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goetzpartners securities Limited Free to access research and investor meetings in a post-MiFID2 world. This research report is intended for use only by persons who qualify as professional investors or eligible counterparties (institutional investors) in the applicable jurisdiction, and not by any private individuals or other persons who qualify as retail clients.
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 / SIRPĪ± 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 / SIRPĪ± 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,
goetzpartners securities Limited The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK. T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com / londonoffice@goetzpartners.com www.goetzpartnerssecurities.com goetzpartners securities LinkedIn page - view updates, comments and news from goetzpartners securities Limited Healthcare Team. Registered in England No. 04684144. Managing Directors: Dr. Stephan Goetz and Ulrich Kinzel.
Senior Management - Ulrich Kinzel, Brigitte de Lima and Paul W. Dunne.
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