Bayer, XPhyto Therapeutics, MorphoSys - Which pharmaceutical companies bring returns?

Bayer - Pharma sector is promising

Bayer almost became a vaccine manufacturer, but the efficacy of the CureVac vaccine was not high enough, and so Bayer did not even go into production. Bayer's focus is still on the risks from the Monsanto acquisition. A capital investor test case was recently added, which does not involve a risk of EUR 1 billion as was initially the case, but even up to EUR 2.2 billion. But the good news from the pharmaceutical sector did not help the share.

Last December alone, the Group reported three positive announcements. At the beginning of December, encouraging results came out of Phase III Arasens study, according to which patients with metastatic prostate cancer can live significantly longer. On December 17, Finerenon, a drug for chronic kidney disease and diabetes, was recommended for EU approval. The final step was the approval of Xarelto by the FDA in the US on December 21. The drug is an anticoagulant and was approved for two additional use cases in children.

The majority of analysts now recommend buying the share. Price targets between EUR 58 and EUR 85 are issued. The share formed an initial upward trend on January 4 and is currently trading at EUR 50.92. The share price is expected to rise above this level by the end of the year. Closing prices above EUR 51.84 would break the downward trend. After the decent increase in the last few days, the dividend yield at the current share price has fallen back to just below 4%.

XPhyto Therapeutics - Clinical study on epilepsy

There has been a lot going on at Canadian biotech company XPhyto Therapeutics over the past month and a half. To kick things off on November 26, the Company raised a total of CAD 7 million. The money was used on December 6 to finalize the acquisition of 3a-diagnostics GmbH (3a), the partner it co-developed the rapid PCR test with. The acquisition strengthened the diagnostics business area, as 3a is considered a specialist in biosensor development. A detailed analysis of the business units can be viewed at researchanalyst.com.

Conventional antigen tests detect Corona only at elevated viral loads, so sufferers may receive a negative test. The developed 25min PCR test achieves more accuracy and does so almost as quickly as an antigen test. In addition, the tests can be performed directly on-site without a laboratory, making them ideal for point-of-care facilities at the airport, pharmacies, etc. According to Allied Market Research, the market is expected to grow to USD 39 billion by 2023. On December 15, the Company announced that it would begin an epilepsy clinical trial with soluble oral CBD strips in 2022. If the pilot study is successful, a pivotal study will follow in H2 2022.

On January 10, a director of business development, Roland Spleiss, was hired. He has already proven at Wörwag Pharma (200 million sales) that he can drive the internationalization of companies and optimize supply chains and sales processes. Dr. Heinrich Jehle, a top-class expert, was recruited for the Diagnostics Division. The share has run sideways between CAD 1.05 and CAD 1.28 since mid-November. From this perspective, the latest news has had no effect. If the Company succeeds in landing a major order for PCR tests, the share price should pick up quickly.

MorphoSys - New lows again

The biotech company MorphoSys was once a model company from Germany. The problems started when the founder wanted to transform the contract research organization into a pharmaceutical company. Many areas, such as sales and distribution, were simply underestimated. MorphoSys has been paying the price ever since. The Company, which says it wants to give people with cancer a better and longer life, has made a mess by acquiring Constellation Pharmaceuticals for EUR 1.5 billion.

Hopes rest on pelabresib, a drug used in bone marrow cancer currently in a phase 3 trial. In the latest update on the drug on December 12, Peters, the Company's chief research and development officer, said, "These data confirm previously published results and reinforce the importance that pelabresib could have in the difficult treatment of myelofibrosis if approved." The second major hopeful, Monjuvi, which is co-marketed with Incyte in the US, fell short of lofty expectations. In 2021, sales were expected to be around USD 79 million. In 2022, however, sales are expected to climb to between USD 110 million and USD 135 million.

Sales have fallen short of expectations, research costs will more than double in 2022, and much of the licensing revenue will go to the backer for the Constellation acquisition. No wonder the stock has already hit new lows of EUR 28.11 this year. At the current price of EUR 32.17, the market capitalization is only EUR 1.1 billion, 400 million less than was paid for the acquisition alone. When the approval of pelabresib comes, the world will look different again, but until then, one should wait for the break of the downward trend.

A lot is going on in the pharmaceutical and biotech sector. While Bayer is still suffering from the Monsanto takeover, things are already improving in the pharmaceutical sector. XPhyto has recently repositioned itself through the acquisition and the newly acquired personnel. The potential must now be developed. At MorphoSys, a lot depends on the funds from Constellation. If the approvals come through, the turnaround will succeed.