Novo Nordisk, Cardiol Therapeutics, Morphosys - Biotechs on a high

MorphoSys heads to Switzerland

Rumours of a possible takeover by a pharmaceutical giant persisted for a long time. Now, it is a certainty. Switzerland's Novartis has been awarded the contract to purchase the German biotech giant. The news agency Reuters already reported on Monday that talks were at an advanced stage, causing the MorphoSys share price to rise by around 35%. With the announcement of the acquisition, the share price rose by a further 15% to EUR 65.65.

The Swiss company is putting a total of EUR 2.7 billion on the table for the Munich-based company, equivalent to EUR 68 per share. Through the acquisition, Novartis gains access to pelabresib, a drug used to treat a rare form of blood cancer, myelofibrosis. Although the initial results of the final phase of clinical trials of pelabresib, presented in November, caused disappointment among investors as it failed to sufficiently achieve key secondary objectives such as alleviating disease symptoms, later results from the study have provided renewed optimism.

MorphoSys intends to file for regulatory approval in the US and Europe by mid-year and believes that pelabresib may also be effective in other disease indications. However, the broad commercialization of drugs is challenging for an independent biotechnology company.

According to Novartis, the acquisition is still subject to regulatory approvals, with a minimum acceptance threshold of 65%. Novartis intends to complete the transaction in the first half of 2024 and then delist MorphoSys AG.

Cardiol Therapeutics - The next takeover candidate

Whether Novartis, Roche or Pfizer, pharmaceutical companies are under enormous pressure to make acquisitions. The reason is clear - many patents for top-selling drugs are due to expire soon. Once affected medications lose their patent protection, other companies can replicate them and offer them at significantly lower prices. As a result, the giants are constantly on the lookout for new, groundbreaking drugs. However, internal drug development takes too long, making a merger an effective and quick solution to fill the pipelines with innovations and offset impending sales losses.

Therefore, the Canadian life sciences company Cardiol Therapeutics likely already stands on the radar of Big Pharma, especially if one compares the stock market valuation of just CAD 107.18 million with the developmental stages of its two studies.

Cardiol Therapeutics is focusing on the development of therapies for heart disease with its leading small molecule drug candidate, CardiolRx™, based on cannabidiol. Currently, two promising studies are in Phase II. In the MAvERIC Pilot study for the treatment of recurrent pericarditis, more than 50% of the necessary patients were already recruited in the fourth quarter. The study, scheduled to be completed in the first quarter of 2024, is being conducted by eight specialized research centres in the USA. Subsequently, the FDA "Orphan Drug" status and the EMA "Orphan Medicine" status are to be targeted directly in the US and the EU, which often includes extended market exclusivity and exemption from certain fees in addition to an accelerated approval process.

The ongoing phase II ARCHER trial against acute inflammation of the heart muscle is similarly promising. Here, too, over 50% of patients have already been enrolled. A conclusion is also expected before the end of this calendar year. The share has clearly outperformed in recent weeks and has risen by almost 47% to USD 1.20. The analysts at Canaccord Genuity still see considerable upside potential at the current price and have issued a target price of USD 6.00, which would correspond to a five-fold increase.

Novo Nordisk with a strategic move

Europe's most valuable listed company continues to strengthen its position in the pharmaceutical market and is expanding its capacities for the blockbuster product Wegovy®. The Danish company is willing to invest a total of USD 11.5 billion to secure the three production sites in Anagni, Italy, Brussels, and Bloomington, Indiana, from the surviving Novo Holdings. The strong demand for diabetes and obesity medication necessitates this strategic move.

As part of this, Novo Holdings secured the pharmaceutical manufacturer Catalent, a major supplier to Nordisk, including debts, at a total value of USD 16.5 billion. Novo Holdings already owns 76.9% of the voting shares of Catalent. The acquisition is expected to lead to a gradual increase in bottling capacity from 2026. However, it could slightly negatively impact operating profit growth in the short term in 2024 and 2025. Catalent shareholders are expected to receive USD 63.50 per share in cash, around 17% more than last Friday's closing price.

Lars Fruergaard Jørgensen, CEO of Novo Nordisk, commented on the acquisition: "This acquisition complements the significant investments we have already made in pharmaceutical manufacturing facilities, and the sites will add strategic flexibility to our existing supply network."

Following the announcement of the deal, Novo Nordisk shares reached a new all-time high of EUR 108.30.

Novo Nordisk intends to meet the demand for the weight loss drug Wegovy® further by acquiring three production sites. After persistent rumours, Novartis was finally able to announce the completion of its acquisition of MorphoSys AG. Cardiol Therapeutics is likely to have become the focus of Big Pharma due to the positive progress of its two studies.