14 February 2023
The FY 2022 results at Basilea reflect a period of financial, clinical and strategic progress. The financial contribution of the anti-infectives franchise and, in particular, the antifungal Cresemba through Astellas in the US and Pfizer has resulted in Basilea delivering operating profitability well ahead of its initial 2022 objective. Cresemba demand continues to outpace our expectations with royalty revenue of CHF 65m (+22.4%), and we expect future growth as demand continues and new geographies are added. Basilea is guiding to CHF145m-148m for Cresemba and Zevtera-related revenues during 2023. The company has also benefited from one-off payments (CHF15m) for the out-licensing of oncology assets during 2022. Reassuringly, these programmes have attracted highly relevant partners with oncology expertise – important given that Basilea has retained a long-term financial interest. With R&D spending reduced as oncology activity waned and SG&A remaining stable, Basilea delivered a positive operating profit of CHF18.5m and ended 2022 in a robust financial position with CHF108.6m in cash and investments. Based on the strong performance and reduced spending, Basilea has guided to an operating profit of CHF45-48m in FY’23.
Ceftobiprole partnering a key de-risking event
The 5th generation cephalosporin antibiotic ceftobiprole (Zevtera) has yet to deliver its full potential as it is only approved outside of the US for HAP/CAP (not VAP). However, positive study results from TARGET (severe skin infections; ABSSSI) and ERADICATE (Staphylococcus aureus bacteraemia, or SAB) suggest this is about to change. Regulatory submission is expected by March/April, with Basilea seeking approval not just for SAB and severe skin infections but also for community-acquired bacterial pneumonia (CABP). From our perspective, it is the SAB indication which represents the major unmet need, with few treatment options available, particularly for resistant (MRSA) infections. Furthermore, a broader label should increase the attraction of ceftobiprole to infectious disease physicians. Our forecasts suggest peak end-market sales for ceftobiprole approaching $400m in the US alone. Fine-tuning this forecast awaits the attraction (and identity) of a commercial partner for ceftobiprole in the US. A company with an existing anti-infectives franchise would bring greater certainty to ceftobiprole attaining its full commercial potential.
Looking forward to pipeline activity in 2023
With its focus on anti-infectives, we look forward to the replenishment of the pipeline in 2023. In particular, adding a novel antifungal should be a priority given the unmet need, the limited treatment options, and the need to secure the franchise's longevity as Cresemba matures. We are encouraged by the language today, which confirms that “..with first transactions expected in 2023”.
Sustainable profitability ahead
The financial performance at Basilea has long been dominated by the ongoing success of the antifungal Cresemba (isavuconazole). Despite its maturity in major markets, continued growth in the short term seems assured as new geographies are added. Cresemba has been a highly rewarding success story for Basilea, its licensees and distributors alike. Cresemba has also enjoyed a protracted rollout as Basilea has identified new distributors and licensing partners.
It is worth a reminder that Cresemba continues to benefit from several pillars of growth. These include 1) growth of the immunocompromised patient population, 2) its extended-spectrum and benign safety profile and 3) the strong existing franchises of current licensees Astellas (US) and Pfizer (Europe, Israel and Asia/Pac) as well as distributors. Momentum has continued as new geographies have been added and awareness of the differentiated profile of Cresemba increases. Given the maturity of Cresemba in major markets and the limited life cycle in the US, new territories (China in particular) take on greater significance. Additionally, we note that after many barren years, there has been some progress on the development of novel antifungals elsewhere, with olorofim (F2G) progressing to a US regulatory filing with an action date of 17 June 2023.
All eyes are on ceftobiprole for now
The 5th generation cephalosporin Zevtera (ceftobiprole) is fleshing out the current anti-infectives franchise. While recent sales performance outside of the US has been muted, we expect the long-term prospects for ceftobiprole should be boosted significantly by the potential addition of bacteraemia (and severe skin infections). The overtly positive nature of the Phase 3 programme and its potential in Staph aureus bacteraemia (including MRSA) in particular, along with severe skin (ABSSSI) and pneumonia (CABP), should facilitate the attraction of a relevant commercial partner. Success here is a key element of enabling ceftobiprole to reach its full commercial potential in the important US market for antibiotics. The company has confirmed today that it intends to enter into a commercial partnership prior to regulatory approval.
Guidance for 2023 confirms sustainable profitability
Basilea is guiding towards revenue contributions of CHF145-148m from a combination of Cresemba and Zevtera during FY’23. This represents growth of 19%-21%. Total revenue guidance of CHF155m-158m for 2023 compares favourably to our forecast of CHF131m. The expectations for significantly reduced R&D spend in 2023 following the effective withdrawal from expensive oncology development is reflected in the FY’23 guidance, with total operating spend expected to decline to circa CHF80m (from CHF104.5m). With cash and investments of CHF108.6m at the end of FY’22, Basilea remains well capitalised to progress its pipeline ambitions.
The financial performance and fiscal prudence at Basilea have been evident throughout 2022. Pivoting back to the anti-infectives franchise 12 months ago may have been surprising, but there is no denying the attraction of near-term and sustainable profitability that the company has delivered. The key for Basilea now is to secure the longevity of the antifungal franchise, and we note the company’s aspirations to replenish the franchise. In the release today, the company has confirmed that the first transactions are expected in 2023. We believe that securing the longevity of the antifungal franchise would represent an important de-risking event for the company, as would the attraction of a suitable commercial partner for ceftobiprole in the key US market.
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