Herantis H2'24: Phase Ib completion is this year's theme

Translation: Original published in Finnish on 3/7/2025 at 7:30 am EET.

Herantis Pharma's H2 was as expected, both in terms of numbers and trial progress. The ongoing Parkinson's clinical trial (Phase Ib) should be completed by Q3'25. The secured funding will last until Q2'26 and will allow the company to complete the Phase Ib trial and prepare for the Phase II trial. In terms of forecasts, we are moving our projections for the implementation of the Phase 2 study forward based on the company's refined plans. The postponed cash flows affect our cash flow model, based on which we lower our target price to EUR 1.9 (was EUR 2.2) and reiterate our Accumulate recommendation.

Key trial is progressing according to plan

Herantis completed the first part of the Phase Ib Parkinson's disease trial in healthy volunteers earlier this year. The second part of the trial has already started and results can be expected in Q3'25. The trial will investigate the pharmacokinetics (i.e. behavior in the body) and safety of the HER-096 drug candidate and will seek to identify potential biomarkers that indicate the effectiveness of the treatment. The company also provided further details on the timing of the Phase II trial. The preparation of the trial will aim at the same conclusion in H1'26, which would allow the submission of a trial permit application to the regulatory authorities for review. The review takes time, after which time is needed to start the actual trial. We now estimate that the first patient could be enrolled in the trial by H1'27 (previously 2026).

The figures in the report were in line with our expectations

The operating result was -2.27 MEUR, in line with our forecast of -2.38 MEUR. Cash flow for the period was 2.27 MEUR and cash and cash equivalents stood at 2.14 MEUR at the end of the year. However, the cash position was strengthened at the beginning of the year with a directed issue of 5.2 MEUR. According to management comments, the current financial resources and secured funding suffice up to Q2’26. The company expects discussions regarding a potential partnership to intensify when new trial results are available in Q3'25.

We update our assessment of the progress of the research pipeline a little further ahead

We are updating our estimate for the Phase II trial schedule by about a year, based on new information reported by the company in connection with the financial statement. In our estimation, regulatory approval for the trial could be possible in H2'26 and patient recruitment could begin in H1'27. The change shifts forecast cash flows further into the future, which has a decreasing effect on the present value of cash flows (DCF model). We are also making minor changes to our cost forecasts, but their practical significance is minimal.

Risk-adjusted DCF modeling suggests that the stock is attractively priced considering the risks

Our DCF model suggests a value of EUR 1.9 per share indicating the attractive pricing of the stock. Our risk-adjusted forecasts consider the significant risk of failure in drug development, which we estimate is almost 90%. The value of the share can be realized not only through licensing-based cash flows, but also through a partnership agreement or a takeover bid. New trial results available in Q3’25 may lower the share’s risk profile if the results are favorable. The investment profile is characterized by a significant return potential with a lower probability and a possibility of loss of capital with a higher probability.