16. March 2021 | 07:16 CET
Bayer, Cardiol Therapeutics, Xiaomi - Biotech: Blockbuster potential here!
Germany is leading the race for a vaccine against the coronavirus With two companies - BioNTech and CureVac. The biotech industry is currently experiencing a growth spurt that will continue over the next few years, if not decades. In Germany alone, EUR 7 billion is invested annually in research and development. The goal is to develop new therapies to prevent, alleviate and cure diseases. The opportunity for disproportionate share price gains by investing in a company at an early stage of research is gigantic.
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ISIN: DE000BAY0017 , CA14161Y2006 , KYG9830T1067
Rocky road ahead
Developing new drugs is a lengthy process. Out of 5,000 to 10,000 hopefuls tested in pharmaceutical companies' research laboratories, on average, only one ends up as a finished drug in the pharmacy. Between them, there is an average period of 13.5 years. In between, there are 3 phases: In the preclinical study, the drug candidate is tested on cell cultures and animals, while in phase 2 clinical trial, the drug is tested on humans for the first time. In phase 3, doctors test the drug on thousands of patients to see whether efficacy and safety can be confirmed in many different patients. Interactions with other drugs will also be studied. Once a new drug has passed all the prescribed studies and tests, the biotech company finally applies for drug approval from the relevant authorities.
Potential in the boom market
The Company Cardiol Therapeutics has already come a long way. The Canadians are focused on manufacturing pharmaceutical cannabidiol (CBD) products and developing innovative therapies for heart disease. These include acute myocarditis and other causes of heart failure. The focus is on the product CardiolRx, which is already in Phase 2/3 clinical trials. CardiolRx is a pharmaceutically manufactured oral cannabidiol formulation. The objective is to evaluate the compound's efficacy and safety as a cardio-protective therapy to reduce mortality and serious heart disease in COVID-19 patients with pre-existing cardiovascular disease and risk and assess the compound's impact on key markers of inflammatory heart disease.
Comparison with USA lags
The current stock market valuation of Cardiol Therapeutics, which has other CBD drugs in development in addition to the blockbuster candidate CardiolRx, currently has a market value of just under EUR 80 million. If one compares US biotechs in a comparable development phase, there should still be considerable potential here. To present itself to a broader circle of investors, the management has applied for a Nasdaq listing. Another positive fact is that the Company receives CAD 10 million from the exercise of warrants and stock options to be used for further development steps.
Focus on growth
With the glyphosate settlement behind it, one must look ahead. In the coming years, the pharmaceutical and agricultural group Bayer intends to accelerate its growth and improve its profitability. According to the Company's headquarters, this will be achieved through new innovations. However, the all-important question is how the legal dispute in the Monsanto takeover course will end. Here, Bayer CEO Werner Baumann expects a possible agreement at the end of June at the earliest. Despite the vague statements concerning the expected settlement, analysts remain positive. The US analyst firm Bernstein Research maintains a "buy" rating on Bayer shares and assigns a price target of EUR 69.00. NordLB raised its price target from EUR 61.00 to EUR 64.00. The experts see the ongoing transformation process, the positioning of the three divisions and the initiated efficiency program as positive.
The tide is turning
A points victory for Chinese technology Group Xiaomi. The Department of Defense had blacklisted Xiaomi shortly before President Donald Trump's term ended amid allegations of ties to the Chinese military. Xiaomi denies the allegations. A judge suspended the punitive measures, and the court said the reasons were based on inadequate justification by the US Department of Defense. Important for Xiaomi is the fact that US investors are now allowed to reinvest in the papers of the current number three smartphone manufacturer in the world. In addition, the Company announced a new USD 1.29 billion share buyback program last week. Management believes that a share buyback under current conditions demonstrates the Company's confidence in its business prospects and creates value for shareholders. It's good timing. After all, Xiaomi has lost a whopping 40% since January.