Mendus Q3'24: Building basis for a pivotal trial

In Q3, Mendus reported bringing ilixadencel back into clinical development, opening research centers for the CADENCE trial and progressing in building Phase III readiness. Operating expenses for the quarter came in below our expectations due to implemented cost savings that should continue in the coming months. As a result, the company’s cash runway has been extended into Q4’25 (was Q3’25). We reiterate our target price of SEK 14 and lower our recommendation to Accumulate (was Buy) due to the stock price appreciation relative to our DCF model and Nordic immuno-oncology peers.

Mendus announced plans for a new ilixadencel clinical trial for soft-tissue sarcomas

In Q3, the company announced that ilixadencel will be studied in soft-tissue sarcomas in combination with the checkpoint inhibitor avelumab and the tyrosine kinase inhibitor regorafenib. Preparations for the trial will be concluded during Q4’24. According to the company, patient recruitment is expected to begin in H1’25 and first data should arrive in H1’26. Regarding the CADENCE trial, Mendus reported the opening of the first clinical centers for patient recruitment. The start of enrolment appears to have been slightly delayed from the initial plan of Q2’24. In addition to these clinical developments, Mendus is building readiness for a pivotal trial in AML. This includes designing a Phase III trial with interactions with the regulatory agencies as well as building manufacturing capabilities. The first clinical batches of vididencel are expected in mid-2025, manufactured by Mendus’ partner NorthX Biologics. The manufacturing development appears to be on track.

Lower than expected cost base extends cash runway into Q4’25

EBIT of -22.7 MSEK was clearly below our expectations of -31.1 MSEK. Operating expenses in term both R&D costs and administration costs were lower than our forecast because of cost savings and seasonal effects. Cash flow from operating activities was -20.1 MSEK. Due to the prepaid costs related to vididencel manufacturing, Mendus’ operating cash flow is currently better than net earnings.

Cash at the end of Q3 was 109.3 MSEK. The company has achieved cost savings that have resulted in lower rate of cash burn. Accordingly, Mendus’ cash runway has extended into Q4’25 (was Q3’25). We believe that CADENCE data readout and pivotal stage readiness are achievable with the financing already in place, despite some delays in CADENCE patient recruitment.

Risk/reward ratio remains attractive as Mendus moves towards late-stage clinical development

Our estimate revisions are minor and have no tangible effect on valuation. Our DCF model indicates an unchanged net present value of SEK 14 per share. The relative valuation has risen above the Nordic immuno-oncology peers, suggesting limited upside. In our view, the absolute valuation of the peer group is on the low side, providing upside if the overall market environment improves. The stock has risen some 26 % since our Q2 update, narrowing the gap between the share price and our DCF model. We therefore lower our recommendation to Accumulate while reiterating our target price, as our view of the intrinsic value of the company has remained largely unchanged. The possibility of a favorable partnering deal or Mendus becoming an acquisition target brings an additional positive option for investors to realize value. We continue to see a favorable risk/reward ratio that supports a positive recommendation.