First Berlin Equity Research has published a research update on Formycon AG (ISIN: DE000A1EWVY8). Analyst Simon Scholes reiterated his BUY rating and increased the price target from EUR 103.00 to EUR 130.00.

Formycon has announced that the previously undisclosed reference product for FYB206 is the Merck & Co. drug, Keytruda. Indications include advanced melanoma, lung and other types of cancer. Keytruda’s worldwide sales were USD17.2bn in 2021, up nearly 20% on 2020 and 89% higher than sales of Stelara (FYB202’s reference product). Stelara is itself one of the top ten best-selling drugs worldwide with 2021 sales of USD9.1bn, and is now Formycon’s second largest biosimilar reference product. Importantly, Formycon fully owns the development and commercialisation rights for FYB206. Similarly to FYB202, for which Formycon also has full control of the rights, royalties could be in excess of 30%. Given Keytruda’s pre-eminent position in its portfolio, Merck & Co. has erected defences around the drug consisting of over 50 patents. Key substance patents expire in the US in 2028 but some production/process patents do not expire until 2036. In the course of developing FYB206, Formycon has created important IP, and patent applications have been filed in order to overcome the Keytruda patent wall. We had previously conservatively assumed that FYB206 reference product sales would be similar in size to those of the FYB201 reference product, Lucentis (2021 sales: USD3.6bn). News that the actual reference product is Keytruda, prompts us to raise our price target from €103 to €130. We maintain our Buy recommendation.