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 105.00 to EUR 80.00.

The Formycon share price has fallen by more than 40% since the beginning of 2023, mainly because of lower than expected royalty income from the first Formycon medicine to reach the market, the Lucentis biosimilar, FYB201. However, FYB201 which was launched in the EU, UK and US in 2022, is only the first of six biosimilars which we expect Formycon to have launched by the end of this decade. Forthcoming biosimilars have higher reference product sales and royalty rates than FYB201. In our view, the most important near-term launch (subject to approval, in both the EU and US in 2025) will be of the Stelara biosimilar, FYB202. Stelara generated worldwide sales of USD10.9bn in 2023. This compares with USD3.6bn of sales for Lucentis in 2021, the last year before the launch of biosimilars of the drug. Furthermore, Formycon will earn a royalty of 30-40% on FYB202 sales. The current royalty on FYB201 sales is 7-8%. There will be more competition on the Stelara biosimilar market than on the Lucentis biosimilar market. But critically, unlike Roche whose 2022 launch of the Lucentis successor product, Vabysmo, coincided with the introduction of Lucentis biosimilars, Johnson & Johnson do not have a near-term successor product to Stelara. We expect Formycon to generate triple digit royalties from FYB202 are early as 2026. This compares with our total 2026 royalty forecast for FYB201 (including both top-line and at-equity revenues) of ca. €15m. We think the current share price weakness is an opportunity to pick up Formycon stock cheaply ahead of the lucrative FYB202 launch. We maintain our Buy recommendation but have lowered the price target to €80 (previously: €105), mainly to reflect downward revisions to our FYB201 forecasts as well as a more conservative view on FYB203 (Formycon’s Eylea biosimilar), for which we model first revenues from next year.