Börse Express – SHARE IN FOCUS: Investors remain cautious after Morphosys acquisition in the USA

After the Morphosys price collapse
the day before, investors only dared triple steps back into the shares of the biotechnology company on Thursday. In the morning they moved in the MDax listed papers of the antibody specialist initially rose by almost two percent, but in the end only recorded a razor-thin increase. On Wednesday, shares had dropped to their lowest level since September 2017 amid the acquisition of Constellation Pharmaceuticals.

Morphosys announced on Wednesday that it would buy the US epigenetics specialist for 1.7 billion dollars. For the takeover, the Bavarians secured financial support from the US company Royalty Pharma in a rather complex deal. This part in particular had initially put the shares under pressure, because the agreement also includes a cash capital increase by Morphosys without subscription rights for existing shareholders.

On Thursday, analysts expressed themselves more precisely. The tenor for the takeover was often positive. Analyst Victor Floc’h from the British investment house Bryan Garnier even described it as “groundbreaking”. The industry expert wrote that it goes far beyond the expectations of the market. The Americans are a “pioneer in epigenetics”, ie the search for drug approaches based on gene properties.

Citigroup expert Vineet Agrawal spoke of a sensible deal, as Morphosys had limited options. The next step in the company’s development has always been a purchase, or Morphosys might have been taken over itself.

Rajan Sharma from Deutsche Bank also expressed his praise. From his point of view, the time for the acquisition was wisely chosen in view of the recent drop in valuations in the biotech sector. He also thinks the step is understandable. After all, there is clear overlap with the existing Morphosys portfolio. In addition, there is the possibility of using the company’s infrastructure to support the launch of Morphoys’ own cancer drug Monjuvi in ​​the USA for the Constellation product candidates.

Aside from the recent turbulence, Morphosys shares have been in a difficult phase for some time. Because with the cancer drug Monjuvi, the most important hope of the group recently lagged behind the high expectations of the market, the paper has been under strong pressure in the past few months. This year alone, the share lost around a third. Since the share almost regained its record level at 146 euros at the beginning of 2020, the price has plummeted by almost 60 percent.

With the takeover, Morphosys boss Jean-Paul Kress has high hopes for two cancer drugs from Constellation that are currently still in clinical trials. Citigroup expert Agrawal also praised one of the agents as “attractive”: pelabresib for myelofibrosis, a bone marrow cancer.

Apparently not all experts share this opinion. For analyst James Gordon of the US bank JPMorgan, for example, Constellation’s product pipeline is at least not a safe bet.

The financing deal with Royalty Pharma therefore gives the expert a headache. The US financial company is investing around 2 billion dollars in various individual steps in the acquisition and further development of the two most important product candidates from Constellation Pharmaceuticals. In return, Royalty Pharma will, instead of Morphosys, collect the full license fees for the psoriasis product Tremfya from the Danish manufacturer Janssen, which is based on an antibody from Bavaria.

Criticism of the swap came from many other industry experts. The deal with Royalty Pharma costs Morphos its most stable source of revenue with the license fees for Tremfya, criticized Bryan Garnier expert Floch, who even canceled his purchase recommendation. With the transfer of license fees, a lot at Morphoys will in future depend on the most important Constellation product candidates, says Barclays analyst Rosie Turner. Investors are therefore likely to question the merits of the “new Morphosys”, believes the expert./tav/ag/jha/

 ISIN  DE0006632003

AXC0103 2021-06-03/12:15

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