First Berlin – Formycon AG Research Update (07/02/2020)

First Berlin Equity Research has published a research update on Formycon AG (ISIN: DE000A1EWVY8). Analyst Simon Scholes reiterated his BUY rating and decreased the price target from EUR 51.00 to EUR 39.00.

Abstract
Formycon's licensing partner, Bioeq, is to withdraw the biologics license application (BLA) for FYB201 which it submitted in December, and plans to resubmit it in a few months time. The withdrawal follows a request from the FDA for additional data following the transfer of a piece of processing equipment to a new location at the original site. In H1/2018 Formycon had expected submission of the FYB201 BLA in late 2018/H1 2019 and marketing authorisation approval in the US in 2020. However, temporary problems in manufacturing sufficient quantities of FYB201 delayed the BLA submission until December 2019. The need to resubmit the BLA suggests that FYB201 will not now be approved in the US until the second half of 2021. Before the latest announcement, we had expected early 2021. Launch schedule delays create uncertainty as to whether FYB201 or its closest competing product, Samsung Bioepis' SB11, will reach the US market first. To take account of this uncertainty, we have reduced our market share forecasts for FYB201 in both the U.S. and other territories from 21% to 17%. Formycon is set to participate in large markets. The reference products of FYB201, FYB202 and FYB203 generated worldwide aggregate sales of USD15.6bn in 2018. However, we raise the discount factor on forecast FYB201 cashflows from 12% to 13% and for FYB202, FYB203 and FYB205 cashflows from 15% to 16% to reflect the fact that on recent evidence, approval processes for the company's biosimilar candidates are not progressing as smoothly as we previously modelled. Our new price target is €39.00 (previously: €51.00). We maintain our Buy recommendation.