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June 16th, 2022 | 11:01 CEST

Biotech stocks ahead of the turnaround - Evotec, NervGen and MorphoSys

  • Biotechnology
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Biotechnology stocks could not escape the current correction. The broad-based NASDAQ Biotechnology Index, for example, has lost around 40% since its peak last August. The fact that biotechnology will increasingly become a key technology in the future was already demonstrated during the Corona pandemic when tests, vaccines and drugs were developed in a very short time and made available in large quantities. Thus, more and more capital is likely to move into the sector in the coming years, with great opportunities for the individual companies.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: EVOTEC SE INH O.N. | DE0005664809 , NERVGEN PHARMA CORP | CA64082X2032 , MORPHOSYS AG O.N. | DE0006632003

Table of contents:

    David Elsley, CEO, Cardiol Therapeutics Inc.
    "[...] As a company dedicated to developing treatments for rare heart diseases, we see this as an opportune moment to contribute to the fight against heart disease and make meaningful strides in improving heart health worldwide. [...]" David Elsley, CEO, Cardiol Therapeutics Inc.

    Full interview


    MorphoSys - Costs in view

    The hard-pressed MorphoSys investors could probably still live with a loss of around 40%, as in the case of the NASDAQ Biotechnology Index. The shares of the biopharmaceutical company, founded in 1992 and based in Planegg near Munich, have lost a staggering 90% since their peak in June 2020. In addition to the current weak market environment, expensive acquisitions such as that of the US oncology specialist Constellation Pharmaceuticals were the main reasons for the sell-off. The somewhat disappointing development of sales of the most important drug Monjuvi also contributed to the weak performance.

    However, several announcements are now brightening the mood, which could lead to a possible turnaround. For example, the US pharmaceutical giant Pfizer intends to cooperate with MorphoSys in the development of a new cancer drug. Pfizer wants to test its cancer drug TTI-622 in a clinical trial in combination with the cancer drug Monjuvi, the two companies announced in a press release. MorphoSys and its partner Incyte will provide Monjuvi for the trial, and Pfizer will fund the testing.

    On the other hand, granting licenses for two antibody preparations to the US company Human Immunology Biosciences (HIBio) caused the share price to rise by more than 6%. In contrast, MorphoSys will receive an upfront payment of EUR 14.4 million and become a 15% shareholder in the Company. In addition, further milestone payments and royalties could flow into the Planegg-based company's tight coffers in the future. US investment bank JPMorgan gave the deal a thumbs-up. Analyst James Gordon takes a positive view of the licensing agreement with Human Immunology Biosciences and reiterated his rating of "neutral" with a target price of EUR 34.

    NervGen - Powerful potential

    The market potential seems unlimited, as the compound NVG-291, developed by NervGen Pharma, treats nerve damage in several diseases such as spinal cord injury, multiple sclerosis and Alzheimer's disease. In the US alone, there are approximately 6 million cases of Alzheimer's disease, 900,000 patients with multiple sclerosis, and 300,000 chronic patients with spinal cord injuries. What these diseases, which at first glance appear to be different, have in common, was discovered some 30 years ago by Dr Jerry Silver, a professor of neuroscience. Nerves everywhere are damaged, and the body responds by scarring to contain the damage. The purpose of scarring is to encapsulate the site of injury to prevent further damage and begin the healing process. However, a component of the scar, a glycoprotein called chondroitin sulfate proteoglycan (CSPG), inhibits the body's ability to regrow and regenerate the central nervous system.

    NervGen was able to secure a license to the NVG-291 technology developed by Dr Silver and is now planning big things. Last month, the Company announced that it had received approval to administer the third and highest dose in the clinical trial. This very important announcement now opens the door for further study extensions. CEO Paul Brennan stated, "this provides a clear pathway for establishing our dosing in planning our upcoming Phase 1b/2a efficacy studies in patients with Alzheimer's disease and spinal cord injury later in 2022 and a Phase 2 study in patients with multiple sclerosis in early 2023." Supporting this effort will be renowned expert Craig Thompson, who has been appointed to the Board of Directors. Thompson most recently served as CEO of Neurana Pharmaceuticals and, in the past, was involved in Cubist Pharmaceuticals' more than USD 700 million acquisition of Trius Therapeutics.

    A further push is likely to come from the planned listing on NASDAQ, which should take place before the end of the year. Currently, the stock market value of the Canadian Vancouver-based company is EUR 57.62 million. Assuming positive study results, this value should rise relatively quickly.

    Evotec - Insiders buy

    In addition to MorphoSys, another German biotechnology company also entered into a cooperation with a US pharmaceutical giant. Evotec announced a drug discovery partnership with Janssen Pharmaceutica NV, one of Johnson & Johnson's Janssen pharmaceutical companies. It involves the application of Evotec's innovative TargetAlloMod platform to discover first-in-class drug candidates with a novel mode of action. The agreement was supported by Johnson & Johnson Innovation.

    Under the agreement, Evotec and Janssen will jointly screen the identified targets and collaborate on hit identification and lead optimization of the most promising compounds. This will be done using Evotec's fully integrated drug discovery and development platform. For Evotec, in addition to research payments, success-based research and commercial milestone payments could bring in up to EUR 210 million per project.

    The purchase of Evotec shares by CEO Werner Lanthaler had a positive effect. For EUR 22.86, the CEO added 10,000 shares to his portfolio. From a chart perspective, the timing could prove right after a major correction. On the one hand, the low for the year at EUR 22.08 could be defended, and on the other hand, the indicators are turning and are close to new buy signals.

    Despite excellent future prospects, the biotech sector corrected strongly in the past half-year. MorphoSys could find its bottom after a decline of around 90%. At Evotec, the CEO is now buying. NervGen is still at the beginning of its development, but its results so far show high potential.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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