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November 16th, 2022 | 11:27 CET

That hit home! Roche and Morphosys fail with Alzheimer's study, Bayer and Defence Therapeutics continue to rise strongly

  • Biotechnology
  • Cancer
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It is common for biotech stocks to publish study results as well as figures several times a year. Since there are usually only expenses and few sales to report for these stocks fundamentally, analysts focus on the clinical successes in the way of a trial for the approval of new active substances. This can sometimes lead to erratic price movements. Roche and Morphosys suffered the same fate at the beginning of the week, with their share prices plummeting on the back of bad news. We take a look at a hot sector.

time to read: 4 minutes | Author: André Will-Laudien

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


    Roche and Morphosys - A setback in Alzheimer's research

    Before the turn of the millennium, German stock exchanges were only open for 4 hours, from 09:30 to 13:30. During this time, there was also telephone trading among banks and brokers. In the case of very positive or negative news, the stocks concerned were announced with plus or minus, and all this with up to three levels. Yesterday, Morphosys would have started the market with a triple minus announcement, which predicted a more than minus 15% movement in previous categories. The stock started at minus 17% and ended at minus 32% in the evening. Roche came away with a 6% discount.

    The key news was on Alzheimer's hopeful Gantenerumab. Even in its second attempt, the hope drug failed to meet expectations in the final trial. After Biogen's great trial success with its product Lecanemab, investors in Roche and its research partner Morphosys also regained some hope that the competitor drug, Gantenerumab, might make it to market after all. But these hopes were not fulfilled. As Roche reported after the clinical trial phase, Gantenerumab did not meet the primary endpoints of the pivotal phase III program "GRADUATE". Morphosys has been hit hard by the setback, now missing out on royalties after a hoped-for product launch. Sales of a blockbuster drug can quickly reach billions of euros, which meant that Morphosys could be earning double-digit millions in revenues, but it is now unable to collect.

    For the Munich-based company, everything now revolves around the two cancer drugs, Monjuvi and Pelabrisib. And here, sales are also rather bumpy, with profits not being talked about until 2025. In terms of the chart, Morphosys is looking for a foothold at around EUR 14.5, and the market capitalization of EUR 480 million currently only corresponds to the reported cash balance. Tomorrow, the Q3 figures will be on the table. Exciting!

    Defence Therapeutics - With mRNA and ACCUM technology against cancer

    The Canadian biotech specialist Defence Therapeutics (DTC) has developed a patented technology with its ACCUMTM platform, which gives great hope to current cancer research. With a Democratic majority in the Senate, the "Cancer Moonshot" initiative can now go ahead spiritedly because Donald Trump had threatened restrictions in the health sector in the event of a change in government. The Inflation Reduction Act (IRA) is also linked to investments in pharmaceuticals and life sciences, so US patients can once again hope for research funding from the government. The approaches have also found a receptive ear in neighboring Canada.

    The combination of mRNA technology with modern methods of delivery to affected cells is a real advance within recent research. It stemmed from the fight against the COVID pandemic, which steered many biotech companies in a new direction. The valuable knowledge can now be used against the big enemy "cancer". Defence Therapeutics most recently presented the AccuTOXTM formulation, an ACCUMTM variant for intratumoral administration. Using this compound in conjunction with various immune checkpoints results in a significant cure rate. At the molecular level, AccuTOXTM inhibits several key cellular signaling pathways utilized by tumors, including DNA replication, cell division, cell integrity and various modifications affecting the genome.

    According to recent findings by Precedence Research, the mRNA therapeutics market is expected to grow to over USD 128 billion by 2030. The compound annual growth rate (CAGR) is over 13%. The Paul Ehrlich Institute, responsible for this area, expects the first approval for mRNA vaccine against cancer to be granted in Germany in about 5 years. Currently, 17 clinical trials against lung, prostate and skin cancer are being conducted. Defence Therapeutics is one of the most innovative protagonists and should therefore play a leading role in the sector. This is also reflected in the share price, which bottomed out in October and is now heading higher. Compared to the sector, the DTC share is still valued low at around EUR 76 million.

    Bayer - Things are already looking good

    Bayer is one of Germany's flagship companies for cancer research. The Company was included as a supporter in the National Decade against Cancer in 2020. The pharmaceuticals division is specifically committed to the development of precision oncology, as it benefits from major advances in the field of molecular diagnostics. Next-generation sequencing, for example, enables the detection of genome alterations that promote tumor growth and provides important information about how likely a patient is to respond to treatment.

    For Bayer, the pharmaceuticals and health sectors continue to be the earnings pearl in the Group. In the last nine months, it earned EUR 5.6 billion (EBITDA). In addition to the pharmaceuticals business, there is an increasing tailwind from the agricultural sector, boosted in particular by higher prices for the weed-killer glyphosate. The charges from the pending lawsuits were gradually reduced, and adjusted operating profit climbed by a good 17% to around EUR 2.45 billion in the third quarter, significantly exceeding analysts' estimates. Sales rose by more than 15% to just under EUR 11.3 billion, up 5.7% after adjusting for foreign exchange. "We expect an exceptionally strong fiscal year," said CEO Werner Baumann. The stock market celebrated the good data, sending Bayer shares up 17% in just 4 weeks. With an estimated P/E ratio of 6.7 in 2023 and a dividend yield of 4.7%, the stock still has room to run.

    The stock market currently reacts to every data release with erratic movements. Roche and Morphosys disappointed and were sent south. Bayer and Defence Therapeutics are currently more convincing on the upside. Therefore, diversification is a good advisor if you want to protect yourself from strong fluctuations in the portfolio.

    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

    André Will-Laudien

    Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.

    About the author

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    Commented by André Will-Laudien on April 10th, 2024 | 06:45 CEST

    Attention: Biotech takeovers, after MorphoSys, now Bayer, Vidac Pharma, BioNTech and Pfizer are on the radar

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    Since the onset of the COVID-19 pandemic, there has been little movement in the biotech sector. However, after a challenging year in 2023, the sector was at least able to start the new year on a solid footing. The surprising takeover of MorphoSys recently got hearts beating again, as Novartis put a whopping EUR 2.7 billion on the table for the cancer specialist from Munich. Only months before, MorphoSys had been traded on the stock exchange at just EUR 700 million. The special market situation in this case was also characterized by the high short ratio, which led to an exorbitant rise in the share price of almost 400% in the final phase. Speculative investors are now keeping a wary eye on potential takeover candidates as the sector is once again attracting considerable attention. We are taking a closer look and searching for the next pearl.