My opinion on Sartorius, Novacyt, Gensight, Theradiag, Genfit, Valneva, Poxel… and the others!, Chat

Anne Barloutaud: Hello everyone, I am happy to meet you for this chat dedicated to biotechnology. This sector, which has been in the spotlight with the health crisis, has suffered a lot this year. The return of risk aversion was even more noticeable here than for other stocks, because these research companies do not generate any turnover and they generate losses… So stocks, by definition, are very risky.

For questions that are not related to the health sector, Rémi Le Bailly or Denis Lantoine will be happy to answer you next week.

The sector has registered an average fall of more than 35% since the beginning of the year, with falls close to 80% in some of them. These start-ups are cash-hungry and have a vital need for capital – an element that can become problematic in today’s climate of rising interest rates and cautious investors.

Consulting firm Biomed-Impact has identified a portfolio of 207 ongoing programs for listed French biotech companies, from preclinical to commercialization, worth a total of €5 billion. Half are in an early stage of development. Among the most advanced, which are in clinical phase 3 or registration, we can mention AB Science, DBV, Gensight, Innate, Nicox, Valneva, Medincell and Quantum Genomics. Therefore, around ten phase 3 results are expected in the next 12 months.

To close this introduction, I remind you that the risk is often binary in biotechnology and that the probability of failure is still 40% in clinical phase 3 (the last one before submitting the file to the health authorities). Clinical announcements are catalysts for both the upside and the downside… So investing remains highly speculative.

Triard: Hi Anne, can you give me your arguments for including Pfizer in your Invest 10? Thanks.

Anne Barloutaud: This cat is more into biotech than big pharma. However, as for Pfizer, the world’s number one pharmaceutical company, we have included it in our Invest 10 due to its expected strong growth this year (+24%). The group continues to benefit from a strong Covid effect, thanks to the vaccine and the anti-Covid pill, which in total could provide it with a turnover of 54,000 million euros in 2022. The US authorities have just allowed a booster dose specifically targeting the Omicron variant. The group is poorly valued, with a PER of just over 7 and a return of 3.7%.

Kimmo: Hello Mrs. Barloutaud, I would like to know your point of view on the evolution of Sartorius Stedim. Indeed, would a 25% drop over the last month herald an uncertain future? With my sincere thanks.

Anne Barloutaud: Sartorius Stedim, who is an industrialist, a manufacturer of equipment for the production of biological drugs, is also a bit off topic. But, despite its 30% drop since the beginning of the year, don’t worry!

Markets particularly punished Covid stocks, whose valuations had soared. The results of the semester were very good: revenues grew by 22% and the Ebitda margin remained at a high level of 35.2%, despite a faster than expected normalization of revenues related to Covid vaccines.

The annual objectives of increasing turnover from 15% to 19% and an EBITDA margin of at least 35% are maintained, close to the 2021 record. We continue to believe that the recurrence of 80% of activity in the defensive market , in the midst of the rise of biological treatments, offers a rare visibility.

Lilith: Hello, your skill is greatly appreciated. Also, thanks for giving me your opinion about Novacyt: possible new prey after Theradiag? What about Genomic Vision, which has fallen so unfairly?

Anne Barloutaud: We are separate from Novacyt and Genomic Vision. Novacyt took advantage of the covid test sales in 2020 and its price reached peaks of around 13 euros, to fall back to around 1 euro.

Disputes with the UK Department of Health (DHSC) have investors worried. Medtech posted a 73% drop in sales in the first half. The title seems too risky to us. Genomic Vision, which has experienced serious cash flow difficulties, uses very dilutive funding and its programs are still very early stage.

Epictète: Hello Anne, in the 2 PEA of my wife and I we have: Abionyx, Innate, Valbiotis, Abivax, Gensight and Ceyliad. What are the 3 titles without great future that I can sell? Thanks for your skills.

Anne Barloutaud: Of the six companies you cite, Gensight Biologic seems to us to have the most near-term potential. The biotech is on the brink of approving its gene therapy in ophthalmology, Lumevoq. The production problems appear to be resolved. The European health authorities must give their verdict in the second half of 2023.

Innate always seems interesting to us. The company has a high level of cash, a promising partnership with Astrazeneca and a very broad portfolio in oncology based on highly innovative immunotherapy approaches.

Abivax also retains potential, thanks to proven technology. Phase 2 results were of high quality for ABX464 (Obefazimod) in ulcerative colitis. However, the company will have to refinance in 2023 to ensure the development of phase 3 in this indication, if it does not find a partner.

For Valbiotis, it is worth waiting for the first half of 2023, to know the results of the phase 2/3 trial, which evaluates the Totum-63 product in prediabetes.

You can free Celyad, whose trials are at a very early stage.

Derby: Hi, what’s your take on Biosynex’s recent takeover bid for Theradiag? Does the price of 2.30 euros seem appropriate to you?

Anne Barloutaud: In fact, Biosynex has submitted an offer for the capital of Theradig, which it does not own. The company, which has done well thanks to its self-tests against Covid, generated more than 100 million euros in profit in 2021. For this reason, it seeks to complete its product offering and acquire new technologies, or distribution networks.

In November 2021, Biosynex had already acquired, in a really non-consensual manner, 25% of Theradiag’s capital (at 1.22 euros), as part of the capital increase launched by the latter. It should be noted that Theradiag’s Board of Directors unanimously accepted the proposed takeover bid.

The operation offers a premium of 58%. Knowing that Theradiag, a theranostics company (tests that accompany biotherapies), which went public 10 years ago (at €5.80, that is, more than double the current offer), has never managed to be profitable, it is difficult to assess.

However, I would advise taking the opportunity to put your shares up for bid, while you await the day of the AMF’s compliance decision, around 8 November. Those who prefer to continue betting on Theradiag will be able to remain shareholders because there are no forced retirement plans, regardless of Biosynex’s participation rate at the end of the operation.

Frediimac: Hi Anne and thanks for this biotech talk. What future for Genfit today? Is it still a first choice biotech for us? Thanks in advance.

Anne Barloutaud: Genfit carried out a major operation in 2021, signing an important agreement with Ipsen, which grants the laboratory an exclusive license for its flagship product Elafibranor in biliary cholangitis (PBC), a rare and serious liver disease. The agreement provides for up to €480 million in milestone payments, of which €120 million was paid immediately to Genfit. At the same time, Ipsen entered the capital of the biotech company at 8% for €28 million, which corresponds to a price paid of €7 per share: it is currently worth half of that…

Genfit recently announced the acquisition of the Swiss company Versantis, whose most advanced drug candidate, VS-01, will enter phase 2 in the indication of liver function restoration. This acquisition, which completes the portfolio of serious liver diseases, seems strategically relevant. Genfit now appears undervalued in view of the Ipsen deal and its strong financial position.

Alain: Hello Mrs. Barloutaud, about the POXEL share, which has just published its half-year results, as well as the presentation of the first results of DESTINY-1, which are encouraging: seeing the fall of the last few days, obviously investors have only the results, the loss of which increased, are not taken into account. Are you optimistic to see the title go up again? Thanking you for your valuable advice.

Anne Barloutaud : The action was, indeed, heavily attacked. However, Poxel is one of the companies that seems to have a future. Recently published phase 2 clinical data for PXL065 treatment in Nash showed a significant decrease in liver fat mass. Other (histological) data, which will be published shortly, will allow the management to decide on the entry into clinical phase 3 of the product. The company is also continuing its trials in ALD, a rare inherited genetic disease that causes severe endocrine dysfunction.

The biotech was hit by some disappointment over its revenue linked to Twymeeg (Imeglimin), its blockbuster drug marketed in Japan since September 2021 by the partner Sumitomo in type 2 diabetes. They came out very modest, due to the specific regulations in Japan, which imposes a maximum of only two weeks of prescription for new treatments during the first year of marketing. Therefore, Twymeeg sales should be much more significant from 2023 onwards. We remain positive on value, on a speculative basis, with a target of €3.

Genbil: What is your point of view on the abandonment of the Covid vaccine in Valneva, in particular for Europe, when you have received all the necessary CAs? Thanks.

Anne Barloutaud : Valneva ended its collaboration with IDT Biologika in the manufacture of its VLA2001 vaccine against Covid-19. The reduction in the volume of orders for the European Comission and the cessation of vaccine production are the main reasons for this. However, the Covid vaccine is not abandoned.

Valneva announced this morning that it has entered into discussions with a possible partner to obtain funding for the continuation of the Covid-19 program, in order to be able to develop a second-generation vaccine. These discussions could continue for several months but also be unsuccessful, the company said.

Important results of VLA2001 as a heterologous booster are eagerly awaited at the end of the year and if they are good they could change the perception of the vaccine whose results, in the framework of a large study carried out in the United Kingdom, had not been confirmed I have not been convinced by the boosters after a primary vaccination with messenger RNA.

Valneva has started deliveries of its Covid-19 vaccine to European states that have requested it. However, already established stocks remain to be sold and the company hopes to do so in international markets. In the absence of buyers, these products with a fairly short expiration date would be lost, which would mean a loss of value that would range, according to analysts, between 100 and 140 million euros.

Valneva had €336 million in cash at the end of June. The company has great potential with the development of its Lyme disease and chikungunya vaccines. Its historical activity, bovine trips, resumes with the return of trips. The risks associated with the Covid vaccine had led us to sell in June. We stay away for now.

We are nearing the end of this talk. I hope I was able to answer your questions. It is Denis Lantoine that you will meet next week at the same time. I wish you a very good evening.

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