Updated: Jan 18, 2021
We initiated research coverage of Swiss biopharma company, Basilea Pharmaceutica, with a fair value of CHF 120 versus a current share price of CHF 50.
Basilea already has two marketed products, antifungal Cresemba, and antibiotic ceftobiprole. Cresemba is approved for sale in Europe and the US to treat severe, and often life-threatening infections such as aspergillosis and mucormycosis. Cresemba’s revenues are growing quickly, and have been well ahead of expectations. Growth will continue as the product is launched in further territories around the world.
Antibiotic ceftobiprole offers a major upside for investors. While sold under the trade names of Zevtera and Mabelio in a number of countries, it has not yet been approved in the US. Ceftobiprole is currently in a US Phase 3 study for bloodstream infections and topline results will be available in H2 2021. A US approval would be a significant positive for Basilea’s shareholders as US hospital anti-MRSA antibiotics represent over 80% of a $3bn global market.
While the current valuation is easily underpinned by existing approved products, Basilea has a number of pipeline cancer candidates that could transform the company in the oncology arena.
Basilea’s lead cancer candidate, derazantinib is an FGFR inhibitor. It already has generated positive interim Phase 2 data in biliary cancer. We anticipate topline data from this trial before the year-end. Derazantinib is differentiated from other FGFR inhibitors as it is believed to enhance the effect of widely used checkpoint inhibitors, particularly in cancers where checkpoint inhibitors have negligible effect. Derazantinib is in trials with Roche’s Tecentriq for bladder and gastric cancer where checkpoint inhibitors have had little success on their own.
Basilea has another oncology drug candidate, lisavanbulin, in development as a potential therapy for diverse cancers. Lisavanbulin has entered a Phase 2 study for patients with brain cancer. Interim results are expected early next year.
Outside Basilea’s clinical-stage oncology programmes, include inhibitors of DNA damage repair, an area of increasing interest to large pharma. Any success here will significantly increase the profile of the company's oncology pipeline.
Basilea's management team has been very successful in raising funds for its development programmes without diluting shareholders. Partnerships negotiated with Pfizer and Astellas were made on attractive terms, with large upfront payments for Cresemba. An agreement made with BARDA provides up to $130m to fund most of ceftobiprole’s Phase 3 programme. successful asset divestments such as Toctino, sold for £146m, have strengthened the balance sheet. These deals should provide confidence that management can secure appropriate partners on favourably terms for ceftobiprole, derazantinib and potentially lisavanbulin over the next few years.
We have a calculated a discounted cash flow fair value of CHF 120 for Basilea. See the full research note here.
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.