Bayer, Defence Therapeutics, Pfizer - Buckle up for the rebound

Bayer - The turnaround should succeed in 2024

Bayer shares recorded a loss of a good 30% in 2023. The challenges for the Company include declining sales in the Crop Science division, setbacks in clinical trials, glyphosate-related legal disputes and high financial debt. However, there are increasing signs that the share price slump following the failure of the blood thinner Asundexian may have been exaggerated. That is because the Company's executive bodies have recently been buying more shares, which can always be considered positive, and there have also been successes with some drugs such as Nubeqa and Kerendia.

In addition, shortly before the turn of the year there was finally another positive decision in favor of Bayer in a glyphosate lawsuit. This means that 10 of the last 15 lawsuits have been won. From this, one could deduce that the provisions for the legal disputes in this area should be sufficient. Nevertheless, an end to the wave of lawsuits is not yet in sight and it can sometimes go through several instances if very high compensation payments have been imposed in a first judgment. These are often reduced in the following cases. This uncertainty has been weighing on the share price for some time.

As a result, shareholder activists have called for the Group to be broken up. No decision has yet been made in this regard. The new CEO, Bill Anderson, is expected to outline his future strategy in detail at the Capital Markets Day on March 5. The fourth quarter results will also be published on the same day. If the EUR 11.3 to 11.8 billion EBITDA target is achieved, adjusted earnings per share will be between EUR 6.20 and EUR 6.40. Based on the current share price of EUR 34.25, this is a factor of 5.4. There are some challenges, but the upside potential is definitely there.

Defence Therapeutics - Phase I study can begin

Defence Therapeutics has achieved an enormous breakthrough in drug delivery. With the development of Accum™ technology, the Company demonstrates up to tenfold increased efficacy in the delivery of drugs to infected cells compared to traditional methods. This novel, patented technology represents a turning point in the treatment of cancer by overcoming existing biological hurdles for existing cancer drugs. The chemotherapeutic AccuTOX™, an injectable cancer molecule, has proven itself in cancer treatment tests.

On December 11, the Company announced the FDA's approval of an Investigational New Drug application for a Phase I clinical trial of AccuTOX™ for the treatment of solid cancer tumors. The study's primary objective is to determine the safest dose to use AccuTOX™ in combination with Opdualag™ in patients with unresectable melanoma. A milestone has thus been reached. The next step is to confirm the results from the preclinical tests, which have already shown limited tumor growth and even a complete therapeutic outcome in 70% of cases. This would open up a market worth billions to Defence Therapeutics.

By 2029, the solid tumor market is expected to quadruple to over USD 900 billion. However, the Accum™ technology is not only a complement to already approved ADC (Antibody Drug Conjugate) therapies but also forms the basis for the Company's own development of innovative vaccines. Despite all the good news and study results, the share came under pressure at the end of the year. The range around CAD 2.19 has now held three times. The share is currently trading at CAD 2.33. If the study results are positive, it could quickly return to last year's high of CAD 4.85.

Pfizer - Looking good in the long term

Pfizer shares lost almost 45% of their value in the past year. The significant drop in demand for the COVID-19 vaccine was one of the reasons why the figures were no longer as strong as in the previous year. The profits from the highly profitable COVID years have been invested in the future. The Company completed the acquisition of Seagen for USD 43 billion to strengthen its presence in the rapidly growing market for cancer drugs. The portfolio was thus expanded by adding three approved cancer drugs.

In January, Pfizer plans to increase the prices of 124 drugs, while its subsidiary Hospira intends to raise the sales price of 22 products. The reason given is the price negotiations with the US government that are being conducted this year as part of the Inflation Reduction Act. Increased demand for Paxlovid could also lead to rising sales. Due to the increased COVID-19 figures for the JN.1 variant, the drug is in greater demand for treatment. On the other hand, several patents are due to expire in the next four years, which has brought Pfizer a lot of money.

In mid-December, the FDA approved the combination of PADCEV® with KEYTRUDA® for the treatment of advanced bladder cancer. The combination has almost doubled survival rates and opens up an alternative to platinum-containing chemotherapy as a first-line treatment. This could boost sales. Although sales in the last quarter were below expectations, profits were higher than forecast. The Group increased the dividend by 2.4%. On March 1, USD 0.42 per share will be paid for the last quarter, representing a dividend yield of 5.8% at a share price of USD 28.79.

All three of the candidates presented have lost ground in the past year. However, as is so often the case, the stock market has exaggerated. At Bayer, a drug candidate is not automatically worth a quarter of the Company and the glyphosate lawsuits are also progressing slowly. A split-up of the Company could have a positive effect. Defence Therapeutics has created a patented platform that delivers active ingredients where they belong and can overcome biological barriers, optimizing the efficacy of the drugs and offering many scaling options. If the Phase I study results are positive, the share will quickly take off again. Pfizer has suffered from the last few "fat" years. This year, as expected, the figures were significantly worse. But the Company pays a high dividend and has already invested money in the future.