TUI, Evotec, BioNxt Solutions: Short squeeze potential, Price drops, and Momentum

BioNxt Solutions: Another 100% upside potential?

BioNxt Solutions' shares have gained 50% since the end of August. Will the momentum of the biotech stock continue, and is it still a buy? The chances of the rally continuing are good. Not only has sentiment in the sector improved significantly in recent months – see the jump in BioNTech's share price – but the share price increase is also based on numerous positive operational announcements by the Company. At a price of EUR 0.16, the market capitalization is around CAD 30 million. At the beginning of 2024, the price was EUR 0.50. Since then, however, the Company has made significant progress, and the positive news flow is likely to continue in the coming months.

The leading drug development program in BioNxt's portfolio for autoimmune neurodegenerative diseases is a proprietary sublingual alternative for the already approved drug cladribine for the treatment of multiple sclerosis (MS). Sublingual means that the patient only has to place the medication under the tongue. It is designed to offer patients with swallowing difficulties (dysphagia) – a common condition in MS patients – a significant advantage over the tablet form. Cladribine is currently available in tablet form in more than 75 countries and, according to the manufacturer Merck KGaA, had annual sales of over USD 1 billion in 2023. Thanks to BioNxt, sales could increase and potentially generate several million euros in revenue for BioNxt.

BioNxt also has a foot in the door in the currently very hot and takeover-driven cancer therapies sector. For example, the European Patent Office (EPO) has approved the patent application for the sublingual administration of cancer drugs for the treatment of neurodegenerative autoimmune diseases. Approval should be granted soon, and further applications are planned for the US, China, and Japan. BioNxt also wants to expand its patent portfolio in the field of cancer to include orally dispersible films. These contain substances to protect against cancer in neurodegenerative diseases.

BioNxt has a broad portfolio, which fuels ongoing speculation about potential acquisitions. Perhaps the German company Merck?

Evotec: Quarterly figures and share price in the red

As we have speculated before, the recently released figures from Evotec have not brought joy to shareholders. The share price plunged by double-digits, ending the price rally that started in early October. The biotech company is in the middle of a restructuring, and the new management board is working to free itself from all legacy issues before moving forward.

Evotec CEO Dr. Christian Wojczewski commented: "We continue to successfully implement our 'priority reset', and have made significant progress on key initiatives. New and expanded partnerships clearly demonstrate Evotec's continued leadership in R&D and precision medicine. Building on this exceptionally strong foundation, we are now laying the groundwork for an accelerated transformation program that will pave the way for long-term profitable growth. While the challenging market environment has affected short-term results, we are making great strides in reviewing strategic priorities and look forward to reporting on this in early 2025."

In the first nine months of 2024, Evotec generated revenues of EUR 575.7 million, 1% less than the previous year. There was a sharp decline in earnings. Reorganization costs of EUR 62 million were reported. Adjusted Group EBITDA fell from EUR 50.2 million to EUR -6.0 million (9M 2023: EUR 50.2 million), and the operating result dropped significantly from EUR -36 million to EUR -149.3 million.

TUI: Short Squeeze possible?

Those who speculated that severe weather in Spain - an important travel destination - would negatively affect TUI stock were disappointed. On the contrary, the stock has been strong, surging toward the EUR 8 mark. This is a level the tourism group's share has not seen in over a year. If the EUR 8 mark is surpassed, the next major hurdle would likely be between EUR 10 and 11.

There are no operational reports as a reason for the recent price jump, but operationally, TUI has been doing well all year. Booking numbers are rising, profits are rising, and debt is expected to be reduced. In addition to analysts, short sellers have also been skeptical about the recovery so far. Accordingly, the short rate for TUI was previously high. But slowly, the shorties seem to be running out of steam. According to shortsell.eu, the ratio has now fallen to 11.3%. This is still relatively high, but the trend is pointing downwards. D.E. Shaw & Co, Gladstone Capital Management, LMR Partners LLP, Two Sigma Investments Marshall Wace LLP and Qube Research & Technologies Limited are the short sellers with the largest positions in TUI. According to the Federal Gazette, the last two addresses have started to reduce their positions. If this trend continues, the share price should head towards EUR 10. Especially if one or the other analyst also switches to the camp of the bulls – which is not unlikely given the operating performance.

Betting on a strong short squeeze at TUI would probably be an exaggeration, but the tourism group's operations have been running smoothly for some time, and a breakout above EUR 8 would also make the chart picture interesting. The BioNxt share has a lot of momentum. If the news flow remains positive, at least the price level from the beginning of 2024 should be achievable. Evotec is certainly exciting at its current price level, but it will likely take time to realign the Company – if a takeover does not happen first.