February 14th, 2023 | 15:46 CET
Biotech stocks on the verge of a breakout? Evotec, BioNTech, Cardiol Therapeutics
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"[...] We are a producer and distributor of medicinal products and thus cover a crucial step in the value chain, especially within the cannabis industry. [...]" Philip Schetter, CEO, Cantourage Group SE
Cardiol Therapeutics: When will the stock react?
Cardiol Therapeutics is the smallest of the featured companies. Nevertheless, it has the greatest share price opportunities if analysts have their way. The experts at Leede Jones Gable Inc. recommend the stock, which is traded on Nasdaq and in Germany (e.g. Tradegate), as a buy with a price target of CAD 4.50. The Canadian biotech company's stock is currently trading at CAD 0.81, barely higher than its cash position. The stock has not reacted to the latest positive news. Yet the Company is solidly financed.
The Company conducts research in a highly attractive market: diseases of the cardiovascular system. At least 17.9 million people worldwide die of these every year. Worldwide, 35% of women die from cardiovascular disease - making it the leading cause of death. To change this, Cardiol has developed an active ingredient based on cannabidiol. It is designed to cure inflammation of the heart. Cardiol Therapeutics has now successfully enrolled the first patient in a Phase II pilot study. The study's objective is to evaluate the tolerability, safety and efficacy of CardiolRx™ in patients with recurrent pericarditis. The study is designed to assess improvement in objective indicators of disease, as well as the feasibility of discontinuing concomitant treatment, including corticosteroids, for an extended period while taking CardiolRx™ simultaneously, in addition to standard safety assessments.
If approved, CardiolRx™ will open up a billion-dollar market. It is estimated that 38,000 patients in the US require treatment for recurrent pericarditis each year. The only therapy approved by the US FDA to date, ARCALYST®, has been on the market since 2021 and costs around USD 6,000 per application. In view of this, Cardiol's current market capitalization of less than EUR 50 million would be a "bargain".
Event update: Cardiol will present at the 6th International Investment Forum tomorrow (February 15, 2023). Registration for the virtual event is free.
BioNTech: Shares with a 100% chance, according to Berenberg
BioNTech is probably not a "bargain" at the moment. After all, the Mainz-based biotech gem brings EUR 32 billion to the stock exchange scales. At the same time, revenues from the COVID-19 vaccine are declining, and it will take several more years until the products under development are ready for the market. For this reason, numerous analysts recommend the share as a buy. Among them are the experts at Berenberg. Their price target for the BioNTech share is USD 300, resulting in a price potential of over 100%. UBS is more cautious. Their analysts rate the Mainz-based company's stock as "Neutral" with a price target of USD 168. In their view, the revenue from vaccine sales continues to be the focus of investors. And the amount of these revenues is subject to great uncertainty. These two different views are expressed in the share price. The share price has been moving sideways for a good year. An upward breakout seems possible only in the event of a major COVID-19 wave or variant or a spectacular research success.
Evotec: On the upswing after a horror year
Evotec shareholders have had a challenging year. The share of the German biotech company more than halved in 2022 from over EUR 40 to EUR 15. But now the chart situation is brightening. In a few days, it went up by about 20%, and the chances are good that the downward trend can be left behind. In the meantime, there is also positive newsflow again. Evotec recently secured a EUR 150 million loan from the European Investment Bank. The unsecured funds will be used for research & development and company investments. It will also support the construction of a new biologics manufacturing facility in Toulouse, France. The facility will be based on Evotec's J.POD® technology. J.POD uses autonomous clean rooms with small, high-density production processes, which is expected to reduce the cost of producing biologics. The loan funds are available to the Company for seven years from drawdown. Evotec CFO Enno Spiller, soon to join Formycon, said, "We are very pleased to enter into this second financing agreement with the European Investment Bank. By funding transformative projects in key areas of high public interest, the EIB is a key driver of innovation in the EU. We are honored and look forward to new opportunities for R&D partnerships - and to establishing Europe's first J.POD biologics manufacturing facility under very attractive terms through the EIB's innovative financing model."
Previously, a strategic collaboration and licensing agreement with Johnson & Johnson subsidiary Janssen Biotech was announced. The collaboration relates to immune-based cancer therapies. Evotec will receive payments for the research work and an upfront payment. Performance-based milestone payments of more than USD 350 million have been agreed upon. In addition, Evotec will receive a royalty on sales when drugs from the collaboration reach the market.
Warburg Research recommends Evotec shares as a buy with a price target of EUR 29. The analysts view the recent extension of the partnership with Bristol Myers Squibb as positive. Eight of eleven analysts recommend the German biotech company's stock with a "buy" or "outperform" rating. The average price target of all eleven analysts is EUR 28. And thus significantly above the current price of EUR 18.33.
Biotech shareholders need strong nerves. In the case of BioNTech, a breakout - upwards or downwards - from the sideways trend, which has lasted for more than a year, is likely to be violent. In contrast, Cardiol Therapeutics appears to have limited downside risk. The Company is trading at cash, and the positive newsflow of the past weeks has been ignored so far. At Evotec, it may take some time for investors to regain confidence after the horror year.
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