Basilea - Infectious growth

Our research note today highlights the opportunities available from Basilea's existing portfolio and pipeline. Basilea addresses the growing global threat of antimicrobial resistance, an area arguably underappreciated by investors. Unlike many drug developers, Basilea is currently and sustainably profitable, and with fosmanogepix in the pipeline, it has a potential blockbuster drug in the making. Additionally, the majority of development costs are funded from non-dilutive sources (BARDA). Basilea has a strong balance sheet, with net cash and substantial government support. Basilea is positioned as a key player in the fight against deadly fungal and bacterial 'superbugs' as identified by the World Health Organization (WHO).

Aside from Basilea's existing revenues from Cresemba and Zevtera, its most important prospect is fosmanogepix, a novel, first-in-class antifungal currently in Phase 3 trials. We believe it could be a game-changer for the company.

Fosmanogepix has shown activity against most of the high-priority, life-threatening pathogens on the WHO's fungal threat list.

Fosmanogepix has already demonstrated real-world success. In a meningitis outbreak, patients treated with the current standard-of-care faced a 65% mortality rate; for the small group who received fosmanogepix, the mortality rate dropped to just 14%. The fungus responsible was resistant to all other available antifungals.

Fosmanogepix can be administered both intravenously (IV) and orally, a key advantage for step-down treatment, which enables patients to be discharged from the hospital, thereby saving healthcare resources and costs. Fosmanogepix can also penetrate key organs, such as the brain, where other antifungals struggle to reach.

Given fosmanogepix's impressive clinical profile, we forecast peak sales could reach $1.2 billion. This would make it a bigger success than Cresemba, which is nearing the end of its patent exclusivity and had been a key driver of the company's success.

While fosmanogepix is important, Bailea has built a comprehensive anti-infective portfolio:

Zevtera (Ceftobiprole), an antibiotic, is being launched in the US. to treat severe bacterial infections, including the dangerous bloodstream infection SAB (Staphylococcus aureus bacteraemia). This represents a significant market, where we forecast peak U.S. sales of around $380 million.

Recently in-licensed Phase 3-ready oral antibiotic, ceftibuten-ledaborbactam, aims to treat complicated urinary tract infections (cUTIs) caused by resistant bacteria. With millions of cUTI cases in the U.S. annually, this drug targets a major unmet need. This had been validated by additional support from BARDA, where Basilea will receive funding of up $159m. We forecast peak sales in the US of 440 million.

The company has other promising drugs in earlier development, including BAL2062, another novel antifungal, and BAL2420, which targets Gram-negative bacteria.

Basilea is executing a successful strategy to become a world-leading anti-infectives company. While the outcome of the ongoing Phase 3 trials for fosmanogepix remains the most important factor, the data so far are exceptionally strong, and we believe the program is significantly de-risked.

With a broad pipeline targeting critical health threats with unmet needs and strong financial backing from key US agencies, Basilea is a key company to watch in the increasingly higher-profile fight against antimicrobial resistance.

We have a DCF-derived fair value of CHF120 per share.

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IMPORTANT:

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 in this publication should be considered as any form of advice.

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