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Basilea - Cresemba exceeding expectations

The importance of the anti-fungal franchise to Basilea was once again epitomised today by the receipt of significant sales-related milestones of $26.25m from licensee Pfizer. Pfizer is the licensee for ex-US sales of Cresemba comprising Europe (ex-Nordic) and 16 countries in Asia Pacific, including the large Chinese market. Like Astellas in the US, Pfizer has proven to be a highly successful partner for Cresemba in key markets. This is unsurprising, we believe, given Pfizer's existing anti-fungal franchise. Pfizer, as the originator of voriconazole (branded as Vfend), which generated peak sales of circa $900m, has been able to position Cresemba as an alternative to voriconazole as per the current guidelines, with Cresemba also offering a more benign tolerability profile. We expect further successful delivery from this Pfizer relationship, given the importance of the Chinese market and the observation that Basilea remains eligible for milestone payments of up to approximately CHF 515m.

Given Cresemba's ongoing success and its maturity in major markets (the US in particular), replenishing the antifungal pipeline is clearly a near-term priority. Additionally, while competition from novel antifungals has been slow to emerge, this is beginning to change, although the direct competitive threat from products like olorofim (FDA action date June 17th) looks limited for now. While novel anti-fungals have recently been proven to be highly sought-after assets, we believe that a combination of Basilea's existing expertise in anti-infectives and its strong cash position should make the company a partner of choice for prospective licensors. The further bolstering of cash resources from significant milestone payments, like today's, should boost Basilea's firepower in this regard. Undoubtedly, Basilea is determined to ensure the longevity of the antifungals franchise as part of its anti-infective ambitions. As a result, we believe that Basilea offers the added attraction to potential licensors of a fully committed partner, ensuring speedy development and significant resources. We believe that a successful replenishment of the anti-fungal pipeline represents a significant de-risking event, given its potential to extend the longevity of the key anti-fungals franchise.

The anti-infectives franchise at Basilea extends beyond Cresemba. Although the 5th generation cephalosporin antibiotic Zevtera (ceftobiprole) is currently a modest contributor, the prospect of entering the important US antibiotic market with a differentiated label (particularly the Staphylococcus aureus bacteraemia indication; SAB) promises significant sales potential, with our peak sales estimate approaching $400m. Ceftobiprole has delivered overtly positive results in both SAB (ERADICATE) and severe skin infections (TARGET), which gives us confidence that the company can deliver a suitable commercial partner to ensure success in the key US market for antibiotics. We believe that consummation of a partnership agreement for ceftobiprole would represent an important commercial validation for ceftobiprole.

We calculate a discounted cash flow fair value of CHF 91 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 in this publication should be considered as any form of advice.



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