Derazantinib interim iCCA data promising

Basilea Pharmaceutica 10 January 2019 Update
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Basilea Pharmaceutica

Derazantinib interim iCCA data promising

Corporate update

Pharma & biotech

 

10 January 2019

Price

CHF48.54

Market cap

CHF573m

US$1.00CHF

Net cash (CHFm) at 30 June 2018

51.3

Shares in issue (including 1m treasury shares)

11.8m

Free float

91.46%

Code

BSLN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.7

(5.5)

(39.2)

Rel (local)

6.3

(2.5)

(32.8)

52-week high/low

CHF79.7

CHF38.7

Business description

Basilea Pharmaceutica is focused on anti-infectives and oncology. Its marketed products are Cresemba (an antifungal) and Zevtera (an anti-MRSA broad-spectrum antibiotic). The R&D pipeline includes three oncology drug candidates in clinical development.

Next events

FY18 results

19 February

Ceftobiprole top-line data

(Phase III ABSSSI study)

H219

BAL101553 Phase IIa data

(glioblastoma &ovarian cancer)

H219

Analysts

Dr Susie Jana

+44 (0)20 3077 5700

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Sean Conroy

+44 (0)20 3681 2534

Basilea has reported positive interim results from the derazantinib Phase II registration trial in intrahepatic cholangiocarcinoma (iCCA, bile duct cancer). The promising efficacy shown highlights the potential for the product in FGFR-driven solid tumours, an unmet need. Full data are expected to be available once the study has completed (mid-2020). Basilea in-licensed derazantinib from ArQule in April 2018. The asset is a complementary addition to its oncology portfolio and the company now has three diversified, early/mid-stage clinical assets targeting cancer resistance in its portfolio. We anticipate increased investor focus on the oncology strategy at Basilea. We value Basilea at CHF115/share.

Year end

Revenue (CHFm)

PBT* (CHFm)

EPS* (CHF)

DPS (c)

P/E (x)

Yield (%)

12/16

66.0

(50.9)

(5.06)

0.0

N/A

N/A

12/17

101.5

(18.9)

(1.78)

0.0

N/A

N/A

12/18e

124.0

(29.6)

(2.74)

0.0

N/A

N/A

12/19e

137.3

(26.7)

(2.48)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Derazantinib shoring up the oncology pipeline

Derazantinib is a tyrosine kinase inhibitor (pan FGFR) with potential utility across a range of cancers that test positive for FGFR genetic aberrations. Its most advanced indication is for iCCA (second line for FGFR2 fusion), Phase II studies in other FGFR-driven tumours are expected to initiate in mid-2019. Although there are no approved targeted therapies for iCCA, the discovery of FGFR2 fusions in ~10–20% of patients could change the treatment paradigm for these patients. While small patient populations in iCCA are expected, there is an unmet need and thus the FDA and EMA have granted orphan drug designation.

Interim analysis promising; await full data mid-2020

The interim analysis of the Phase II study, based on the subset of 29 patients (42 enrolled on the study) who had at least one post-baseline imaging assessment, showed an objective response rate of 21% and disease control rate (partial response or stable disease) of 83%. Safety and tolerability were confirmed as seen in previous studies. Full data from the ICCA trial should be available mid-2020, the trial is expected to enrol 100 patients. We model 2023 launch following a traditional development path including a Phase III trial.

Valuation: rNPV of CHF1,239m or CHF115/share

Our valuation remains unchanged at CHF1,239m or CHF115/share. We include derazantinib for only iCCA in our model (peak sales of $59.4m), but the valuation is largely based on Cresemba (worldwide) and antibiotic Zevtera (ex-US), plus net cash of CHF51.3m at 30June 2018. We also include risk-adjusted contributions for Zevtera (US), BAL101553 and BAL3833. Basilea has provided a preliminary update to FY18 results; unaudited revenue for 2018 of CHF133m vs our CHF124m estimate is partly driven by a strong sales ramp up of Cresemba. The company also reported a cash position of c CHF223m at 31 December 2018 (preliminary, unaudited). We will update our model once the audited financials are published.

Basilea Pharmaceutica is a research client of Edison Investment Research Limited

Exhibit 1: Financial summary

CHF'000s

2016

2017

2018e

2019e

December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

65,984

101,521

124,010

137,255

Cost of Sales

(5,347)

(9,025)

(11,994)

(12,429)

Gross Profit

60,637

92,496

112,015

124,826

Research and development (gross)

(48,449)

(53,493)

(102,500)

(113,000)

SG&A

(56,077)

(53,139)

(33,861)

(33,415)

EBITDA

 

 

(41,570)

(12,236)

(21,877)

(18,819)

Operating Profit (before amort. and except.)

(43,789)

(14,036)

(24,223)

(21,361)

Intangible Amortisation

(100)

(100)

(123)

(228)

Exceptionals

0

0

0

0

Other

0

0

0

0

Operating Profit

(43,889)

(14,136)

(24,346)

(21,589)

Net Interest

(7,065)

(4,890)

(5,375)

(5,375)

Profit Before Tax (norm)

 

 

(50,854)

(18,926)

(29,598)

(26,736)

Profit Before Tax (reported)

 

 

(50,954)

(19,026)

(29,721)

(26,964)

Tax

(333)

(334)

(26)

(26)

Profit After Tax (norm)

(51,187)

(19,260)

(29,624)

(26,763)

Profit After Tax (reported)

(51,287)

(19,360)

(29,747)

(26,991)

Average Number of Shares Outstanding (m)

10.1

10.8

10.8

10.8

EPS - normalised fully diluted (CHFc)

 

(505.74)

(178.36)

(274.34)

(247.83)

EPS - (reported) (CHFc)

 

 

(506.73)

(179.28)

(275.47)

(249.95)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

91.9

91.1

90.3

90.9

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

59,264

58,189

59,640

61,188

Intangible Assets

232

326

526

726

Tangible Assets

8,878

7,768

9,019

10,367

Investments

50,154

50,095

50,095

50,095

Current Assets

 

 

268,494

292,976

220,988

173,249

Stocks

14,931

15,320

16,431

13,621

Debtors

2,492

4,955

5,776

6,393

Cash

239,030

260,724

186,805

141,259

Other

12,041

11,977

11,977

11,977

Current Liabilities

 

 

(72,914)

(79,491)

(54,144)

(66,713)

Creditors

(72,914)

(79,491)

(54,144)

(66,713)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(289,844)

(313,114)

(284,293)

(247,903)

Long term borrowings

(195,466)

(196,224)

(195,466)

(195,466)

Other long term liabilities

(94,378)

(116,890)

(88,827)

(52,437)

Net Assets

 

 

(35,000)

(41,440)

(57,808)

(80,178)

CASH FLOW

Operating Cash Flow

 

 

(75,003)

19,014

(64,597)

(35,827)

Net Interest

0

0

(5,375)

(5,375)

Tax

0

0

(26)

(26)

Capex

(394)

(711)

(3,720)

(4,118)

Acquisitions/disposals

0

0

0

0

Financing

0

0

0

0

Other

(51,021)

2,633

558

(200)

Dividends

0

0

0

0

Net Cash Flow

(126,418)

20,936

(73,161)

(45,546)

Opening net debt/(cash)

 

 

(169,982)

(43,564)

(64,500)

8,661

HP finance leases initiated

0

0

0

0

Other

0

(0)

0

0

Closing net debt/(cash)

 

 

(43,564)

(64,500)

8,661

54,207

Source: Company data, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison, in consideration of a fee payable by Basilea Pharmaceutica. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney+61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison, in consideration of a fee payable by Basilea Pharmaceutica. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney+61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney+61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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