Kancera Q1: Continued efforts with Recardio

Research Update

2025-05-27

08:00

Redeye returns following Kancera's Q1 report. The investment case is currently centred around the letter of intent with Recardio Inc. Given the uncertainty surrounding the outcome, we continue to value the share based on our DCF model.

Filip Lindkvist

Martin Wahlström

Contents

Investment Thesis

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No surprises in the report

The report contained no surprises, which is often the case with pre-revenue biotech companies. Operating expenses amounted to SEK13.1m (13.4), with R&D costs of SEK11.1 (11.4). Cash flow for the period was SEK-9.0 (-15.2), leaving a cash position of SEK37.4. Kancera expects its current cash position to fund operations through Q1 2026e, which we consider a reasonable assumption.

Continued hunt for investors

In March 2025, Kancera signed a letter of intent (LoI) with US-based private biotech company Recardio, aiming to jointly advance their respective cardiovascular assets - forming a specialty pharma company. Potential new investors will dictate the structure of such a transaction, and discussions are continuing. Kancera states that the macroeconomic climate has posed a headwind and that it may take longer to finalise a capital raise.

Valuation

Given the significant uncertainty surrounding the potential transaction, we continue to base our valuation on our 2025e-2042e DCF model. We are not making any changes and maintain our current SEK0.2–4.4 valuation range, with a base case of SEK1.5. That said, we will monitor developments closely.

Key Financials
SEKm2022202320242025e2026e
Total Revenue0.751.00.1430.120.1
Revenue Growth-70.5%37.5%-86.9%22059%-33.2%
EBITDA-51.9-65.0-46.0-4.9-35.9
EBIT-51.9-65.0-46.0-4.9-35.9
EBIT Margin-6896%-6284%nm.-16.1%-178%
Net Income-52.5-64.9-44.4-4.9-35.9
EV/Sales-nm.nm.nm.nm.
EV/EBIT--7.61.025.02.4

Investment Thesis

Case

Deal or no deal?

Kancera has promising results from the FRACTAL phase IIa study, showing safety, tolerability, and efficacy signals for KAND567 in patients with high-risk ST-elevated myocardial infarction (STEMI) who undergo percutaneous coronary intervention (PCI). However, the case is now centred around the possible transaction with Recardio Inc, which currently includes many uncertainties. We believe there is a rationale to the LoI with Recardio and that the companies together constitute a more compelling investment case.

Evidence

Recardio collaboration to determine the way forward

The intended FRACTIVE phase IIb study will have a similar design as the FRACTAL trial, including endpoints to evaluate cardio-protective effects measured with magnetic resonance imaging (MRI). The most significant difference is that the FRACTIVE study will be powered to demonstrate efficacy with statistical significance.



Regarding the potential transaction with Recardio Inc, the structure will be determined by potential new investors. It is still unclear what this will translate to in terms of shareholder value for Kancera's owners.

Challenge

Capital need

If no new investors are found and the transaction with Recardio is not finalised, we judge that Kancera may need to raise capital (cSEK125-175m) to fund the phase IIb study FRACTIVE independently, depending on study size and design. Given Kancera’s current market cap of SEK125m, this may be difficult, at least leading to a substantial dilution. We also note that a transaction with Recardio, involving new investors, may ultimately be unfavourable to Kancera's shareholders. However, as just outlined, the alternative is not favourable in the short term.

Inherent high-risk due to clinical development

As with all pre-revenue biotech companies, Kancera faces significant development risks, and we estimate the likelihood of approval for its head candidate within myocardial infarction to be 18%. Kancera has shown favourable safety and tolerability profiles and effects on key biomarkers in a phase IIa study.

Valuation

Possible transaction to determine the value

We base our valuation of Kancera on a 2025e-2042e DCF model using a WACC of 16%. Our base case comes in at SEK1.5, with respective bull and bear cases of SEK4.4 and SEK0.2 per share. The outcome of the setup with Recardio will to a large excent determine the valuation of Kancera, and we will monitor developments closely.

Disclosures and disclaimers

Contents

Investment Thesis

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