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 82.00 to EUR 46.00.

Abstract
On 17 February Formycon informed the market that price pressure in the U.S. on FYB201 (Lucentis biosimilar, launched in late 2022) and on FYB202 (Stelara biosimilar, U.S. launch imminent) is higher than it previously expected. Formycon also announced that after consultation with the FDA the completion of the FYB206 (Keytruda biosimilar) phase 3 trial will not be necessary for the drug candidate’s approval. In its 2024 accounts Formycon intends to write FYB201 and FYB202 down by high single digit to low double digit €m and high double digit to low triple digit €m amounts respectively. The reduction in the investment stemming from the elimination of the FYB206 phase 3 trial is likely to amount to a high double digit €m sum. We had previously assumed annual average price erosion of 40% for Formycon’s biosimilars relative to their reference products. We now raise this figure to 52%. We also raise the average discount rate for cashflows generated by the biosimilar portfolio by an average 7% to 13.6% to account for increased uncertainty over future price erosion. The net impact of the reduced investment in FYB206, and higher price erosion and discount rate assumptions, lowers our price target from €82 to €46. We think the market’s reaction to the 17 February press release is overdone. We maintain our Buy recommendation.