cells

Licensing double act

Basilea Pharmaceutica 16 September 2016 Update

Basilea Pharmaceutica

Licensing double act

Corporate update

Pharma & biotech

16 September 2016

Price

CHF70.95

Market cap

CHF838m

Net cash (CHFm) at July 2016

115.8

Shares in issue*
*Including 1m treasury shares

11.8m

Free float

90.4%

Code

BSLN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.7)

2.7

(27.1)

Rel (local)

(1.2)

(3.7)

(21.7)

52-week high/low

CHF108.8

CHF59.5

Business description

Basilea is a Swiss biopharmaceutical company focused on anti-infectives and oncology. Its lead products are Cresemba, an antifungal that is approved in the US and Europe, and Zevtera, an anti-MRSA broad-spectrum antibiotic, approved in several European countries for pneumonia.

Next events

Zevtera initiate PIII US studies

H117

FY16 results

20 February 2017

Analysts

Dr Susie Jana

+44 (0) 20 3077 5700

Daniel Wilkinson

+44 (0)20 3077 5734

Basilea Pharmaceutica is a research client of Edison Investment Research Limited

Basilea continues to make good partnering progress with key assets Cresemba for mould infections and Zevtera for bacterial infections. Both drugs will be developed and marketed across Latin America by Grupo Biotoscana (GBT), while Cresemba will be developed and marketed by Asahi Kasei Pharma in Japan. Basilea will receive a total upfront of CHF18m (to be treated as deferred revenue over a number of years), plus additional payments on reaching regulatory and commercialisation milestones (up to CHF60m from Asahi plus royalties, undisclosed amounts from GBT). We value Basilea at CHF1,091m.

Year
end

Revenue (CHFm)

PBT*
(CHFm)

EPS*
(CHF)

DPS
(CHF)

P/E
(x)

Yield
(%)

12/14

42.6

(41.2)

(4.14)

0.0

N/A

N/A

12/15

52.8

(61.3)

(6.07)

0.0

N/A

N/A

12/16e

61.2

(54.1)

(4.96)

0.0

N/A

N/A

12/17e

88.6

(35.6)

(3.20)

0.0

N/A

N/A

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

Cresemba and Zevtera underpin current share price

Basilea continues to make good partnering progress with key assets Cresemba and Zevtera against a backdrop of an ongoing European roll-out for both and a US roll-out for Cresemba by licence partner, Astellas. Following on from the extension with Hikma in the MENA region to cover Cresemba, in addition to the original agreement on Zevtera, Basilea has now announced two separate licence agreements covering Latin America and Japan. GBT has the exclusive licence for Cresemba and Zevtera across 19 Latin American countries whilst Asahi Kasei Pharma has been granted the sole licence for Cresemba in Japan.

Expect pipeline progress through 2016/17

Following the award of the BARDA contract (up to $100m) for the US development of Zevtera, we anticipate its US Phase III clinical trials could start in H117. The company is in discussions with the FDA to finalise the Phase III study SPAs. Oncology assets BAL101553 and BAL3833 are making progress in targeting drug-resistant tumour types; there could be synergies between the anti-infectives and oncology pipelines as a large number of invasive fungal and bacterial infections develop in leukaemia cancer patients that are immunocompromised owing to treatment with aggressive chemotherapies.

Valuation: rNPV of CHF1,091m or CHF101/share

Our valuation of Basilea remains unchanged at CHF1,091m. Our valuation is based on an NPV analysis, which includes the main portfolio of products and net cash. Cresemba, based on $600m peak sales globally, which encompasses the LatAm and Japanese markets (our model does not include the CHF18m in upfronts), is worth c 65% of our rNPV and underpins c 90% of the current market cap. We also include Zevtera in Europe, in addition to risk-adjusted contributions for the US opportunity and the earlier-stage pipeline.

Cresemba and Zevtera underpin current share price

Basilea continues to make good partnering progress with key assets Cresemba for mould infections and Zevtera for bacterial infections against a backdrop of an ongoing European roll-out for both and the US roll-out of Cresemba by licence partner, Astellas. Following on from the extension with Hikma in the MENA region to cover Cresemba, in addition to the original agreement on Zevtera, Basilea has now announced collaborative partnership with Grupo Biotoscana (GBT) for LatAm (Cresemba and Zevtera) and Ashai Kasei Pharma for Japan (Cresemba).

GBT to commercialise Cresemba and Zevtera across LatAm

Basilea has announced a supply, distribution and licence agreement with Grupo Biotoscana (GBT) for the LatAm region for its key antimicrobial agents, Cresemba and Zevtera. Basilea will receive CHF11m upfront for the agreement (to be treated as deferred revenue over a number of years; not included in our model assumptions), plus additional undisclosed amounts on reaching regulatory and commercialisation milestones. GBT holds the sole licence to commercialise both drugs across 19 countries in the region; including Brazil, Mexico, Argentina and Colombia. GBT has established operations in 10 countries in LatAm and focuses on rapidly growing healthcare segments including speciality pharmaceuticals and oncology; we see Cresemba and Zevtera as neat fits into its existing partnership portfolio of drugs.

Ashai Kasei Pharma to commercialise Cresemba across in Japan

Basilea has entered into a partnering agreement with Ashai Kasei Pharma for Cresemba in Japan. Under the terms of the deal Ashai Kasei Pharma has the sole licence to develop and commercialise the product; Basilea will receive CHF7m upfront for the agreement (to be treated as deferred revenue over a number of years; not included in our model), plus up to an additional CHF60m contingent on reaching regulatory and commercialisation milestones. Basilea will receive double digit tiered royalties on product sales in Japan. Ashai Kasei Pharma will be initiating the Cresemba clinical trials for the treatment of invasive aspergillosis and mucormycosis required for the Japanese marketing authorisation.

We forecast Cresemba global peak sales potential of $600m

We forecast global peak sales potential of $600m, with Cresemba contributing c 65% to our valuation. Our Cresemba valuation is based on a blended royalty which assumes around 30% for countries like Japan where bridging studies will be needed and a distribution agreement where the economic interest is likely to be around 40%. We will maintain our current assumptions until we have more visibility as to start of the bridging trials and the timing of a potential launch in these newly partnered markets.

Total Zevtera peak sales of $556m forecast

We continue to forecast $100m peak sales for Zevtera in Europe (for the currently approved indications) and $456m for RoW (including $317m for the US opportunity, which is risk adjusted). Phase III data from the US trials, if positive, could be used to expand Zevtera’s EU/RoW label to include Staphylococcus aureus bacteraemia and acute skin and skin structure infections indications. Our current peak sales estimates for EU/RoW do not include these indications, hence this could provide upside to our financial forecasts.

For more detail on Cresemba and Zevtera see our note dated March 2016, Riding the crest of the antimicrobial wave.

Exhibit 1: Financial summary

CHF'000s

2014

2015

2016e

2017e

2018e

December

US GAAP

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

42,634

52,825

61,208

88,605

105,084

Cost of Sales

0

0

(661)

(2,426)

(5,210)

Gross Profit

42,634

52,825

60,547

86,179

99,875

Research and development

(54,377)

(60,075)

(54,701)

(60,410)

(63,309)

EBITDA

 

 

(39,239)

(58,885)

(46,803)

(28,711)

(19,823)

Operating Profit (before amort. and except.)

(41,539)

(61,285)

(49,142)

(31,162)

(22,420)

Intangible Amortisation

(291)

(200)

(206)

(117)

0

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Operating Profit

(41,830)

(61,485)

(49,348)

(31,279)

(22,420)

Net Interest

311

(35)

(4,948)

(4,425)

(4,108)

Profit Before Tax (norm)

 

 

(41,228)

(61,320)

(54,090)

(35,587)

(26,528)

Profit Before Tax (reported)

 

 

(41,519)

(61,520)

(54,296)

(35,704)

(26,528)

Tax

(26)

(83)

(26)

(26)

(26)

Profit After Tax (norm)

(41,255)

(61,403)

(54,116)

(35,613)

(26,554)

Profit After Tax (reported)

(41,546)

(61,603)

(54,323)

(35,730)

(26,554)

Average Number of Shares Outstanding (m)

10.0

10.1

10.9

11.1

11.4

EPS - normalised (c)

 

 

(414.46)

(607.22)

(496.01)

(319.87)

(233.81)

EPS - normalised fully diluted (c)

 

(414.46)

(607.22)

(496.01)

(319.87)

(233.81)

EPS - (reported) (CHF)

 

 

(4.17)

(6.09)

(4.98)

(3.21)

(2.34)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

100.0

100.0

98.9

97.3

95.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

N/A

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

N/A

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

12,807

13,870

13,072

13,162

13,718

Intangible Assets

224

346

117

0

0

Tangible Assets

12,157

10,724

10,155

10,362

10,918

Investments

426

2,800

2,800

2,800

2,800

Current Assets

 

 

244,571

384,865

288,045

212,221

170,531

Stocks

4,904

9,579

7,650

10,710

7,137

Debtors

1,171

1,545

1,677

2,428

2,879

Cash

226,125

364,688

269,935

190,300

151,732

Other

12,371

9,053

8,783

8,783

8,783

Current Liabilities

 

 

(61,690)

(68,836)

(70,638)

(53,345)

(33,276)

Creditors

(61,690)

(68,836)

(70,638)

(53,345)

(33,276)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(137,756)

(315,043)

(260,997)

(228,997)

(217,197)

Long term borrowings

0

(194,706)

(194,706)

(194,706)

(194,706)

Other long term liabilities

(137,756)

(120,337)

(66,291)

(34,291)

(22,491)

Net Assets

 

 

57,931

14,856

(30,518)

(56,959)

(66,224)

CASH FLOW

Operating Cash Flow

 

 

(71,461)

(67,780)

(87,962)

(72,526)

(31,281)

Net Interest

0

0

(4,948)

(4,425)

(4,108)

Tax

0

0

(26)

(26)

(26)

Capex

(1,247)

(1,009)

(1,836)

(2,658)

(3,153)

Acquisitions/disposals

0

0

0

0

0

Financing

0

(0)

0

0

0

Other

24,937

12,645

20

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(47,772)

(56,143)

(94,753)

(79,635)

(38,568)

Opening net debt/(cash)

 

 

(273,898)

(226,125)

(169,982)

(75,229)

4,406

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(226,125)

(169,982)

(75,229)

4,406

42,974

Source: Basilea accounts, Edison Investment Research. Note: During 2013 Basilea distributed CHF5.0/share, equivalent to CHF48m to shareholders, which we classify as a dividend. This followed a shareholder request (from HBM Healthcare Investments, which held 24.97%) that was approved at the 2013 AGM.

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “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.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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