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Basilea - New positioning apparent

Basilea has announced a progress update this morning regarding its refocus on the long-established anti-infectives franchise. Importantly, the strategy has evolved to the extent that the various oncology programmes will be partnered separately, in line with our previous expectations.

For Basilea, the rapidly evolving competitive landscape for the FGFR inhibitor derazantinib has frustrated efforts to deliver a differentiated profile. We had previously highlighted the importance of the gastric cancer indication and the ongoing FIDES-03 study. However, it would appear that the competitive situation, along with the apparent desire to conclude funding the oncology R&D effort by the end of 2022, has resulted in the decision to terminate the license agreement and return rights to Merck & Co (previously Arqule). Derazantinib represented the bulk of the oncology R&D expenditure, with three registration Phase clinical studies ongoing. The tumour checkpoint controller lisavanbulin was always going to be a high-risk endeavour in its chosen initial indication of glioblastoma, particularly given the need to find a relevant biomarker. We still believe that lisavanbulin could be a meaningful addition to the clinical oncologist's armamentarium and are hopeful that the partnering process will provide a productive outcome.


More encouragingly, partnering discussions for the preclinical programme BAL0891 - a TTK/PLK1 inhibitor, as well as other preclinical oncology programmes, are well advanced with an expectation that a successful conclusion can be achieved by the year-end.


Given the largely productive efforts to bring the ongoing oncology programmes to a conclusion by year-end 2022, Basilea looks well placed to begin 2023 as a pure-play anti-infectives company along with a move to sustainable ongoing profitability. This well-established franchise is underpinned by the ongoing commercial success of the anti-fungal Cresemba. In the short term, we look forward to the results of the Phase 3 ERADICATE study evaluating the 5th generation cephalosporin ceftobiprole in patients with Staph. aureus bacteraemia (SAB). Our evaluation of ceftobiprole in SAB, based on previous clinical data, is suggestive of a positive outcome, we believe. This remains an unmet need with few treatment options, particularly in patients suffering from MRSA. Success here, along with the previously reported positive Phase 3 TARGET study in patients with severe skin infections, should facilitate approval in the US - the key market for anti-MRSA antibiotics. We have previously highlighted the commercial potential of ceftobiprole, suggesting a peak sales expectation of approximately $400m, although we suspect that much will depend on the existing franchise and resources of a future commercial partner.


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


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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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