Recent data for cancer treatment manufacturer MorphoSys AG suggests the German biotech's shares could see a significant rally, according to Morgan Stanley. The bank double upgraded MorphoSys American depositary shares to overweight from underweight on Friday, and raised its price target to $9.20 from $3.70, implying 45% upside from Thursday's close. "Despite increasing competition, our updated analysis suggests peak global sales of $1.6bn for pelabresib," analyst James Quigley wrote in a Friday note. Pelabresib is an investigational selective small-molecule therapy designed to promote anti-tumor activity. MorphoSys is awaiting topline results from the Phase 3 MANIFEST-2 trial, a global, multi-center study examining the effects of pelabresib in patients with myelofibrosis, a rare type of bone marrow cancer. "In addition, while some clinical risk remains, the data so far suggests that MANIFEST-2 has a good chance of success, which should drive significant upside in the shares," Quigley said. To be sure, the analyst noted that "binary outcome and profit taking" have led to weak MorphoSys shares in recent weeks, but the risk-reward profile is positively skewed at current prices, he added. Shares have sold off nearly 25% since mid-September, compared to the Nasdaq Biotechnology Index down 4% over the same period. "We believe [this] reflects increased competition in 1L MF from GSK's Ojjaara, profit taking as well as nervousness into the data read out by the end of 2023," said Quigley. Shares jumped 2.7% Friday morning, bringing the year-to-date gain in 2023 to some 77%. MOR XBI YTD mountain MorphoSys vs SPDR S & P Biotech ETF in 2023. —CNBC's Michael Bloom contributed to this report.
