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Basilea - A period of strong financial and pipeline performance




The H1 2021 results at Basilea reflects a period of both financial and clinical progress. The financial contribution of the anti-infectives franchise and, in particular, the anti-fungal Cresemba principally through Astellas in the US and Pfizer, has allowed Basilea to invest in progressing its emerging oncology portfolio. Despite some Covid related issues, demand has been strong with non-deferred revenue of CHF46.1m (+26.3%) the most relevant measure and we expect future success as demand continues and new geographies are added (70 countries by end 2022). As a result of this stronger performance Basilea has increased its 2021 revenue guidance from non-deferred revenues to CHF115m-CHF125m (from CHF108m-118m). Given all of the investment opportunities to expand and accelerate the oncology pipeline we continue to be impressed by the ability of Basilea to contain costs with total cost and operating expenses guidance maintained at CHF149m-CHF154m, resulting in a reduced operating loss expectation of CHF7m-17m (compared to CHF13m-23m previously) and an improved cash and investment position of CHF165m-170m. Basilea finished H1 2021 in a strong financial position with CHF164.7m in cash and investments.


The oncology pipeline has been dominated by the FGFR inhibitor derazantinib. The FGFR class is now well established with the approvals of Balversa (erdafitinib) and Pemazyre (pemigatinib) in bladder and biliary cancer – two relevant indications also for derazantinib. Indeed, the FGFR field has been evolving rapidly and Basilea has responded by endeavouring to capitalise on the specific attributes of derazantinib versus its peers. At the very least data generated in biliary cancer patients with FGFR gene fusions demonstrated a median PFS of 7.8 months which is highly competitive as a monotherapy in this proof of concept indication. While this has recently included altering the clinical trials to evaluate a dose intensification strategy to improve efficacy, the potential for derazantinib to boost the performance of the checkpoint inhibitors in bladder and gastric cancer indications is arguably the most promising. However, we await clinical data to support this approach from FIDES-02 (in urothelial cancer) and FIDES-03 (gastric cancer). These are due to start reading our later in 2021 but with key data (as part of the dose intensification strategy) later in 2022. Success here would likely lead to the attraction of a commercial partner with deep pockets to expeditiously progress development of derazantinib to fully exploit its potential in relevant cancers and combinations.


The performance of the spindle assembly checkpoint inhibitor lisavanbulin has been highly impressive in the challenging glioblastoma indication albeit in a limited number of patients. Glioblastoma represents a high unmet medical need and we are highly encouraged by the long lasting benefit that some patients have experienced and the observation that a novel biomarker (EB-1) should be able to help identify those patients most likely to benefit most. We previously highlighted the data presented by Basilea at ASCO, which demonstrated the relevance of this biomarker to other cancers including melanoma, breast, colorectal and lung cancers as well as rare cancers. We are looking forward to interim data from the glioblastoma Phase 2 study later in 2021 with topline data available in 2022.


Also, we should not forget the 5th generation antibiotic ceftobiprole is continuing its Phase 3 evaluation with the key bacteraemia (ERADICATE) study due to report in 2022. Success here would likely deliver a relevant partner in the US, which would provide additional funding through upfront and milestone payments. It is also important to remember that ceftobiprole has benefited from non-dilutive BARDA funding.


2021 is proving to be an important transition period for Basilea. Revenues received from partners and distributors selling Cresemba continue to grow (global end market sales +18% to $266m) and help fund oncology R&D at Basilea. The potential of the FGFR class in general is clear and derazantinib’s positioning and potential should also become clearer over the next 12-18 months, building on supportive data generated to date. Lisavanbulin has shown real promise but currently sits outside of our forecasts and valuation offering significant upside if excellent data so far are confirmed later this year and next.

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We have calculated a discounted cash flow fair value of CHF120 for Basilea and further success with lisavanbulin will provide an important upside.


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IMPORTANT:

Basilea Pharmaceutica is a client of Calvine Partners and as such, this publication is not independent and should be considered a marketing communication under FCA Rules. None of the information contained in this publication should be considered as any form of advice.

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