InDex Pharmaceuticals reported EBIT of negative SEK107.9m, as anticipated, marking an increase compared to previous quarters on account of costs related to the closing down of induction study 1 of the CONCLUDE program. Additionally, SEK22.2m in other operating expenses in the quarter derived from foreign exchange losses related to cash and cash equivalents in foreign currency.

As previously communicated, the company reported a cash position of SEK294.3m at the end of Q4 and reiterated an expected cash position of SEK180-190m by the end of Q1. This figure encompasses all CONCLUDE-related costs, including those anticipated beyond March 31. Following this date, the burn rate is projected to decrease significantly to SEK0.6-0.8m per month. The report specifies that only essential team members needed to finalize and report the study in compliance with regulatory requirements will remain with InDex during H1 2024 until a path forward is determined.

The company has gathered data from the study with the aim of analyzing it to gain a deeper understanding of the lack of efficacy and to assess if there are any significant differences among subgroups. The company plans to communicate the results of this analysis by the end of February. We believe it is very unlikely that the company will propose any way forward with cobitolimod. However, the company is still in the process of evaluating various potential paths forward, such as liquidation, reverse merger, and public bids, as we have previously discussed. Furthermore, it emphasizes its intention to identify an option that would provide greater value to its shareholders than simply liquidating the company.

In any of the abovementioned scenarios, the end of Q1 cash position, which amounts to ~SEK0.34-0.36 per share (InDex currently trades at SEK0.24 per share), provides an exciting play on future events in our view.

The content of the year-end report did not deviate from what we had expected and thus result in no adjustments to our valuation of InDex Pharmaceuticals. Our base case, which we would consider a relatively conservative approach given the current circumstances, remains at SEK0.27. The bull case amounts to SEK0.36, and the bear case comes in at SEK0.21. Consequently, we view the current circumstances as offering a favorable risk/reward ratio, as the share price trades substantially below the expected cash position, with the added potential for a transaction providing further optionality.