MorphoSys Clinical Trial Data And Deals

The presentation of data and completion of deals by MorphoSys (MOR.DE) marked Q412 as an important time for the company. Data presented on MOR103, MOR208 and a product related to MOR202 indicated the potential of its proprietary pipeline. The amendments to its long-term collaboration with Novartis are expected to lead to new discovery alliances and extra resources for its proprietary pipeline. The sale of its AbD Serotec division for a net consideration of €48m has also generated additional funds for MorphoSys to invest in its own products. The next significant event that could occur is the partnering of MOR103. We have raised our valuation to €804m.

More data on MOR103 and MOR208
Additional data from the Phase Ib/IIa study in RA with MOR103 were presented at the American College of Rheumatology (ACR) meeting in November, which re-affirmed the product’s potential in RA. The likelihood of MorphoSys finding a partner was further increased by Phase I data showing that a subcutaneous formulation of MOR103 has favourable pharmaco-kinetics/pharmacodynamics. Also, promising data from a Phase I trial with MOR208 in chronic lymphcytic leukaemia was presented at the ASH conference in December.

Novartis alliance now includes Ylanthia
The long-term collaboration with Novartis has been amended so that MorphoSys will use its new antibody platform, Ylanthia, to develop antibodies for Novartis (NVS). This shows that Novartis has been convinced of the benefits of the Ylanthia platform over HuCAL. It also enables MorphoSys to form antibody discovery alliances with other companies, as the exclusivity condition in the original contract no longer exists.

Disposal of AbD Serotec
MorphoSys has sold its AbD Serotec in a favourable deal to Bio-Rad for a net amount of c €48m. The company is now able to focus its efforts on developing therapeutic products and has greater resources available to invest in its proprietary pipeline.

Valuation: DCF valuation of €804m
We have raised our valuation by €107m to €804m (€34.77 per share) after a detailed review. Substantial changes have also been made to estimates, primarily because of the sale of AbD Serotec and expected increases in proprietary R&D spending, and we have restated FY11 numbers for the deal. The main event that could lead to a re-rating of the shares is the potential partnering of MOR103, which we estimate would increase our valuation to c €850m (€37.00 per share).

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