Key figures from the H2 report:

(The numbers in parenthesis refer to the corresponding quarter of last year)

We conclude that the financial report came in as expected. Herantis has displayed a decrease in OPEX, following a slimmer organization and focused approach on HER-096. Our expectation for 2023 is that OPEX will continue to decrease as the changes take further effect and Herantis finishes its IND- and CMC-related work. During yesterday’s call, Herantis reiterates that the funding it currently has will take the company into 2024 and through the clinical phase Ia trial with HER-096. We are overall impressed by Herantis history of rights issues, that either have been directed issues or rights issues with decent rebates. This, we argue, is a result of Herantis strong ownership structure, that includes several institutions and industrial partner Nanoform. We argue that Herantis deserves a premium valuation compared to its peers given the stable ownership and continued history of efficient capital injections (that are especially valuable in today’s market). Furthermore, it was announced in December that Herantis had been selected to receive a grant of EUR2.5m from the European Innovation Council (EIC), with the option to receive an additional equity financing. Our impression is that the remaining process mostly is a formality, but note that Herantis likely will update the market further once it is fully finalized. We assume that Herantis will receive the grant in 2023 but do not include the potential equity investment at this stage, but note that this could give additional cash runway. Overall, we think that the grant validates the quality of the science and further demonstrates that Herantis has a strong ability to raise funding.

In December, it was announced that Herantis had submitted a CTA (Clinical Trial Application) to the Finnish Medicines Agency (FIMEA) to start a phase Ia trial in healthy volunteers with HER-096, which in February was approved. We learn that it mostly is a matter of practicalities to initiate the trial, which will be conducted in Finland.  To us, the step back into the clinic has been an important milestone and we like that the timeline continues to be followed. The goal of the study is to evaluate safety and tolerability (single dose), blood-brain-barrier penetration and also to look at exploratory biomarkers. We think that Herantis has a developed biomarker approach that could give initial insights on efficacy but note that the key datapoints will be blood-brain-barrier penetration (a must in CNS diseases) and safety. Herantis has produced convincing pre-clinical data on BBB and efficacy (protecting neurons, reducing neuroinflammation and reducing a-synuclein aggregation) and has also further data from the clinical trial with rhCDNF, ie the biologics drug candidate that HER-096 uses active fragments from. Herantis reiterates the timeline that the first patient will be dosed in H1 and that the readout will be during H2 2023.

We largely reiterate our view of Herantis from earlier this year (see this update), where we slightly raised our base case. Following the report, we did some model housekeeping (adjust FX; roll over the model). This leads to an updated base case of EUR2.4 (2.2) per share. We note that the Herantis share has seen a significant rally recently (+60YTD), likely a relief rally following the application process (CTA) to start the phase I trial and flow-driven due to the delisting in Sweden and low liquidity. We believe that Herantis has an exciting year ahead and note that positive phase I data and blood-brain-barrier data would be a significant milestone that would make us further adjust our valuation upwards.

Redeye has a new rating model (2.2), and we have adjusted our rating per the latest version. Overall, the questions are more difficult and we make some modifications to our people rating. We keep our WACC at 13.5%.

Share Price Development