MorphoSys, Defence Therapeutics, Bayer - Biotech and Pharma suddenly back in focus

MorphoSys - To be acquired

The rumors about a potential acquisition of MorphoSys have been circulating for a while, especially when the stock fell below the EUR 20 mark. Since the end of October, the share had already started to rebound from its low of EUR 14.52. When the rumors about Novartis emerged, the share price shot up further. Novartis has made shareholders an offer of EUR 68 per share and is thus paying around EUR 2.7 billion for the former German biotech flagship company. For the takeover to proceed, at least 65% of all shares must be tendered to Novartis.

With this step, Novartis aims to strengthen its portfolio in the field of oncology. MorphoSys has an extensive oncology pipeline. The focus is on developing treatment options for diseases such as myelofibrosis. The question remains as to why the Swiss are willing to pay such a high price. The high premium on the share price could be due to the fact that another interested party, Incyte, has made an effort to acquire MorphoSys. In the end, Incyte secured the global marketing rights for MorphoSys's drug tafasitamab for USD 25 million on February 5. Tafasitamab received accelerated FDA approval for the treatment of diffuse large B-cell lymphoma.

It can be assumed that the takeover will go ahead. The Board of Directors and the Supervisory Board have voted in favor of the Novartis offer. Should Novartis wish to terminate the agreement, the Company would have to pay EUR 100 million to MorphoSys. Many shareholders were in despair in early October last year, and now the share has gained around 360% from its lows, provided shareholders accept the offer. Last Friday, the share closed at EUR 64.10 in XETRA trading. There is not much room left to reach the EUR 68 offered.

Defence Therapeutics - AccuTOX® is also effective against lung cancer

Defence Therapeutics utilizes its patented Accum™ technology to develop novel cancer therapies. It involves using proprietary or third-party antibody-drug conjugates (ADCs) and targeting them to fight cancer cells. Even ADCs that initially failed can be given a second chance with this technology, as the optimized transport increases efficacy by up to 10 times. In some cases, the dosage can also be reduced. The focus is on melanoma, breast cancer, and lung cancer. The Accum™ platform can also be used to develop vaccines against cancer and infectious diseases.

According to Data Bridge Market Research, the market for solid tumors is expected to reach over USD 900 billion by 2029, indicating high growth potential in this area. In mid-December, Defence Therapeutics received approval from the FDA for a Phase I clinical trial to combat solid cancer tumors with the drug AccuTOX®. This marks a significant advance in immuno-oncology for the Company. The drug stimulates the immune system and inhibits tumor cell growth. On January 10, the Company announced that AccuTOX® has also been successfully tested against tumors in the lung.

This new formulation expands the scope of AccuTOX® in treating cancer tumors. These studies cost money, and the Company is currently raising CAD 2.25 million through a private placement at CAD 1.50 per share. In addition, each investor receives a warrant with a strike price of CAD 2.00, valid for 24 months. The first tranche was completed at the beginning of February, raising CAD 850,500. The money will be used to finance the studies. After the share price moved towards CAD 1.50 following the announcement of the financing, it subsequently rose to CAD 2.32. One share currently costs CAD 2.00.

Bayer - Not just a shadow

Over the years, Bayer, once a beacon of German engineering and pharmaceutical innovation, has lost much of its luster and is facing challenges. A major factor is the problematic acquisition of Monsanto in 2018, which has left the Company with immense debts and a flood of legal battles. This decision, in retrospect, marked a turning point from which Bayer's image and finances were severely affected. In addition, businesses that were once considered unshakeable are increasingly facing regulatory hurdles, increased competition and shifts in consumer preferences.

Despite these problems, it is inappropriate to write Bayer off prematurely. After all, the Company still has strengths and potential that point to a positive future. Firstly, there is the strong position in research and development. In Europe, Bayer is leading in patent applications to combat cancer, according to a report from the European Patent Office. The Company is also planning to minimize development times using artificial intelligence. Most recently, a collaboration with TetraScience was announced with the aim of improving the development of active ingredients in all areas.

The Company is currently undergoing a transformation phase. Jobs are being cut, departments merged and much more to increase efficiency. On March 5, the Company will hold its Capital Markets Day and present its annual figures. It will be interesting to see what the new CEO, Bill Anderson, will present. It will then also become clear whether the dividend will be left untouched. With a current share price of EUR 27.78, this would mean a dividend yield of around 8.6%. However, investors should not count on this with certainty, as many issues need to be resolved that come with associated costs.

All three companies presented have one thing in common. They are all involved in the fight against cancer. According to experts, this market will grow significantly in the coming years. MorphoSys will most likely be taken over by Novartis. It was important for the Swiss company to secure access to the oncology pipeline. With the Accum™ platform, Defence Therapeutics has created the possibility of transporting active substances directly to diseased cells. With AccuTOX®, the Company has a promising candidate in its portfolio focused on fighting cancer. Bayer has filed the most oncology patents in Europe. The glyphosate lawsuits are currently back in the spotlight. Those not yet invested should wait for March 5 and see if there are any new findings.