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November 30th, 2022 | 13:31 CET

Biotech stocks in focus: Morphosys, Evotec, Bayer, BioNxt Solutions

  • Biotechnology
  • Cancer
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Biotech stocks have struggled in 2022. In Germany, BioNTech has overtaken the previous heavyweights Morphosys and Evotec in record time. Morphosys shocked investors with data on its Alzheimer's hope. Analysts lowered their thumbs, and short-sellers discovered the stock for themselves. Evotec has been quiet this year. Analysts think the valuation is attractive, but meeting earnings guidance in the current year is not a given. BioNxt shares have jumped recently, and if the positive newsflow continues into 2023, a re-rating is possible. At Bayer, the pharmaceuticals division is also developing positively. Conclusion: investors should position themselves for the biotech year 2023.

time to read: 4 minutes | Author: Fabian Lorenz
ISIN: BAYER AG NA O.N. | DE000BAY0017 , MORPHOSYS AG O.N. | DE0006632003 , BioNxt Solutions Inc. | CA0909741062 , EVOTEC SE INH O.N. | DE0005664809

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


    BioNxt Solutions: Will newsflow bring a revaluation?

    BioNxt Solutions (formerly XPhyto Therapeutics) could make a breakthrough in 2023. In November, BioNxt attended CPHI, the world's largest pharmaceutical conference, and said it had a number of meaningful discussions with potential contract manufacturers, product licensees and collaboration partners for new products. As a result, the share price has jumped and has a lot of upside potential, with a market capitalization of EUR 34 million. The Canadian biotech company is also active in Germany with several subsidiaries and is focused on developing next-generation drug formulations, diagnostics and new active pharmaceutical ingredients. Several projects are approaching commercialization.

    BioNxt could achieve the first marketable product with a product from its diagnostics division. The Company is working on several products to detect diseases in the oral cavity. This is a particularly important topic in the US, where widespread opioid addiction massively affects the oral cavity of addicts. The follow-up costs for dental treatment run into the billions. BioNxt has inexpensive and easy-to-use tests to detect or rule out risks. There is already a letter of intent with a US company for manufacturing, distribution, research and development. It is also in talks with possible cooperation partners for another product.

    BioNxt is working on further developing its leading drug formulation - a rotigotine transdermal patch for the treatment of Parkinson's disease - and in parallel, is taking appropriate steps towards regulatory approval, commercial production and worldwide distribution. Discussions on this were held at the CPHI. The market volume for rotigotine patches is expected to grow from USD 518 million in 2021 to USD 760 million by 2030. If there is further positive news on product developments and collaborations in the coming months, a re-rating of the stock would be possible.

    Morphosys: What comes after the study and number flop?

    Analysts have re-evaluated the Morphosys share in recent weeks. However, there were no positive results. Deutsche Bank has reduced the price target for the biotech company's shares after quarterly figures from EUR 18 to EUR 13. The share is currently trading at around EUR 15. Therefore, the recommendation is consequently "Sell". Currently, it is not foreseeable how Morphosys can achieve sustainable profitability, the analysts said. JPMorgan was also disappointed with the sales of the cancer drug Monjuvi. Therefore, the price target was reduced from EUR 32.50 to EUR 18, and the rating was confirmed at "Neutral".

    For the first nine months of 2022, Morphosys reported revenue growth from EUR 127 million to EUR 197 million. However, the loss also increased significantly, from EUR 134 million to EUR 481 million. "We are working hard to increase awareness and usage of Monjuvi in appropriate patients with relapsed or refractory diffuse large B-cell lymphoma. Looking forward, we are focused on continued execution and adherence to the timeline for the pivotal study with pelabresib," said Jean-Paul Kress, Chief Executive Officer at Morphosys, on the outlook. The figures put the large gap between market value and cash into perspective, but the gap still seems quite large, even though Morphosys has just reported disappointing progress results. For example, the phase 3 trial of its Alzheimer's drug showed no slowdown in the clinical course of the disease.

    Heavy losses and poor progress results have put short-sellers on notice. For example, Marshall Wace LLP (short position size: 2.21%), Qube Research & Technologies Limited (1.59%), Arrowstreet Capital, Limited Partnership (1.36%), HRTEU Limited (0.49%), LMR Partners LLP (0.61%), and Qube Research & Technologies Limited (1.48%), among others, sold Morphosys shares short.

    Evotec: 2022 earnings targets at risk?

    Evotec's stock has roughly halved in the current year and is currently trading at only around EUR 16.50. This is the lowest level since 2018. There was no terrible news, but no good news either. Therefore, analysts are cautious about the operational development in the coming year. RBC believes Evotec will not meet market expectations in EBITDA in the coming years. The analysts expect average earnings growth of 31% through 2025. The consensus is 42%. However, this is already priced into the share price. They reduce their price target from EUR 32 to EUR 28 but continue to recommend Evotec with "Outperform". Deutsche Bank is more pessimistic. Analysts there have reduced their price target for Evotec shares from EUR 26 to EUR 21. It is unclear whether the Company can achieve its targets for 2022. This also applies to the coming year. The "Evotec bulls" include Jefferies and Warburg. Both recommend buying the stock with a target price of EUR 34. Jefferies believes that Evotec is currently attractively valued and that the medium-term targets up to 2025 are achievable.

    Researchers examining tumor tissue sections. Photo: Bayer AG

    Bayer with blockbuster potential?

    Bayer is regularly traded as a possible buyer of research-based biotech companies. The Company also has its own pipeline. Nubeqa, used against prostate cancer, is already on the market and is also delivering successful new trial data. Thus, annual sales of over EUR 3 billion could be achieved in the future. That means that Nubeqa has blockbuster potential. This week it was announced that Nubeqa may now be administered in England - the first European country to do so - to patients with advanced-stage prostate cancer. Bayer also sees annual blockbuster sales of around EUR 1 billion for the kidney drug Kerendia, which recently received EU approval. Elinzanetant is currently in the European approval process. The hormone preparation is intended to help women with menopausal symptoms. A strong pipeline is needed. The patent for the best-selling drug Xarelto will expire in a few years. Bayer generated sales of more than EUR 4 billion with the stroke prevention drug in 2021 alone.

    After the disappointing study results and the weak quarterly figures, Morphosys is currently lacking in share price fantasy. Evotec is attractive due to its low valuation, but it is far from certain that the earnings forecast for 2022 will be achieved. At BioNxt Solutions, a steady news flow is certain in the coming months. If this also turns out to be good, the share is anything but expensive. At Bayer, the focus is on the agricultural sector, and it is worth taking a look at the pharmaceutical pipeline.

    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.

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    Der Autor

    Fabian Lorenz

    For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.

    About the author

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