Morphosys stock on rollercoaster ride

Last Updated: 15. Januar 2024By

It is a truism that the stock market goes up and down. Nevertheless, it may have been unusual for some of you to observe the development of Morphosys‘ stock in the past two months. And because the development was so unusual, I would like to briefly introduce it to you in today’s newsletter.

But first, let’s talk about the company’s business model, because I am sure that only a few of you are fully familiar with it.

Business model overview Morphosys is a biopharmaceutical company specializing in the research and development of antibody-based therapies for the treatment of cancer and other serious diseases.

To do this, Morphosys has its own pipeline of drug candidates in various clinical phases. In addition, Morphosys collaborates with several pharmaceutical and biotech companies, providing them with its antibody technologies.

Unusually for a biotechnology company, Morphosys already generates significant revenues, for example from licensing fees, milestone payments, and revenue sharing for the use of its antibody library called HuCAL and other technologies.

In addition, Morphosys receives revenues from the sale of its own products, such as Monjuvi, an approved medication for the treatment of lymph node cancer.

A blockbuster? Seems like a pretty stable thing, don’t you think? But the stock price has been less stable lately. It has experienced both a crash and a surge. In November, the stock price halved within just two weeks to 16 euros, and then doubled to over 36.50 euros.

When a price behaves so erratically in a short period of time, you should know that it is often due to a company announcement that was not uniformly interpreted by market participants.

This was also the case in this situation. The trigger was the drug Pelabresib, which Morphosys wants to use to treat a certain form of bone marrow cancer. Many market participants agree with the Morphosys management that the drug could become a blockbuster. Pharmaceutical products that can generate annual sales of at least 1 billion dollars are referred to as blockbusters.

Analysts divided In November, Morphosys published the highly anticipated Phase 3 study. However, the enthusiasm of the management was not shared by all analysts and investors. Many of them believe that some so-called secondary goals were not achieved. In any case, the stock price collapsed by more than 21 percent immediately after the announcement of the study results.

But then there was the described price rally. Apparently, the more optimistic analysts now gained the upper hand.

Further capital increases necessary However, the security remains highly risky. This is also shown by the estimates of the analysts, who expect that Morphosys will continue to make operating losses for at least the next four years. This, in turn, means that further capital increases will have to be carried out.

A business model that requires regular capital rounds is always risky. Depending on the market situation, such a capital increase can lead to painful dilution. Therefore, only extremely risk-tolerant investors should take a closer look at the Morphosys stock.