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November 21st, 2022 | 11:07 CET

Morphosys, Defence Therapeutics, Evotec - Stabilization after the sell-off

  • Biotechnology
  • Investments
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After the publication of the figures for the third quarter, many biotech companies were able to surprise positively. Due to the partly panic-like sell-off in this capital-intensive sector, there are attractive entry opportunities at a strongly discounted level, which should pay off with disproportionate price gains in the long term. The fact that promising companies are already trading below their cash levels shows that the panic is exaggerated. There are currently signs of a bottoming out, which could herald the next upward wave.

time to read: 4 minutes | Author: Stefan Feulner

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


    Defence Therapeutics - Downward trend broken

    Defence Therapeutics offers a diversified portfolio with a highly scalable, patented platform. With its Accum technology, the Canadians are taking a revolutionary approach to the fight against both cancer and infectious diseases. The ADC drug development serves as the basis. Antibody-drug conjugates promise great potential in cancer therapy because they can specifically destroy cancer cells. The therapeutic window of ADCs, i.e. the ratio of efficacy to safety, compares favorably with other forms of treatment. Because the technology is highly specific, acting directly on the cancer cell, side effects can be reduced. The novel Accum method enables the precise transport of vaccine antigens or antibody-drug conjugates in the intact form to target cells, which is expected to result in improved efficiency and efficacy.

    The news flow of the past weeks shows the far-reaching possibilities of Accum technology. First, the start of a new preclinical program for the treatment of lung cancer, including various types of malignant tumors of the upper and lower respiratory tract, was reported. The potential here is enormous. The market for lung cancer therapeutics is expected to grow 10% annually to more than USD 54 billion by 2029.

    In addition, a new research and development program has been launched to utilize Accum's technology in developing mRNA-based cancer vaccines. The start will be a series for an Accum mRNA vaccine against cancer, targeting solid lymphomas. Building on that, companies such as BioNTech and Moderna are expected to be granted access to the Accum technology, which should help Defence Therapeutics upgrade significantly in terms of exposure.

    The stock is about to complete its bottoming phase at CAD 1.84 after breaking the downward trend formed in September 2021. A sustainable breakout above CAD 1.97 would significantly brighten the chart picture in the long term. In terms of financing, the successful placement of debt units with total gross proceeds of CAD 2,355,000 was also reported.

    Evotec - Analysts lower their thumbs

    A study by Deutsche Bank Research caused significant downward pressure. The analysts lowered the price target for Evotec from EUR 26 to EUR 21, and the investment rating was downgraded from "buy" to "hold". Analyst Falko Friedrichs sees the targets set for 2022 in danger, and the outlook for 2023 is ambitious. In order to achieve even the lower end of the projected profit margin this year, the active pharmaceutical ingredient researcher would have to present an adjusted operating result of EUR 60 million in the final quarter. In the first nine months of this year, Ebitda has been EUR 45 million.

    After a significant fall, the Hamburg-based company's share price of EUR 16.57 is now just above the low for the year of EUR 16.18, marked in October. A drop below this level is likely to result in further selling. The next target would then be the support area at EUR 15.00. On the upside, the closing of a gap at EUR 18.16 could result in a 10% trading opportunity.

    Strongly increased energy costs and high expenses for the expansion of production reduced Evotec's operating profit. In addition, the contribution from milestone payments and upfront and license payments was lower in the first nine months of the year. The Hamburg-based company continues to be in the red because a high write-down on an investment in the UK was also due in the third quarter.

    Morphosys - Quarterly figures stabilize

    At least for the time being, the downward slide of the former German biotech star Morphosys could be stopped. The loss of the Morphosys share since the beginning of the year amounts to 55%. The share price is thus at the same level as in 2011. The subsequent price gains with a performance of 737% have been completely eroded. With the announcement of the figures for the third quarter, which were above analyst estimates, there is hope, at least for a short-term bottoming out. In the area of EUR 15.10 lies a broad support zone, which was successfully defended in recent days. In the short term, a trading opportunity of around 30% to EUR 20.90 could open up here. In this area, the price would close the gap it opened last week.

    The Planegg-based company provided a positive surprise in terms of revenues in the third quarter. Due to high licensing income, especially from the contract with the US group Human Immunology Biosciences, sales rose by more than 60% to EUR 95.8 million. Net sales of the most important preparation Monjuvi in the US contributed EUR 21.9 million. In addition, the operating loss was significantly minimized to EUR 29.3 million, compared to a loss of EUR 82.4 million in the same period of the previous year. However, due to a significant increase in research and development expenses, the consolidated loss of EUR 122.9 million was higher than in the third quarter of 2021, when minus EUR 112.8 million was recorded.

    Despite many setbacks this year, Morphosys CEO Dr Jean-Paul Kress remains combative: " With the end of this year in sight, I am proud of what we have achieved so far; in particular, the progress we have made in patient recruitment for our pivotal studies for pelabresib and tafasitamab, as well as the preliminary results of the phase 1/2 study we published for tulmimetostat, which indicate anti-tumor activity in various tumors. We are working hard to increase awareness and use Monjuvi in appropriate patients with relapsed or refractory diffuse large B-cell lymphoma. Looking ahead, we are focused on executing and meeting the timeline for the pivotal study with pelabresib."

    Following sharp share price declines in recent weeks, Morphosys could have a trading opportunity of around 30%. The shares of Defence Therapeutics could leave their downward trend, while Evotec is at risk of a further sell-off by marking new lows for the year.

    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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