Formycon stock plummets on trial termination and anticipated impairments

Investing.com -- Shares of Formycon AG (ETR:FYB) tumbled 39.16% on Monday following the company's announcement regarding the termination of its Phase III study for FYB206 and expected financial adjustments.

The Germany-based biotech firm decided to end the "Lotus" trial for its biosimilar candidate prematurely after discussions with the FDA suggested that the continuation of the study was unnecessary for the development and approval in the U.S.

The decision is based on the belief that the therapeutic comparability of FYB206 with the reference drug Keytruda can be sufficiently demonstrated using data from another ongoing study and a comprehensive analytical program.

While this could lead to investment savings in the future, the company is also grappling with anticipated price reductions for its Stelara biosimilar in the U.S., which will likely require a valuation adjustment of FYB202.

Formycon anticipates a non-cash impairment in the range of high double-digit to low triple-digit millions due to higher-than-expected price discounts for biosimilars as it prepares for the U.S. market launch of FYB202/Otulfi.

This expected impairment is a substantial factor contributing to the stock's decline.

Additionally, increasing price discounts among ranibizumab providers in the U.S. have prompted discussions between Bioeq AG, the exclusive license holder of FYB201/CIMERLI, and its commercialization partner Sandoz (SIX:SDZ) AG regarding the U.S. commercialization strategy for FYB201/CIMERLI.

The outcome of these discussions may lead to a temporary pause in commercialization efforts, resulting in an extraordinary adjustment to the valuation model and balance sheet measurement for FYB201, as well as the stake in Bioeq AG, which could amount to a non-cash figure in the high single-digit to low double-digit millions for the 2024 financial year.

"Formycon is facing two significant portfolio write-downs due to increasingly difficult biosimilar pricing in the US. Assuming the valuation corrections could be €100m for FYB202 and €10m for FYB201 this would be equivalent to €6.2 per share," according to RBC analysts.

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