Basilea - Underscoring long term ambitions

Basilea announced this morning it has entered into a collaboration with privately held US anti-infectives specialist Prokaryotics to jointly develop a first-in-class broad spectrum antifungal for the treatment of severe invasive fungal infections.

Under the terms of the agreement, Basilea will make an undisclosed upfront as well as near term milestone payments. Following the selection of a clinical candidate, Basilea will undertake clinical development and commercialisation. Prokaryotics is scheduled to receive development, regulatory and commercial milestone payments of up to $48.5m, as well as tiered low single-digit royalties. Prokaryotics is a spin out Merck & Co's antimicrobial programmes, with the company licensing several of Merck & Co's novel antibiotics. Prokaryotics has been supported by numerous grants from the US NIH and NIAID for anti-infectives projects such as restoring the efficacy of old drugs against MRSA and developing new treatments for carbapenem-resistant infections.

Despite recent pipeline progress with several novel antifungals in late stage clinical development, including Basilea's own highly promising candidate fosmanogepix, along with potentially competing candidates such as olorofim (F2G) and ibrexafungerp (Scynexis), there remains a dearth of new antifungal classes and an ongoing pressure from increasing resistance. At the same time, the risk of life-threatening invasive fungal infections continues to rise as procedures which drive growth in the immunocompromised patient population continues to increase. These are well understood and include organ transplantation and more aggressive cancer treatments.

The increasing threat from serious invasive fungal infections caused by Aspergillus and Candida species along with rarer more insidious infections such as Fusarium and Mucorales have been highlighted as priority pathogens by the WHO as the organisation seeks to increase awareness and encourage development of novel antifungals. Reassuringly, we note that Basilea's fosmanogepix is active against almost all of the problem infections highlighted by WHO.

We believe that the announcement today is another endorsement of the anti-infective capabilities at Basilea, and confirms our view that Basilea is rapidly becoming a leading partner of choice for companies as they seek to develop and commercialise their anti-infective programmes.

It is also noteworthy that Basilea is amongst a select group of drug development companies that contribute to the US’s health security strategy, and its various antibiotic and antifungal programmes have been awarded up to $420m in non-dilutive funding from Biomedical Advanced Research and Development Authority (BARDA). The $268m OTA agreement, in particular, provides significant flexibility to the company's pipeline ambitions.

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

To read our recent research, 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.