Basilea Pharmaceutica — Growth pivot with potential antibacterial addition

Basilea Pharmaceutica (SIX: BSLN)

Last close As at 19/04/2024

CHF41.95

0.25 (0.60%)

Market capitalisation

CHF550m

More on this equity

Research: Healthcare

Basilea Pharmaceutica — Growth pivot with potential antibacterial addition

Basilea has announced an exclusive evaluation licence and option agreement with South Korea-based iNtRON Biotechnology (KOSDAQ: 048530) for tonabacase, a potential first-class antibacterial of endolysin class. The product candidate could potentially fit well into Basilea’s portfolio of anti-fungal and anti-bacterial products, Cresemba and Zevtera. This announcement follows the recent in-licensing of GR-2397 (an antifungal compound, renamed BAL2062) and aligns with management’s strategic focus to seek anti-fungal and anti-infective synergistic additions to its portfolio. As part of the agreement, Basilea will evaluate tonabacase in a range of preclinical studies which, if favourable, could lead to a licensing agreement for further clinical development, at Basilea’s exclusive discretion and at pre-agreed financial terms. Basilea is making an undisclosed upfront payment to iNtRON and will make an additional payment if it decides to exercise its exclusive option to execute the licence agreement. While the terms of the deal are undisclosed, management maintains that the transaction has no impact on its FY23 financial guidance.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Basilea Pharmaceutica

Growth pivot with potential antibacterial addition

Licensing update

Pharma and biotech

1 November 2023

Price

CHF35.8

Market cap

CHF431m

Net debt (CHF) at 30 June 2023

38.1

Shares in issue (excluding 1.12m treasury shares)

11.98m

Free float

90%

Code

BSLN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

Business description

Basilea Pharmaceutica is focused on treating infectious diseases. Its marketed products are Cresemba (an antifungal) and Zevtera (an anti-MRSA broad-spectrum antibiotic).

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Basilea Pharmaceutica is a research client of Edison Investment Research Limited

Basilea has announced an exclusive evaluation licence and option agreement with South Korea-based iNtRON Biotechnology (KOSDAQ: 048530) for tonabacase, a potential first-class antibacterial of endolysin class. The product candidate could potentially fit well into Basilea’s portfolio of anti-fungal and anti-bacterial products, Cresemba and Zevtera. This announcement follows the recent in-licensing of GR-2397 (an antifungal compound, renamed BAL2062) and aligns with management’s strategic focus to seek anti-fungal and anti-infective synergistic additions to its portfolio. As part of the agreement, Basilea will evaluate tonabacase in a range of preclinical studies which, if favourable, could lead to a licensing agreement for further clinical development, at Basilea’s exclusive discretion and at pre-agreed financial terms. Basilea is making an undisclosed upfront payment to iNtRON and will make an additional payment if it decides to exercise its exclusive option to execute the licence agreement. While the terms of the deal are undisclosed, management maintains that the transaction has no impact on its FY23 financial guidance.

Year end

Revenue (CHFm)

PBT*
(CHFm)

EPS*
(CHFc)

DPS
(CHFc)

P/E
(x)

Yield
(%)

12/21

148.1

(6.6)

(56.9)

0.0

N/A

N/A

12/22

147.8

12.3

104.1

0.0

34.4

N/A

12/23e

158.2

43.5

332.2

0.0

10.8

N/A

12/24e

180.7

63.2

482.3

0.0

7.4

N/A

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

Basilea plans to investigate a number of hypotheses for tonabacase across a range of preclinical studies during 2024. These studies will form the basis for determining the appropriate clinical development programme for the asset and could result in the candidate moving directly into a potential Phase II study in 2025 on favourable results from the preclinical studies. Tonabacase has already demonstrated positive activity in vitro and in preclinical animal models of infection related to methicillin-resistant and methicillin-susceptible Staphylococcus aureus, along with in vitro activity against coagulase-negative staphylococci. The drug was also shown to be well-tolerated in Phase I studies, at single and multiple doses.

The rising issue of antimicrobial resistance has added complexity to the treatment of bacterial infections and represents a challenge to global public health. Drug-resistant bacterial infections can lead to at least 50,000 deaths a year in Europe and the US, along with a large number of affected patients globally, resulting in a GDP loss of c US$3tn annually. Among the World Health Organization’s list of global priority pathogens, gram-positive (G+) bacteria form a significant portion of drug-resistant bacteria, hence there is a medical need to combat these infections. Endolysins represent a novel treatment in bacterial infections (especially for G+ bacteria) and we understand they may potentially demonstrate both a better treatment profile (compared to traditional antibiotic treatments) and better compatibility (when used with other antibiotics), along with a low risk of developing resistance. In our view, the potential licensing deal presents an important portfolio expansion opportunity for Basilea.

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 £60,000 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.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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.

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United Kingdom

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 research department of Edison 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 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison 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.

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.

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

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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