Pharma - 38 percent price increase: Corona drug primarily raises Molecular Partners on the stock exchange

Molecular Partners stock is up 38.2 percent in morning trade by midday. After the start of trading, when the price was already 26 percent higher, the price increased significantly.

Since a low point in mid-November 2016, when study goals were not achieved with the product candidate Ensovibep, the price has risen by almost two thirds. Good results have now been achieved with Ensovipep in a phase II study.

It is one of several drugs from the pharmaceutical and biotech industry that are intended to treat diseases with the coronavirus. The pharmaceutical company Novartis now intends to exercise the option to in-license Ensovibep and push for approval in the USA. Molecular Partners achieves milestone figure of 150 million Swiss francs through Novartis. There is an opportunity for Novartis to market a corona therapeutic.

The price of Molecular Partners since the beginning of 2021 (Graphic: cash.ch.)

In the study, which is now mainly increasing the Molecular Partners course (Novartis is meanwhile increasing by 0.8 percent), Ensovibep doses and placebo were assigned to outpatient corona patients. The drug achieved a 78 percent reduction in hospitalization and death compared to placebo. There were two deaths among the 99 placebo patients and none among the 301 Ensovibep patients.

Ensovibep may work against variants such as Omicron. The Zürcher Kantonalbank, which analyzed the study for the Novatis share, writes: "For Ensovibep we do not yet have any estimates in our Novartis model; this news, while positive, is based on the fair discounted cash flow value (.. .) have little effect." However, there is a good chance that Ensovibep could generate sales of several hundred million in certain years due to new variants. Government stockpiling is also to be expected. "We consider the in-licensing to be sensible."

Buy recommendation for Novartis

Novartis has meanwhile received a buy recommendation from Citigroup. Analyst Andrew Baum sets the price target at 95 francs. The share is currently trading at CHF 82.37.

Baum does not focus on the cooperation with Molecular Partners, but on the potential for a "short-term commitment" by activists. The recent divestment of Roche's stake and the announced strategic review of Sandoz have only slightly reduced Novartis' vulnerability to potential activism.

Regarding the recently approved cholesterol-lowering drug Leqvio, Baum believes that sales for the drug should ultimately be well above the current consensus. He expects $2.7 billion in sales, while the consensus is $1.8 billion.

(cash/Bloomberg)