MorphoSys, Cardiol Therapeutics, Bayer - Where will the rebound start first?

MorphoSys - Hopeful drug with mixed results

The development of the MorphoSys share price in recent years has been a disaster. An overly expensive takeover of Constellation caused problems for the former biotech flagship company. Since the beginning of the year, new euphoria has been generated by the prospect of approval for the drug Pelabresib, which was in clinical Phase III. Pelabresib is aimed at a rare form of blood cancer and, according to experts, has a potential of billions. But even before the trial results, the quarterly results brought a noticeable setback. The operating result showed a minus of EUR 51 million.

Turnover of EUR 63.8 million also fell by 30% compared to the previous year. The hopeful candidate, Monjuvi, contributed approximately EUR 21.5 million, slightly less than the EUR 21.9 million from the previous year. Nevertheless, the forecasts for the product were confirmed. Operating costs were EUR 7 million above 2022 and amounted to EUR 15.1 million. Research and development costs were reduced from EUR 77.8 million to EUR 63.2 million. This is due to prematurely terminated research projects and a reduction in headcount. At the end of the third quarter, MorphoSys had cash and cash equivalents of EUR 642.2 million.

On November 20, the study results of pelabresib in myelofibrosis were presented. The results were mixed. On the one hand, there was a significant improvement in the reduction of spleen volume. This means that the primary objective was achieved, but the results of the secondary objective were disappointing. Here, the comparator drug ruxolitinib performed significantly better, so a combination therapy appears to make more sense. More detailed data will be presented at the 65th Annual Meeting of the American Society for Hematology. This news has attracted short sellers. After falling to EUR 14.52, the share has recovered to EUR 18.40. This rebound could be a result of short sellers covering their positions through purchases.

Cardiol Therapeutics - MAvERIC-Pilot Study speeds up

Among our candidates, the stock of Cardiol Therapeutics has performed the best thus far. Cardiol Therapeutics is a clinical-stage life sciences company focused on developing anti-inflammatory and anti-fibrotic therapies for the treatment of heart disease. The Company has a strong financial position, a broad intellectual property portfolio and a product called CardiolRx™ that is in two Phase II trials for the treatment of recurrent pericarditis and acute myocarditis. The Company is also advancing the development of CRD-38, a subcutaneously administered drug for the treatment of heart failure.

On November 1, the Company announced that more than 50% of the enrollment target for the Phase II MAvERIC-Pilot Study evaluating the safety and efficacy of CardiolRx™ in patients with recurrent pericarditis has been reached. The study aims to assess the improvement in objective disease characteristics and the feasibility of discontinuing background therapy, including corticosteroids, while taking CardiolRx™. The results of the pilot study will contribute to understanding the treatment profile of CardiolRx™ and developing the design of a pivotal Phase III trial.

On November 16, study results were published showing that in an experimental model of pericarditis, mesothelial-to-mesenchymal transition (MMT) is induced. Treatment with cannabidiol, the active ingredient in CardiolRx™, inhibits this process. This finding suggests a potential benefit in preventing complications associated with pericarditis. The relevant studies were submitted by international research partners for the 2023 Annual Congress of the European Society of Cardiology Working Group on Myocardial and Pericardial Diseases in Belgrade. The shares, currently trading at USD 0.8899 on the NASDAQ, formed an upward trend again for the first time. This will remain intact as long as the USD 0.72 mark is not broken on a closing price basis.

Bayer - The tree is burning

Bayer's shares have been weak all year, but on November 20, they took another dive. The Group had previously announced the discontinuation of the drug development of asundexian with the study name OCEANIC-AF. The drug was one of the greatest hopes in the Pharma division's pipeline and was intended to help patients with atrial fibrillation and stroke risk. In contrast, the OCEANIC-STROKE phase III clinical trial is still ongoing. The Leverkusen-based company also had to recall a batch of the cancer drug Vitrakvi due to microbacterial contamination.

In an interview with the Financial Times, CEO Bill Anderson said that the Company had invested too little in the pharmaceutical sector in the past and that this had ultimately led to a thin product pipeline. However, he assumes that the course for the future has now been set. As if the bad news about the pharma division was not enough, there were also setbacks regarding glyphosate. While the approval in the EU has been extended by 10 years, a court in the USA awarded the three plaintiffs USD 61.1 million in damages and imposed USD 1.5 billion in punitive damages.

Further pressure on the share was exerted by a Bloomberg report according to which the Group had various parties run through spin-off scenarios. The aim was to be prepared for the demands of larger investors at an early stage. However, a result has not yet been reached. The pressure is growing, and the share is falling daily. Analysts have also become more cautious, and the majority have downgraded Bayer to "Hold". Only UBS, Bernstein Research and DZ Bank see Bayer as a "Buy". The share is approaching the psychologically important EUR 30 mark and is currently trading at EUR 30.66.

Only Cardiol Therapeutics, who is financially well positioned and can report positive study results, is currently doing really well. MorphoSys was unable to fulfill the high hopes for the next blockbuster with Pelabresib. Caution is advised here. Bayer's pharma division has been the guarantor of success so far. If the biggest hopeful from the development pipeline fails and the glyphosate lawsuits continue unabated, this creates uncertainty. Is the share worth 25% less because of these incidents? Probably not. Nevertheless, one should not catch a falling knife.