DJ Vivoryon Therapeutics (PBD-NA): Agreement with MOR in I-O, earlier than expected
goetzpartners securities Limited
Vivoryon Therapeutics (PBD-NA): Agreement with MOR in I-O, earlier than
expected
09-Jul-2019 / 12:50 GMT/BST
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*Published to the market and investors on 9th July 2019 @ 12.01pm (BST). *
*Vivoryon Therapeutics (PBD-NA): Agreement with MOR in I-O, earlier than
expected*
*Recommendation: OUTPERFORM*
*Target Price: EUR 20.00 *
*Current Price: EUR 5.60 (CoB on 8th July 2019) *
*KEY TAKEAWAY*
Vivoryon announced that it had granted leading German biotech company
MorphoSys AG an exclusive option to license its small molecule QPCTL
inhibitors for cancer. The agreement, which includes lead asset PQ912 in Phase
IIb development in Alzheimer's disease ("AD"), covers worldwide development
and commercialisation. MorphoSys has also committed to investing up to EUR15m
in a planned equity raise later this year. We see this as a very favourable
development, since (1) it allows Vivoryon to move quickly in the rapidly
evolving immuno-oncology ("I-O") field, (2) MorphoSys is a highly credible,
motivated and committed partner, and (3) the committed investment in the
upcoming financing round should help attract additional investors, thus
providing much-needed financial firepower for the PQ912 Phase IIb trial in AD.
Reiterate OUTPERFORM and EUR20 target price.
Agreement comes earlier than expected, accelerates efforts in I-O
In a paper published in Nature Medicine in 2019, Logtenberg et al. showed that
the enzyme QPCTL plays a critical role in regulating the CD47 / SIRPa immune
checkpoint ("IC") and that blocking its activity enhances tumour cell killing.
The authors also highlighted PQ912 as a promising molecule to target the CD47
/ SIRPa axis. Today's announcement comes only four months after this paper was
published, underscoring that both parties are highly motivated to join forces
to compete in the rapidly evolving I-O space. We understand that the option
period is sufficiently long to allow MorphoSys to complete the necessary
preclinical validation work to move a molecule from Vivoryon's family of QPCTL
inhibitors into a clinical study, potentially in combination with tafasitamab
(MOR208), currently in late-stage development for relapsed / refractory
diffuse B-cell lymphoma ("DLBCL").
MorphoSys is a highly credible and motivated partner
MorphoSys, one of Germany's most successful biotech companies, is a good fit
for Vivoryon for multiple reasons, in our view. The company has already
brought a product of its own pipeline to market, Tremfya (guselkumab) for
psoriasis, which was launched by partner J&J in 2017 and brought in revenues
of $544m in 2018. With a market cap of EUR2.75bn, ample cash resources and a
Nasdaq listing that should allow for future fund raises (if needed), MorphoSys
has the financial resources to develop one (or more) of Vivoryon's QPCTL
inhibitors. The speed of execution in signing today's agreement is testament
to MorphoSys's high level of motivation. We would expect the company to move
quickly and potentially be able to start a clinical trial for a QPCTL
inhibitor in around six months.
Committed EUR15m investment to contribute toward PQ912 Phase IIb trial in AD
We see the planned equity investment as a strong endorsement of Vivoryon's
scientific credentials and MorphoSys's belief in the company's long-term
potential. This also means that the planned equity raise will benefit from a
highly credible cornerstone investor that should therefore help attract
additional investors. We expect the majority of the fund-raise to contribute
towards the ongoing Phase IIb trial for PQ912 in AD, which on our estimates
will cost >EUR64m of which c.EUR40m still need to be raised.
Potential licensing deal likely to be worth >$1bn
We also see a high chance that MorphoSys will exercise the option to enter a
licensing agreement with Vivoryon, the terms of which have already been
agreed. I-O is one of the hottest areas of medical research and novel
mechanisms of action are in high demand to boost response rates in advanced
cancers. Recent licensing deals in the I-O field show that even preclinical
assets have been able to command total deal values of several $bn, usually
including double- or even triple-digit upfront payments.
Kind regards,
Brigitte de Lima, PhD, CFA | Research Analyst
goetzpartners Healthcare Research Team | Research Team
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