(0.70)

(0.25)

(0.16)

Diluted EPS (SEK)

(0.73)

(0.70)

(0.25)

(0.16)

 

 

 

 

 

Balance sheet

 

 

 

 

Property, plant and equipment

2,109

13,899

14,588

15,191

Intangible assets

532,441

532,441

532,441

532,441

Right of use assets

361

26,216

26,216

26,216

Other non-current assets

843

618

618

618

Total non-current assets

535,754

573,174

573,863

574,466

Cash and equivalents

155,313

41,851

219,326

81,139

Prepaid expenses and accrued income

10,214

1,919

1,919

1,919

Other current assets

19,702

3,442

3,442

3,442

Total current assets

185,229

47,212

224,687

86,500

Non-current loans and borrowings*

36,666

22,844

22,844

22,844

Non-current lease liabilities

0

23,706

23,706

23,706

Total non-current liabilities

36,666

46,550

46,550

46,550

Trade and other payables

11,610

7,411

7,411

7,411

Current loans and borrowings

0

29,198

19,198

19,198

Short-term lease liabilities

309

2,413

2,413

2,413

Other current liabilities

15,657

20,375

20,375

20,375

Total current liabilities

27,576

59,397

49,397

49,397

Equity attributable to company

656,743

514,440

702,604

565,020

 

 

 

 

 

Cashflow statement

 

 

 

 

Operating Profit/(loss)

(130,100)

(133,684)

(131,586)

(135,851)

Depreciation and amortisation

1,851

4,139

3,311

3,477

Other adjustments

0

0

0

0

Movements in working capital

(10,089)

27,030

0

0

Interest paid / received

(140)

(1,135)

(2,026)

(1,732)

Income taxes paid

0

0

0

0

Cash from operations (CFO)

(138,031)

(109,331)

(130,300)

(134,107)

Capex

(1,361)

(12,324)

(4,000)

(4,080)

Acquisitions & disposals net

0

0

0

0

Other investing activities

0

0

0

0

Cash used in investing activities (CFIA)

(1,361)

(12,324)

(4,000)

(4,080)

Net proceeds from issue of shares

128,949

0

321,775

0

Movements in debt

(1,922)

10,925

40,000

0

Other financing activities

0

(2,731)

(50,000)

0

Cash flow from financing activities

127,027

8,194

311,775

0

Increase/(decrease) in cash and equivalents

(12,330)

(113,462)

177,475

(138,187)

Cash and equivalents at beginning of period

167,643

155,313

41,851

219,326

Cash and equivalents at end of period

155,313

41,851

219,326

81,139

Net (debt)/cash

118,647

(10,191)

177,284

39,097

Source: Mendus company accounts, Edison Investment Research. Note: *Includes the Van Herk Investments shareholder loan and the Negma Group convertible debt facility which we assume will both be fully drawn down.


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 2023 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 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 2023 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

More on Mendus

View All

Latest from the Healthcare sector

View All Healthcare content

Research: Healthcare

Paradigm Biopharma — Progressing toward key near-term objectives

Paradigm has shared its June 2023 quarterly update. In Q423, net cash outflow from operating activities was A$17.1m (up from A$10.3m in Q323) or A$45.2m for FY23. R&D costs were A$16.1m (versus A$9.0m in Q3) or A$47.0m for FY23, and were attributed to recruitment initiatives and new site identification for the PARA_OA_002 trial, analytical activities for the PARA_OA_008 trial as well as the canine model studies of naturally occurring osteoarthritis (OA), and clinical activities assessing iPPS for mucopolysaccharidosis (MPS) types I and VI. The full year figures were partially offset by a A$7.4m R&D tax incentive rebate (reported in Q223). Paradigm reported a cash balance of A$56.4m at end-June 2023 (versus A$73.2m at end-March 2023). Assuming the cash burn rate remains at the FY23 level of A$45m, the company should have sufficient funds to bring it through near-term key inflection points, as described below.

Continue Reading
Paradigm Photography Pool Bone

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free