Basilea - Significant BARDA funding

In a further demonstration of the strength and importance of Basilea's anti-infectives portfolio, the company announced this morning that it has entered into an agreement with BARDA to fund certain pipeline assets. Basilea will receive initial non-dilutive funding of $29m to support the development of both fosmanogepix and BAL2062, two of its novel antifungals.

The multi-year agreement allows for potential funding of up to $268m to develop fosmanogepix, BAL2062 and other antifungal and antibacterial assets. As a result of the initial financing, the company has increased its revenue and profit forecast for 2024. Net profit is expected to increase by 43% and is now forecast to be CHF60m in 2024, up from CHF10.5m in 2023. The deal continues an already productive relationship between BARDA and Basilea, which resulted in the approval of 5th generation cephalosporin antibiotic ceftobiprole in the US for Staphylococcus aureus bacteraemia (SAB) as well as severe skin infections (ABSSSI) and community-acquired bacterial pneumonia (CABP).

The agreement will allow Basilea and BARDA to move candidates in and out of the portfolio as clinical data emerge and medical need evolves. The flexibility is likely to save time, effort, and cost. It continues an already productive relationship which has resulted in the approval of 5th generation cephalosporin antibiotic ceftobiprole in the key US market for Staphylococcus aureus bacteraemia (SAB) as well as severe skin infections (ABSSSI) and community-acquired bacterial pneumonia (CABP).

Importantly, the agreement will facilitate the Phase 3 development of fosmanogepix and BAL-2062. BARDA funding is expected to contribute approximately 60% of the total costs over the agreement term. Fosmanogepix has already been studied extensively, with three open-label Phase 2 studies in the treatment of candidaemia, including Candida auris and invasive mould infections. We have previously highlighted our enthusiasm for the commercial potential of fosmanogepix, given its profile and relevance to a broad range of moulds and invasive fungal infections. It is the first in a new "gepix" class of antifungals. We believe that not only will fosmanogepix provide longevity to Basilea's antifungal franchise, but it should also take it to new heights given its activity on resistant strains as well as extending the franchise into the treatment of candidiasis – a rapidly growing fungal threat.

Moreover, fosmanogepix addresses almost all of the fungal infections highlighted by WHO in its list of critical fungal infections. Our sales forecasts suggest a significant market opportunity for fosmanogepix, with peak sales approaching $1.2bn. Basilea intends to start a phase 3 study in invasive yeast infections shortly. We have suggested that the cost of Phase 3 development of fosmanogepix over the next two to three years will be approximately $140m, and the agreement with BARDA will substantially relieve this burden.

The recent past at Basilea has witnessed a strategic refocus on the company's anti-infectives franchise with a desire to turn the company into one of the few global anti-infective powerhouses. We believe that Basilea is one of the few companies that truly understands the unmet medical needs in the anti-infective field and what is required to deliver a successful commercial product.

The BARDA arrangement announced today highlights the importance of Basilea's portfolio in addressing life-threatening infections. It significantly bolsters its efforts to become a global leader in the anti-infectives field.

We have a discounted cash flow fair value of CHF 110 per share for Basilea.

To read our recent research report, please use the link here.

Please subscribe here to receive our research, articles and invitations as soon as they are available.

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.

Link to full disclosures.