Basilea Pharmaceutica — Refilling the pipeline for growth

Basilea Pharmaceutica (SIX: BSLN)

Last close As at 23/02/2024

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Research: Healthcare

Basilea Pharmaceutica — Refilling the pipeline for growth

Basilea recently expanded its antifungal and antibacterial product pipeline with three new assets, including the latest addition, fosmanogepix. As a broad-spectrum antifungal (including multidrug-resistant fungi), fosmanogepix has a novel mechanism of action, a key differentiator in the rise of antifungal drug resistance. Two Phase III trials are expected to commence in mid- and late-2024 (in candidemia/invasive candidiasis and invasive mould infections, respectively) and a successful launch has the potential to refill the pipeline as the company’s lead asset Cresemba matures. We update our estimates and valuation to reflect the revised FY23 guidance and incorporate the potential contribution from fosmanogepix. Our overall valuation increases to CHF910.4m or CHF76.0/share (from CHF797.8m or CHF66.6/share previously). In the more immediate term, we view the US New Drug Application (NDA) decision on Zevtera (PDUFA date of 3 April 2024) as the next big catalyst for the company.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Basilea Pharmaceutica

Refilling the pipeline for growth

Pipeline update

Pharma and biotech

22 December 2023

Price

CHF34.6

Market cap

CHF453m

Net debt (CHFm) 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

%

1m

3m

12m

Abs

(3.5)

(19.6)

(27.5)

Rel (local)

(6.5)

(20.0)

(29.4)

52-week high/low

CHF55.2

CHF34.2

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). In late 2023, the company expanded its pipeline to include antifungal GR-2397 (now BAL2062), antibiotic tonabacase (evaluation license) and Phase III-ready, novel broad-spectrum antifungal treatment, fosmanogepix (two Phase III trials planned for 2024).

Next events

Regulatory decision on Zevtera NDA

Q224

Fosmanogepix Phase III initiation

H224

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Dr Arron Aatkar

+44 (0)20 3077 5700

Basilea Pharmaceutica is a research client of Edison Investment Research Limited

Basilea recently expanded its antifungal and antibacterial product pipeline with three new assets, including the latest addition, fosmanogepix. As a broad-spectrum antifungal (including multidrug-resistant fungi), fosmanogepix has a novel mechanism of action, a key differentiator in the rise of antifungal drug resistance. Two Phase III trials are expected to commence in mid- and late-2024 (in candidemia/invasive candidiasis and invasive mould infections, respectively) and a successful launch has the potential to refill the pipeline as the company’s lead asset Cresemba matures. We update our estimates and valuation to reflect the revised FY23 guidance and incorporate the potential contribution from fosmanogepix. Our overall valuation increases to CHF910.4m or CHF76.0/share (from CHF797.8m or CHF66.6/share previously). In the more immediate term, we view the US New Drug Application (NDA) decision on Zevtera (PDUFA date of 3 April 2024) as the next big catalyst for the company.

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

33.2

N/A

12/23e

155.0

5.2

43.8

0.0

79.0

N/A

12/24e

183.3

35.1

293.1

0.0

11.8

N/A

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

Fosmanogepix: A worthy successor to Cresemba?

Fosmanogepix is a first-in-class, novel antifungal drug candidate and one of the most clinically advanced, with the potential to alleviate the rising threat of antifungal resistance. Fast Track and Orphan Drug designations from the FDA, as well as a qualified infectious disease product (QIDP) tag, should provide regulatory and commercial benefits (more than 10 years of market exclusivity post launch). With activity against yeast and moulds (including drug-resistant varieties), the drug could become Basilea’s next lead product (if clinical data are supportive) in a market valued at $13.8bn in 2022 and projected to reach $22.8bn by 2033.

Significant peak sales potential across both targets

Despite the availability of treatment options (echinocandins and azoles are standard of care across invasive yeast and mould infections, respectively), mortality rates remain as high as 30–80% for immunocompromised patients (due to high resistance levels and issues with drug-drug interactions) highlighting the need for novel mechanisms of action. We expect fosmanogepix to be positioned as a first-line treatment and project peak sales potential of $330m (invasive candidiasis) and $470m (invasive mould infections), with an incremental contribution to valuation with clinical progression.

Valuation: Resets to CHF910.4m or CHF76.0/share

After incorporating fosmanogepix, our revised valuation for Basilea is CHF910.4m or CHF76.0/share (from CHF797.8m or CHF66.6/share previously). We estimate a 2029 launch for fosmanogepix, assigning a 60% probability of success and using a 12.5% discount rate. Overall, the drug adds CHF133m to our valuation (c 15% of the revised valuation), with the potential for a growing contribution on clinical development progress.

Recap of a strong anti-infectives product pipeline

Basilea is focused on developing and commercialising therapies for the treatment of severe fungal and bacterial infections (Exhibit 1). Its two marketed products are Cresemba (or isavuconazole), an antifungal therapy, and Zevtera (or ceftobiprole), an antibiotic therapy.

Cresemba has been approved in 76 countries, is marketed in 71 countries and has Orphan Drug designation in the US, Europe and Australia. It continues to drive top-line revenues for the company, as discussed in our previous update note, and in November 2023 Basilea received an additional $1.25m milestone payment based on a sustained strong sales performance in Asia-Pacific and China. In December 2023, US licensing partner Astellas received FDA approval for Cresemba’s expanded use in children with invasive aspergillosis and invasive mucormycosis (types of mould infections), extending the drug’s market exclusivity in the US by six months (to September 2027). This marks the first approval of an azole antifungal therapy for the treatment of invasive mould infections in children, a market that remains particularly underserved. Basilea expects a regulatory decision by the European Medicines Agency (EMA) on a similar paediatric label expansion in H124, which it expects to extend European market exclusivity by two years (to October 2027).

Zevtera is marketed in selected countries in Europe, Latin America, the Middle East, North Africa and Canada. In October 2023, Basilea announced that the FDA had accepted its NDA, and has set a Prescription Drug User Fee Act (PDUFA) date of 3 April 2024. In our view, this regulatory decision could represent the next most significant catalyst for the company.

Exhibit 1: Basilea pipeline of antifungal and antibiotic therapies

Source: Company presentation (13 November 2023)

In October and November 2023, Basilea entered into three transactions for new assets, in line with its previously disclosed objectives of expanding its product pipeline.

BAL2062 (previously GR-2397) has been acquired from Gravitas Therapeutics (original patent owned by Astellas Pharma). It is a Phase II-ready antifungal compound for the treatment of invasive mould infections, mainly caused by the Aspergillus species. The asset has already received Fast Track, Orphan Drug and QIDP designations from the FDA for invasive aspergillosis. Basilea plans to conduct a preclinical profiling programme to ascertain the optimal clinical development path for BAL2062, with Phase II studies scheduled to commence, upon successful completion of the preclinical work, in H125.

Tonabacase is being evaluated by Basilea as part of a licence and option agreement with iNtRON Biotechnology. Tonabacase is an antibacterial therapy of the endolysin class, offering potential advantages over conventional antibiotics. As part of the agreement, Basilea will evaluate the asset in a range of preclinical studies and, if favourable, this could lead to a licensing agreement for further clinical development at Basilea’s exclusive discretion.

Fosmanogepix is a late-stage clinical asset, for which management plans to commence Phase III trials from mid-2024. The drug has been acquired from Amplyx Pharmaceuticals, an affiliate of Pfizer. Basilea already has an established relationship with Pfizer as a collaborator in the commercialisation of Cresemba in parts of Europe, China and the Asia-Pacific region, and we note that Pfizer continues to hold the right of first negotiation for commercial rights to fosmanogepix, which we believe it will exercise, if clinical data are favourable. We discuss fosmanogepix and the antifungal market in more detail below.

Fosmanogepix: Basilea’s next lead product?

In November 2023, Basilea introduced fosmanogepix as the latest acquisition to bolster its product pipeline. Deal considerations for this Phase III-ready, broad-spectrum antifungal therapy include an upfront payment of $37m and potential milestone payments of up to $506m ($110m to Pfizer and $396m from previous agreements), the majority of which relate to regulatory and commercial milestones, as well as tiered single-digit royalties.

Antifungals: Addressing overlooked superbugs

The invasive fungal infection market represents an important area of significant unmet medical need. This is driven by a rise in underlying conditions that predispose people to these infections, including chronic obstructive pulmonary disease, cystic fibrosis and acquired immune deficiency syndrome. Furthermore, immunocompromised patients, such as cancer and transplant patients, are at notable risk to conditions caused by fungal infections. While often overlooked and under-recognised as serious microbial conditions (versus bacterial infections, which have been attracting significant attention as the other component of antimicrobial resistance, AR), we note that such conditions cause c 1.5 million deaths worldwide each year, and this figure is expected to be increasing.

Antifungal therapies can be broken down into four major classes, depending on their chemical structure and mode of action (Exhibit 2):

Azoles: these treatments are the most commonly used antifungals. They are designed to prevent fungi from growing, working by targeting an enzyme required to create the fungal cell membrane. Consequently, this weakens the cell membrane, causing it to leak, and eventually leads to cell death. Azoles can be subcategorised as either triazoles or imidazoles. Cresemba (or isavuconazole) is an example of a triazole antifungal therapy.

Allylamines: like azoles, this type of treatment works by interfering with an enzyme implicated in the formation of the fungal cell membrane. However, allylamines are not used as frequently as azoles.

Polyenes: these are natural product-derived treatments, which work by making fungal cell walls more porous, rendering the cells more susceptible to bursting. We note that more recent research is working on developing derivatives of such naturally occurring compounds, focused on updated understanding of the underlying mechanisms and aiming to reduce side effects, particularly renal toxicity.

Echinocandins: these are semi-synthetic treatments that target an enzyme involved in forming fungal cell walls. They are a more modern form of antifungal therapy, with the first drug in the category, caspofungin, approved in January 2001.

Beyond these four classes of therapies, there is a limited number of other approved antifungals that operate by a different mechanism of action and/or are restricted to being used as combination treatments. Two examples of note are:

Flucytosine, which works by penetrating the fungal cell wall and disrupting fungal RNA and protein synthesis. As a result, the cell stops growing. Flucytosine is used for the treatment of systemic infections caused by Candida or the Cryptococcus species.

Griseofulvin, which works by preventing the fungal cells from replicating. Griseofulvin is used to treat skin, hair and nail fungal infections.

While collectively these available therapies can be used to treat a range of fungal infections, their use is generally constrained by dose-limiting toxicities, drug-drug interactions and possible routes of administration. Consequently, we believe there is ample opportunity to address this area of medical need. Furthermore, in 2022 the World Health Organization (WHO) identified four fungal priority pathogens considered to be of critical concern: Cryptococcus neoformans, Candida auris, Aspergillus fumigatus and Candida albicans. The development of new antifungals should therefore remain a point of focus, if the healthcare community is to address this potentially global threat.

Exhibit 2: Examples of available antifungal therapies

Drug

Class

Subgroup

Disease

Administration

Isavuconazole

Azole

Triazole

Aspergillosis

Mucormycosis

IV or oral

Fluconazole

Azole

Triazole

Candida infections (mucosal, systemic and invasive infections)

Cryptococcosis

IV, oral or topical

Itraconazole

Azole

Triazole

Aspergillosis

Blastomycosis

Candida infections (mucosal)

Histoplasmosis

Onychomycosis

IV, local, oral or topical

Posaconazole

Azole

Triazole

Candida infections (mucosal and invasive infections)

IV or oral

Voriconazole

Azole

Triazole

Aspergillosis

Candida infections (mucosal and invasive infections)

Fusarium infections

IV or oral

Ketoconazole

Azole

Imidazole

Blastomycosis

Candida infections (skin and mucous membrane infections)

Fungal skin and hair infections

Histoplasmosis

Oral or topical

Clotrimazole

Azole

Imidazole

Skin and mucous membrane infections

Oral or topical

Miconazole

Azole

Imidazole

Skin and mucous membrane infections

Local or topical

Terbinafine

Allylamine

N/A

Fungal skin infections

Oral or topical

Amphotericin B

Polyene

N/A

Aspergillosis

Blastomycosis

Candida infections (mucosal and invasive infections)

Coccidioidomycosis

Cryptococcosis

IV

Nystatin

Polyene

N/A

Candida infections (skin and mouth)

Local or topical

Anidulafungin

Echinocandin

N/A

Candida infections (mucosal and invasive infections)

IV

Caspofungin

Echinocandin

N/A

Aspergillosis

Candida infections (mucosal and invasive infections)

IV

Micafungin

Echinocandin

N/A

Candida infections (mucosal and invasive infections)

IV

Source: Edison Investment Research

Fosmanogepix aims to differentiate on multiple fronts…

Fosmanogepix is a type of drug called a prodrug, which means it is converted in the body to its active form, manogepix (Exhibit 3). The drug operates by a novel mechanism, working by blocking the function of the fungal enzyme Glycosylphosphatidylinositol-anchored wall protein transfer 1 (GWT1). Inhibition of this protein/enzyme prevents the cell wall from producing mannoproteins, causing cell wall fragility and leading to cell death and decreased potential for biofilm formation (Exhibit 4). The drug is being developed in both oral and intravenous (IV) formulations, allowing for treatment in both inpatient and outpatient settings. It also has Fast Track and Orphan Drug designations from the FDA, as well as a QIDP tag, which should provide more than 10 years of market exclusivity post launch.

Exhibit 3: Conversion of fosmanogepix to its active form

Exhibit 4: Fosmanogepix’s mechanism of action

Exhibit 3: Conversion of fosmanogepix to its active form

Exhibit 4: Fosmanogepix’s mechanism of action

To date, fosmanogepix has demonstrated potent broad-spectrum activity (in several in vivo fungal infection models including azole/echinocandin-resistant isolates) against a range of pathogens such as yeasts, moulds and dimorphic fungi, including azole-resistant phenotypes. It is active against all of the pathogens listed in the WHO’s critical priority group, as previously discussed: Cryptococcus neoformans, Candida auris, Aspergillus fumigatus and Candida albicans.

…offering a much-needed novel alternative to standard of care

As previously highlighted, while there are available therapies to treat a range of fungal infections, the epidemiology of invasive fungal infections has been changing and evolving, such as the emergence and growing threat of Candida auris, which the US Centers for Disease Control and Prevention has deemed an urgent AR threat. Moreover, growing usage of antifungal agents in prophylaxis, empiric therapy and agriculture has resulted in antifungal resistance to available treatments. Furthermore, the current standard of care treatment options also come with other potential constraints:

Invasive candidiasis (fungal infections caused by Candida) is typically treated with echinocandin antifungal therapies, but these are limited to IV administrations, which may limit patient compliance.

Both invasive candidiasis and aspergillosis (fungal infections caused by Aspergillus) can be treated with azole-based therapies, but these are limited by drug-drug interactions, off-target side effects and toxicity.

Unlike the antibacterial space, where c 15 new antibiotics across five novel drug classes have been approved in the past two decades, no new class of antifungal drugs for the treatment of invasive fungal infections has been approved in more than 20 years (after echinocandins in the early 2000s). This highlights the urgent need for new antifungal treatments with novel and varied mechanisms of action. We therefore believe that fosmanogepix holds the potential to fulfil this unmet need, provided efficacy is established in the Phase III clinical studies, which could translate into a potentially significant opportunity for Basilea.

Competitive landscape

In terms of the competitive landscape, we acknowledge that there are new and emerging treatment options for severe fungal infections, including ibrexafungerp, olorofim and rezafungin. However, fosmanogepix appears to have the broadest potential based on a comparative analysis of drug activity against different fungal strains, as compiled by company management (Exhibit 5).

Exhibit 4: Broad potential of fosmanogepix

Source: Company presentation (13 November 2023)

Ibrexafungerp (or Brexafemme) was recently in the headlines when GlaxoSmithKline (GSK) in-licenced the product from Scynexis, a New Jersey-based biotech, in March 2023. GSK made an upfront payment of $90m for ibrexafungerp and deal considerations include up to $503m in additional payments based on the drug reaching certain milestones, of which Scynexis has already received $25m. We note that ibrexafungerp has already been approved for the treatment of vulvovaginal candidiasis (VVC) and for reduction in the incidence of recurrent VVC, for which GSK holds the commercial rights now. Scynexis will continue to develop the drug for other indications such as invasive candidiasis, for which it is undergoing Phase III clinical trials. It is considered a first-in-class triterpenoid antifungal therapy, although it operates by a similar mechanism to that of echinocandins. It is distinguished by its oral bioavailability, the fact that few drug-drug interactions provide a favourable safety profile and its activity against multidrug-resistant pathogens.

Rezafungin (or Rezzayo) is the newest echinocandin to join the antifungal market. Shortly after Cidara Therapeutics submitted an NDA to the FDA in July 2022, the drug was in-licensed by Melinta Therapeutics in exchange for $30m upfront, plus up to $60m from reaching regulatory milestones and $370m in commercial milestones. In March 2023, the FDA approved rezafungin for the treatment of candidemia and invasive candidiasis, although usage has been restricted to adults with limited or no alternative treatment options. While it is only available via IV administration, we believe the once-weekly treatment regimen differentiates it from other approved treatment options, which typically require once-daily dosing.

The above-mentioned licensing deals highlight the potential commercial opportunity for effective antifungal therapies, although to our knowledge fosmanogepix is the only advanced clinical-stage antifungal treatment with a novel target as well as a novel mechanism of action. Basilea plans to out-license fosmanogepix for commercialisation following completion of clinical development. As noted above, Pfizer holds the right of first negotiation for commercial rights under the terms of the acquisition agreement. If clinical data are positive, we believe that the ensuing licensing deal may come with a more premium valuation than suggested above.

A strong track record in preclinical studies…

Fosmanogepix generated encouraging data in preclinical studies, mainly focused on murine (mouse) models. In one study, survival was measured in a disseminated candidiasis model involving Candida auris infection, with a comparison of various dosing regimens of fosmanogepix, as well as anidulafungin, which is commonly used for the treatment of Candida infections. Importantly, mice in each member of the fosmanogepix treatment group exhibited superior survival compared to anidulafungin, highlighting early signs of efficacy (Exhibit 6). A separate study looked at a murine model involving infection by Scedosporium apiospermum. Treatment with either placebo, fosmanogepix (various doses), posaconazole or liposomal amphotericin B (L-AMB) were compared. Survival and tissue burden were measured, showing enhanced survival with fosmanogepix treatment, as with the previous study, and reduced lung, kidney and brain tissue fungal burden was observed with fosmanogepix. Histological observations were also made based on the brain tissue of the mice. The placebo mice showed that Scedosporium apiospermum spores had disseminated from the lungs to the brain, with signs of growth and inflammation. Contrastingly, mice treated with fosmanogepix or L-AMB showed no signs of infection or inflammation, demonstrating comparable efficacy of fosmanogepix to the FDA-approved polyene (Exhibit 7).

Exhibit 5: Efficacy of fosmanogepix in a disseminated candidiasis immunocompromised murine model

Exhibit 6: Histological observations in a disseminated Scedosporium apiospermum infection immunocompromised murine model

Source: Company presentation (13 Nov 2023); Hager CL, Larkin EL, Long L, et al. Antimicrob Agents Chemother. 2018;62:e02319-17. Note: BID = twice daily; TID = three times daily.

Source: Company presentation (13 Nov 2023); Alkhazraji S, Gebremariam T, Alqarihi A, et al. Antimicrob Agents Chemother. 2020;64:e01735-19. Note: Numbers refer to IV doses in mg/kg.

Exhibit 5: Efficacy of fosmanogepix in a disseminated candidiasis immunocompromised murine model

Source: Company presentation (13 Nov 2023); Hager CL, Larkin EL, Long L, et al. Antimicrob Agents Chemother. 2018;62:e02319-17. Note: BID = twice daily; TID = three times daily.

Exhibit 6: Histological observations in a disseminated Scedosporium apiospermum infection immunocompromised murine model

Source: Company presentation (13 Nov 2023); Alkhazraji S, Gebremariam T, Alqarihi A, et al. Antimicrob Agents Chemother. 2020;64:e01735-19. Note: Numbers refer to IV doses in mg/kg.

…with encouraging results extending to the clinic

Fosmanogepix has also demonstrated a desirable safety and efficacy profile in clinical studies, having been administered to more than 300 patients across seven Phase I trials, a Phase Ib trial and three Phase II trials. In a Phase I trial conducted in healthy adults, 151 (out of 154) participants completed the study, and showed that single and multiple IV dosing of fosmanogepix gave linear and dose-dependent pharmacokinetics. Single and repeat oral administration of fosmanogepix showed a similar trend and the drug also demonstrated high oral bioavailability (more than 90%). Furthermore, no severe treatment-emergent adverse events, serious adverse events or withdrawals due to treatment-emergent adverse events were reported, highlighting a desirable safety and tolerability profile.

A multicentre, open-label, single-arm Phase II trial was conducted to evaluate the safety and efficacy of fosmanogepix, both in IV and oral formulations. Eligible participants had established candidemia and/or invasive candidiasis caused by Candida auris, and had limited treatment options. The patients were treated with fosmanogepix, started with a loading dose of 1,000mg twice daily (IV administration) for day one, followed by 600mg once daily (IV administration), with the option to switch to the oral formulation at 800mg once daily from day four. The primary endpoint for the trial was treatment success based on measures of Candida auris at the end of the study treatment. The secondary endpoint was survival at day 30. Nine patients took part in this study and none were switched to the oral formulation. The treatment was determined to be successful, with 89% (eight out of nine) of the population achieving the defined threshold for clearance of Candida auris from blood/tissue cultures. The remaining patient had failed the treatment and unfortunately developed sepsis and died due to cardiac arrest; the death was considered unrelated to treatment with fosmanogepix. There were no treatment-related adverse events across the duration of the study. With a day 30 survival rate of 89%, the results demonstrate that the drug was safe, well-tolerated and efficacious against this indication.

A separate global, multicentre, non-comparative Phase II trial has also been completed, in this case to assess the safety and efficacy of fosmanogepix as a first-line treatment for candidemia in non-neutropenic adults. Like the Phase II trial mentioned above, patients received 1,000mg twice daily (IV administration) on day one, then 600mg once daily (IV administration), with the option to switch to 700mg orally once daily from day four. The primary efficacy measure was treatment success at the end of study treatment based on clearance of Candida from blood cultures. The results showed that, of the modified intention-to-treat population (n=20), treatment success was 80% (16/20) and survival at day 30 was 85% (17/20). It was noted that the three deaths were deemed unrelated to treatment with fosmanogepix. Of the full 21 in the intention-to-treat to treat population, 10 patients switched to the oral formulation of the drug and this transition showed no discernible influence on safety. Throughout the duration of the study, fosmanogepix was well tolerated and no treatment-related serious adverse events or discontinuations were reported.

All eyes on Basilea’s Phase III programme for fosmanogepix

Basilea is planning a global Phase III clinical programme for fosmanogepix comprising two clinical trials:

For the treatment of candidemia and invasive candidiasis, the trial is planned as a randomised, double-blind, non-inferiority study, aiming to recruit c 450 participants. The trial will compare fosmanogepix (starting with IV administration, with step-down to the oral formulation) to caspofungin (starting with IV administration with step-down to fluconazole). The primary endpoints that have been agreed with the regulators will be survival at 30 days for the FDA (covering the US region) and overall response at end-of-study treatment for the EMA (covering the EU region). Management has already obtained protocol and initial health authority approvals, and expects this Phase III trial to commence in mid-2024.

For the treatment of invasive mould infections, the trial is planned to be a randomised, open-label study including a non-controlled salvage treatment arm, aiming to recruit c 200 participants. The trial will compare fosmanogepix (IV or oral formulations) with the best available therapies for cohorts of invasive mould diseased caused by Aspergillus spp., Fusarium spp., Scedosporium spp., Lomentospora prolificans, Mucorales fungi, or other multidrug-resistant moulds. Planned endpoints include survival and overall response, and management plans to initiate this Phase III trial by end-2024.

We expect this Phase III programme to have a duration of approximately three to four years. With revenues for Cresemba expected to diminish from 2028 and market exclusivity ending in 2027 in the US and European markets, management hopes that fosmanogepix can fill Cresemba’s shoes. However, we note that this will be sensitive to clinical trials tracking on the planned timelines. Also, while exclusivity ends in the US and the EU, Cresemba was launched later in other regions, including Japan and China (representing approximately 26% of the global potential for Cresemba), and are expected to continue to grow after 2027.

Valuation

We update our forecasts and valuation for Basilea, now including the potential contribution from the recently in-licensed and most advanced clinical asset, fosmanogepix, with planned Phase III trials in candidemia and invasive candidiasis (mid-2024) and invasive mould infections (late-2024). For both indications, we assume Basilea will exclusively fund the Phase III trials, followed by a subsequent out-licensing deal to commercialise the asset. As previously highlighted, Pfizer holds the first right of negotiation for fosmanogepix’s commercial rights. Note that while management has been working on obtaining non-dilutive funding, for example from the Biomedical Advanced Research and Development Authority (BARDA) to help defray some or all of the R&D costs for fosmanogepix (similar to the funding provided for the Zevtera clinical study), we conservatively assume that Basilea will shoulder all clinical expenses for now. This is subject to revision as more clarity on these talks emerge.

Revenue model assumptions

For the first indication (candidemia and invasive candidiasis), we estimate a target population of c 700,000 patients globally per year, of which 46,000 cases are in the US, 48,000 in Europe, 11,000 in Japan and remainder in the rest of the world (RoW). Given the treatment’s first-line positioning in this indication, we assume 20% peak penetration in the US, albeit a lower 10% in the other key geographies of Europe and Japan. For the RoW, we assume a peak penetration of 5%. We estimate market entry in 2029, with peak sales achieved in 2035 across the key geographies (2037 in RoW). We assume a treatment cost (likely to be two- to four-week treatment) of $7,000/patient in the US, with similar pricing in Europe. In Japan we assume a 20% discount to this price. This is broadly in line with the $6,000 treatment cost ($2,000 per vial) of the recently approved Rezzayo for the same indication.

For the second indication (invasive mould infections), we estimate a target population of c 350,000 (of which c 300,000 are cases of invasive aspergillosis, the most common mould infection), with 29,000 patients in the US and Europe each and 6,000 patients in Japan. While management has indicated that fosmanogepix could have utility in front-line therapy in this indication as well, we cautiously assume 10% peak penetration in the US and a lower 5% penetration in other key geographies, given the market dominance of azoles (Cresemba is the US market leader with a 37% share) and possible challenges in patients switching to alternate treatments. For this indication also, we assume market entry in 2029 with peak sales achieved in 2035. While the per-vial costs for the drug across both indications will likely be the same, we estimate the total treatment cost for invasive mould infections to be significantly higher ($28,000/patient in the US with similar discounts as above in the other geographies), given the longer average duration of treatment, especially for the treatment of infections with rare moulds (three to six months).

For both indications, we project a post-launch market exclusivity period of c 10 years and project sales up to 2040, with declining revenues thereafter to 2045. We assume per patient R&D expenses to be $150,000, with around $5–6m in other overheads/year. This adds up to R&D expenses of c $140m across the clinical programme for the two indications. The probability of success has been set at 60% (slightly higher than the typical early Phase III programme due to solid preclinical and clinical data to date and high unmet need in this space) and we use a discount rate of 12.5%, which is our standard for programmes at the clinical stage of development. Our key modelling assumptions across the two indications are shown in Exhibit 8 below.

Exhibit 7: Fosmanogepix modelling assumptions

Indication

Stage

Assumptions

First line in candidemia and invasive candidiasis

Phase III ready (expected in mid-2024)

Target population: 700,000 per year globally growing at 1% pa (c 46,000 US, c 48,000 Europe, c 11,000 Japan, c 595,000 RoW). Peak penetration: 20% in the US and a more conservative 10% in Europe and Japan based on current assessment. US and European pricing: $7,000/patient for a 2–4-week treatment course growing by 2% pa. Peak sales potential globally: $330m. Market entry and exclusivity period: 2029 and 2040, respectively. Probability of success: 60%.

First line in invasive mould infections

Phase III ready (expected in late 2024)

Target population: 353,000 per year globally growing at 1.5% pa (c 29,000 US, c 29,000 Europe, c 6,000 Japan, c 288,000 RoW). Peak penetration: 10% in the US based on current assessment, 5% in other key geographies. US and European pricing: $28,000/patient for a 3–6-month treatment course growing by 2% pa. Peak sales potential globally: $470m. Market entry and exclusivity period: 2029 and 2040, respectively. Probability of success: 60%.

Source: Edison Investment Research

Note that our estimate for the target patient population is based only on the patients clearly diagnosed with these above infections (eg clear positive diagnosis), although we acknowledge that the drug may also be prescribed and administered in patients without a clear or definitive diagnosis. Treatment usage and administration therefore could potentially be higher than our forecasts. In addition, we do not capture the incremental opportunity from potential utility as an antifungal prophylaxis treatment where the current standard of care is posaconazole and fluconazole.

Licensing deal assumptions

In line with Basilea’s current business model, we assume that it will seek out-licensing opportunities following completion of the Phase III programme. For simplicity, we currently assume that the company will sign a global out-licensing deal for fosmanogepix across both indications, with the partner taking on complete responsibility of manufacturing, commercialisation and marketing. Taking guidance from Basilea’s deal terms for Cresemba, we estimate that it will out-license fosmanogepix global rights for a total consideration of $1bn (across all markets worldwide), including $300m in potential upfront and regulatory milestones and $700m in potential commercial milestones. We also assume tiered, double-digit royalty payments. As previously highlighted, Basilea made an upfront payment of $37m to acquire the rights to fosmanogepix and is required to make potential milestone payments of $506m, including up to $110m in commercial sales-related milestone payments to Pfizer and up to $396m in development, regulatory and commercial milestone payments from previous agreements. In addition, the company is required to pay tiered single-digit royalties on sales, which we assume to be 5–8% in our model. Management has indicated that the payout, in total, will be in the mid-single digits in the next few years, and we accordingly estimate an annual payout of $1.25m for the duration of the Phase III clinical trials.

Revision to valuation

After incorporating fosmanogepix, our valuation for Basilea increases to CHF910.4m or CHF76.0/share (from CHF797.8m or CHF66.6/share). For fosmanogepix, we estimate peak sales of $801m (across both indications), which translates to a net present value (NPV) and risk-adjusted NPV of $248.2m and $133.0m, respectively based on a 60% probability of success. On a per-share basis, this comes to CHF11.1/share or 15% of the current group valuation. For Cresemba, our peak sales estimate is unchanged at $691m, although the rNPV goes down to CHF633.7m (from CHF652.3m) as we roll forward our model and the asset approaches maturity. For Zevtera, our rNPV remains broadly unchanged at CHF181.9m (previously CHF183.6m). Note that our valuation does not currently consider the other two recently acquired Phase I assets, BAL2062 (invasive aspergillosis) and Tonabacase (severe Staphylococcal infections) as we await further information of their clinical development plans. As these programmes progress, they may add additional upside to our valuation. Our updated valuation is presented in Exhibit 9 below.

Exhibit 8: Basilea Pharmaceutica valuation

Product

Indication

Launch

Peak sales
($m)

NPV
(CHFm)

Probability

rNPV
(CHFm)

rNPV/share (CHF)

Cresemba (isavuconazole)

Severe fungal infections

2015 (US); 2016 (EU); 2018 (RoW); 2022 (China): 2023 (Japan)

691

633.7

100%

633.7

52.9

Zevtera/Mabelio (ceftobiprole)

Severe bacterial infections

2015 (EU); 2018 (RoW); 2024 (US)

581

191.2

85–100%

181.9

15.2

Fosmanogepix

Severe fungal infections

2029 (US, EU and Japan), 2030 (RoW)

801

248.2

60%

133.0

11.1

Net debt at end June 2023

 

 

(38.1)

100%

(38.1)

(3.2)

Valuation

 

 

 

1,034.9

 

910.4

76.0

Source: Edison Investment Research

Revision to financial estimates

At the same time as the announcement of the fosmanogepix deal, Basilea provided revised guidance for FY23 (see Exhibit 10). Total revenue is now expected to be CHF154–157m (CHF157–160m previously) due to lower than expected BARDA reimbursements, based on lower operating expenses for the phase 3 ceftobiprole program. More importantly, operating profit expectations have been revised to CHF11–15m (CHF50–55m previously), with the decrease primarily driven by the company recognising the $37m upfront consideration for fosmanogepix as R&D expenses in its accounts. We have updated our FY23 estimates to account for these revised expectations.

We have also made certain changes to our FY24 forecasts. Based on a recent filing from Basilea’s US commercial partner, Astellas, we note that Cresemba has achieved in-market sales of $192m in the nine months ending 30 September 2023. At this run rate, we believe Cresemba will exceed $250m (CHF217m) in annualised sales in the US soon. Reflecting this performance, we slightly upgrade our sales estimates for FY24 to CHF183.3m (vs CHF180.7m previously). We also make certain adjustments to our FY24 R&D expense estimates (revised upwards to CHF78.7m from CHF47.9m previously) to incorporate the incremental clinical costs related to the initiation of the fosmanogepix clinical trials in candidemia and invasive candidiasis in mid-2024, as well as the $1.25m (CHF1.1m) milestone payment we estimate that the company will pay for initiation of the first Phase III clinical trial. Our FY24 estimates for cost of sales and SG&A expenses remain broadly unchanged at CHF35.7m and CHF32.5m, respectively (from CHF33.7m and CHF31.9m previously). Overall, we now expect operating profit of CHF36.4m in FY24 versus CHF67.2m previously.

Exhibit 9: FY23 corporate guidance

CHFm

New FY23 guidance

Old FY23 guidance

Cresemba- and Zevtera-related revenue

147–150

147–150

Royalty income

c 76

c 76

Total revenue

154–157

157–160

Cost of products sold

c 27

25–27

Operating expenses

c 115

c 80

Operating profit

11–15

50–55

Net profit

2–6

41–46

Source: Basilea investor presentation, December 2023

We also update our FY24 interest expense estimates to take into account the company’s recently announced plans to prepay its outstanding senior secured loan from Athyrium Capital Management by the end of Q124, six months in advance of the original repayment date of September 2024. Basilea raised the CHF75m loan (net proceeds of CHF73.9m) from Athyrium in September 2022 to support repayment of its CHF117m convertible bond, due in December 2022. Of this, CHF18.4m of the principal repayment was made in H123 (payment made on a quarterly basis), with a similar payment anticipated in H2. Based on the latest update, the remaining c CHF38m principal outstanding will be redeemed by end Q124, saving the company c CHF1.5m in interest payments and fees, according to management (the loan bore an interest rate of 7.75% plus the lesser of the Swiss Average Rate Overnight, or 3% per year). Basilea will reinvest this sum in progressing its anti-infective drug pipeline. Following this adjustment to our interest expense estimates (in addition to the aforementioned changes to operating profit), we forecast FY24 net income of CHF35.1m (CHF63.2m previously).

Exhibit 10: Financial summary

Accounts: US GAAP, Yr end: December 31, CHF:000s

 

 

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

Total revenues

 

 

148,122

147,765

155,032

183,264

Product revenues (Cresemba and Zevtera)

 

 

131,382

122,315

147,032

182,064

Cost of sales

 

 

(24,072)

(24,603)

(27,024)

(35,674)

Gross profit

 

 

124,050

123,162

128,008

147,590

Research and development expenses (net)

 

 

(93,157)

(73,804)

(83,837)

(78,667)

SG&A costs

 

 

(29,721)

(30,815)

(30,756)

(32,536)

Exceptionals and adjustments

 

 

15

0

0

0

EBITDA (reported)

 

 

1,941

19,640

14,563

37,636

Reported operating income

 

 

1,187

18,543

13,415

36,387

Operating margin %

 

 

n/a

n/a

n/a

n/a

Finance income/(expense)

 

 

(7,982)

(6,441)

(8,369)

(1,480)

Profit before tax (reported)

 

 

(6,795)

12,102

5,047

34,908

Profit before tax (normalised)

 

 

(6,610)

12,302

5,247

35,115

Income tax expense (includes exceptionals)

 

 

(37)

45

0

0

Net income (reported)

 

 

(6,832)

12,147

5,047

34,908

Net income (normalised)

 

 

(6,647)

12,347

5,247

35,115

Basic average number of shares, m

 

 

11.68

11.86

11.98

11.98

Basic EPS (CHF c)

 

 

(58.5)

102.4

42.1

291.4

Adjusted EPS (CHF c)

 

 

(56.9)

104.1

43.8

293.1

Dividend per share (CHF c)

 

 

0

0

0

0

BALANCE SHEET

 

 

 

 

 

 

Restricted cash

 

 

0

22,000

22,000

22,000

Tangible assets

 

 

2,018

4,277

5,329

5,388

Intangible assets

 

 

632

578

578

571

Long-term investments

 

 

2,390

1,266

1,266

1,266

Other non-current assets

 

 

1,161

17,363

17,363

17,363

Total non-current assets

 

 

6,201

45,484

46,536

46,588

Cash and equivalents

 

 

53,700

84,659

63,355

55,314

Restricted cash

 

 

1,253

1,908

1,908

1,908

Short-term investments

 

 

95,000

0

0

0

Inventories

 

 

22,783

24,244

26,630

35,154

Trade and other receivables

 

 

24,947

33,152

34,782

41,117

Other current assets

 

 

43,383

31,401

31,401

31,401

Total current assets

 

 

241,066

175,364

158,076

164,894

Convertible senior unsecured bonds (long-term)

 

 

94,544

95,000

95,000

95,000

Senior secured loan

 

 

0

36,360

0

0

Deferred revenue

 

 

11,926

10,693

10,693

10,693

Non-current operating lease liabilities

 

 

10

16,323

16,323

16,323

Other non-current liabilities

 

 

24,986

8,337

8,337

8,337

Total non-current liabilities

 

 

131,466

166,713

130,353

130,353

Convertible senior unsecured bonds (short-term)

 

 

123,505

0

0

0

Senior secured loan

 

 

0

37,467

36,360

0

Accounts payable

 

 

10,617

191

11,846

15,638

Deferred revenue

 

 

1,233

1,233

1,233

1,233

Current operating lease liabilities

 

 

896

1,988

1,988

1,988

Other current liabilities

 

 

38,157

33,971

33,971

33,971

Total current liabilities

 

 

174,408

74,850

85,398

52,830

Net assets

 

 

(58,607)

(20,715)

(11,139)

28,298

CASH FLOW STATEMENT

 

 

 

 

 

 

Reported net income

 

 

(6,831)

12,147

5,047

34,908

Depreciation and amortisation

 

 

754

1,097

1,148

1,248

Share based payments

 

 

4,322

3,598

4,530

4,530

Other adjustments

 

 

1,522

497

0

0

Movements in working capital

 

 

(31,787)

(10,282)

7,639

(11,066)

Cash from operations (CFO)

 

 

(32,020)

7,057

18,364

29,619

Capex

 

 

(581)

(3,138)

(2,000)

(1,100)

Short-term investments

 

 

6,023

94,951

0

0

Long-term investments

 

 

0

0

0

0

Other investing activities

 

 

(1,867)

(165)

(200)

(200)

Cash used in investing activities (CFIA)

 

 

3,575

91,648

(2,200)

(1,300)

Net proceeds from issue of shares

 

 

42,240

250

0

0

Movements in debt

 

 

(23,212)

(49,672)

(37,467)

(36,360)

Other financing activities

 

 

(2,388)

4,176

0

0

Cash from financing activities (CFF)

 

 

16,640

(45,246)

(37,467)

(36,360)

Cash and equivalents at beginning of period

 

 

66,256

54,952

108,566

87,263

Increase/(decrease) in cash and equivalents

 

 

(11,805)

53,459

(21,303)

(8,041)

Effect of FX on cash and equivalents

 

 

501

155

0

0

Cash and equivalents at end of period

 

 

54,952

108,566

87,263

79,222

Net (debt)/cash

 

 

(69,349)

(46,701)

(31,645)

(39,686)

Source: Company reports, 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 £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

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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.

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

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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