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Basilea - Focus on anti-infectives apparent

The announcement this morning that Basilea has sold one of its preclinical oncology programmes reflects its determination to focus and capitalise on its successful and expanding anti-infectives franchise.

With lead programme derazantinib already returned to originator Merck & Co, the announcement this morning that the preclinical PARG programme has been sold to UK-based Nodus Oncology reflects the attraction of programmes targeting DNA damage repair, we believe, largely given the ongoing success of the PARP inhibitor class and the desire by the industry to identify additional targets tractable to therapeutic intervention. It is particularly heartening to see that Nodus Oncology has a focus on developing molecules targeting novel DNA damage response targets, suggesting that the programme is in safe and knowledgeable hands.

Although this may be a preclinical programme, Basilea has managed to negotiate attractive terms with a long-term financial participation. Under the terms of the agreement, Basilea will receive upfront and near-term research milestone payments of CHF 1m with the potential to receive a further CHF 241m should predefined development, regulatory and sales milestones be achieved. Additionally, Basilea is set to receive 5% of any sales if this programme reaches commercialisation.

For Basilea, this agreement represents another important step in exiting oncology and re-focusing on its long-standing and successful anti-infectives franchise. Key to delivering on the long-term potential will be further sales growth of the anti-fungal Cresemba and a successful introduction of the 5th generation cephalosporin antibiotic, ceftobiprole, in the key US market. Additionally, we also look forward to Basilea progressing its recently acquired novel anti-fungal programme.

We calculate a discounted cash flow fair value of CHF120 per share for Basilea.

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Calvine Partners LLP is authorised and regulated by the Financial Conduct Authority.

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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