03. November 2021 | 11:03 CET
MorphoSys, Defence Therapeutics, Formycon - Biotech and pharma offer potential for the portfolio
The pharmaceutical industry alone has annual sales of over EUR 1,000 billion worldwide and helps people overcome their illnesses. Since the Corona pandemic, biotech and pharma companies are even more in the spotlight. If a company manages to develop a blockbuster, big profits also beckon to shareholders. BioNTech is currently a prime example of this, even if the share has consolidated in the meantime. Where there are high profits, there is also a higher risk. The road to the development and approval of a drug is long, and failure is also possible. As people are getting older and diseases are rising, it makes sense to invest in these areas. Today we analyze three potential candidates.
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ISIN: MORPHOSYS AG O.N. | DE0006632003 , DEFENCE THERAPEUTICS INC | CA24463V1013 , FORMYCON AG | DE000A1EWVY8
MorphoSys - Good news
The former stock market darling MorphoSys owns the most extensive antibody library globally, and from this, new drugs have been developed repeatedly through collaborations. The licensing income generated in this way allowed the Company to grow, and the biotech company was to slowly become a pharmaceutical company. Since then, this major undertaking has caused difficulties within the Company. These became even greater with the decision to take over Constellation Pharmaceuticals because large parts of the licensing income were given out of hand to finance the takeover.
Recently, the Company was able to come up with a series of good news. On October 20, it was announced that the first patient with immunoglobulin A nephropathy, a chronic kidney disease, had been treated in the course of a Phase II trial. This prompted the analysts at Berenberg to give the share a price target of EUR 124. On November 2, there was a small preview of the 3rd quarter figures, which will be presented on November 11. Compared to Q2, sales of the cancer drug Monjuvi increased by EUR 3.7 million to EUR 18.6 million.
In addition, the Company has two drugs from Constellation Pharmaceuticals in the pipeline, which are in their phase III trials. Since October 19, the stock has risen from EUR 37.10 to EUR 42.26. To leave the downtrend, a closing price above EUR 43.25 would be necessary. That would also mean crossing the 50 moving average from the bottom to the top. The next resistance would then be at EUR 51.60.
Defence Therapeutics - Success in the fight against breast cancer
The Canadian biotech company Defence Therapeutics is breaking new ground in drug delivery. Whereas conventional drugs using antibody-drug conjugates (ADC) have repeatedly shown ineffective drug delivery, using the Company's proprietary Accum platform, the drug is delivered precisely to the cell nucleus that needs it. This intracellular ADC routing improves outcomes by a factor of 10, and the platform technology, which all approved ADCs can use, significantly enhances the therapeutic effect.
The first results are available for the AccuVAC-IN002 Corona vaccine, which is administered intranasally. It was previously tested with success in mice and subsequently in rabbits. Furthermore, a program is underway to develop a vaccine against HPV to prevent cervical cancer. Since June 29, the collaboration with the Institut Curie in Paris has been ongoing to investigate the therapeutic efficacy of the Accum-T-DM1-ADC compound against breast cancer. On October 13, the Company reported that the efficacy of Accum variants of T-deruxtecan against breast cancer was improved 5-fold.
The Company is currently preparing a Phase I trial of its cancer vaccine AccuVAC-D0002. The product pipeline is full, and the more successful trials that have been completed, the more exciting the stock becomes. It is currently at 6.10 Canadian dollars (CAD) and could form a double bottom. If that succeeds, the all-time high at CAD 8.15 should be tested. The upward trend remains intact as long as there has been no closing price below CAD 6.00. Support below this mark is at CAD 3.39. This would then close the price gap.
Formycon - FDA reviews approval
The biotech company Formycon develops biosimilars after patent expiry of the original drug, i.e. biological drugs as an alternative to the originals. The focus is on therapies in ophthalmology, immunology and chronic diseases. The Company sees itself as a partner for large pharmaceutical and generics companies. The Company started shortly after the outbreak of the Corona pandemic with the development of an antibody fusion protein to block cell infection by the virus completely. It is currently in preclinical development.
A potential profit driver for the future is FYB201, the biosimilar to the eye drug Lucentis. On October 4, acceptance of FYB201 for approval by the FDA was confirmed, and approval has also been filed in Europe. The decision is expected to be made in August 2022. On October 19, a licensing and collaboration agreement was signed with SCG Cell Therapy, giving the Asian Company exclusive rights to Covid's drug FYB207 in Asia, excluding Japan. If the drug is approved in the region, up to EUR 63.5 million in one-time payments and royalties in the low double-digit percentage range of sales await.
The Company has a broad range of drugs in the pipeline. Management and the advisory board are experts in biosimilar development. The stock has been able to attract some attention due to its research in the Corona area. If FYB201 is approved, up to EUR 100 million per year could be flushed into the Company's coffers. Since the beginning of August, the share has been moving sideways between EUR 47.00 and EUR 53.90. An upward breakout makes a test of EUR 64 likely.
The potential of biotech and pharmaceutical companies is great. If you jump on the bandwagon too late, you will have to endure significant setbacks, as in the case of MorphoSys. If you invest early, as in the case of Defence Therapeutics, you can quickly have a multiplier in your portfolio if the Company is successful. Formycon uses existing drugs and reproduces them on a biological basis. The principle promises big profits if approved. However, the share has already started up well due to the development of a Corona drug.