In December 2022, Cereno Scientific announced it has updated its guidance on top-line data from its clinical phase II trial with its CS1 drug candidate for treating pulmonary arterial hypertension (PAH). The company expects top-line data at the end of 2023. In our recent Research Update, we projected Cereno initiating a phase IIb/III trial with CS1 in PAH during H1 2024e and potentially delivering top-line data in 2026e. Due to the updated guidance, we have updated the timeline and our projections. 

Furthermore, Cereno Scientific has increased its scientific communication by actively presenting the preclinical results from the two early-stage drug candidates, CS014 and CS585 at congresses. The results from the two preclinical programs are encouraging; thus, we believe Cereno Scientific will likely file IND applications for both candidates in the coming 12-18 months.

We believe moving both drug candidates into the clinic would diversify Cereno’s risk profile. Growing its clinical pipeline is contingent on access to sufficient financing through, e.g., equity issues or partnerships.

With an expanding drug portfolio, with CS1 in clinical Phase II trial and the two preclinical programs CS014 and CS585 in preparation for clinical development, changes have been made to Cereno Scientific’s executive management team. Dr Björn Dahlöf’s role has expanded, a Head of IR & Communications has been appointed, and a Chief Business Officer has been recruited. We are encouraged by the company's focus on advancing research and development activities, IR and communications, and in particular, ensuring business development, commercialization efforts and viability. Thus, we consider the company on its way to gearing up for its ongoing transformation towards a late-stage clinical development and commercialization company.

We make an adjustment to our base case, to SEK5.1 (5.8) per share due to the updated guidance on top-line data of its clinical phase II trial with its CS1 and our updated timeline and projections. Furthermore, some housekeeping in our model (updated timeline, USD/SEK, risk-free rate and equity risk premium), consequently increasing our WACC to 14.5% (14%) has also impacted our fair value range. For the same reasons, we adjust our valuation range from SEK1.9-12.2 to SEK1.8-9.6 per share.

We consider clinical phase IIa trial data of CS1 in PAH to constitute the most critical catalyst for Cereno Scientific’s share in the coming 12 months. Further, CS014 and CS585 could enter the clinic in 2024e, which could potentially induce a share price re-rating and lead us to revise our current valuation assumptions.