BASILEA | Buy | FV CHF73 Like a treasury bond with free upsides

BASILEA | Buy | FV CHF73 Like a treasury bond with free upsides
-> Basilea is a commercial stage biopharmaceutical company with a cash generative, anti-infectives franchise. The latter helps finance a highly promising oncology pipeline, led by derazantinib which should reach the market as soon as H2 2021.

-> The anti-infectives (AI) franchise consists of Cresemba, a leading antifungal for severe mould infections, and Zevtera, a broad-spectrum antibiotic for severe bacterial infections. Respectively launched in 2015 and 2014, both are currently commercialized through multiple licensing and distribution partnerships. While their cumulative contributions to top-line reached CHF 82m (on total revenues of CHF 132.6m), most of it come from Cresemba. Indeed, Zevtera sales performance has been modest so far, given that physicians tend to use new antibiotics as a last resort, and that MRSA rates are much smaller in Europe than in the US. We are still convinced that the AI franchise will continue to drive top-line growth, especially through additional launches of Cresemba in new geographies and a US launch of Zevtera as of 2023.

-> Profits from the solid AI franchise help finance Basilea’s significant effort in oncology. Lead asset derazantinib was licensed from ArQule in 2018, and is currently evaluated in iCCA through a pivotal phase II trial. While being a proof-of-concept indication, we still believe that derazantinib’s peak sales should exceed CHF 55m as soon as 2026. Beyond iCCA, a promising combination of derazantinib with Tecentriq will be assessed in urothelial cancer planned to start around mid-year. Two other oncology assets (BAL101553 and BAL3833) must not be overlooked, as the former is a promising MTA therapy evaluated through three trials, while the latter is an earlier stage kinase inhibitor in RAF/RAS driven tumors.

-> We initiate coverage of Basilea with a Buy rating and a CHF73 Fair Value