Revenues from marketed products Cresemba and Zevtera grew 40% YoY to CHF115m contributing to total revenues of CHF134 for Basilea in FY2019. We expect further growth in revenue contributions from Cresemba and Zevtera in 2020E and a greater proportion of cash generative revenues overall. We also anticipate additional upside from Basilea's diversified clinical pipeline. Oncology asset derazantinib is on track for a number of clinical readouts in 2020E and the ongoing US Phase III trial of ceftobiprole (Zevtera) in S. aureus bacteraemia ("SAB") is expected to produce top-line data in H2/2021E, which we expect will subsequently trigger a licensing deal in H1/2022E. We maintain both our OUTPERFORM recommendation and CHF105 target price ("TP"), with the current share price neither reflecting the continued growth from marketed products nor attributing value to the clinical pipeline.
Companies: Basilea Pharmaceutica
Basilea continues to build on its key franchises, Cresemba and Zevtera, with FY19 contributions from both increasing 39% to CHF114m, driven mainly by Cresemba. Longer-term value creation is dependent on crystallising mid/late-stage oncology assets, with new trials initiated or expected for both derazantinib (multiple data points expected in 2020) and lisavanbulin (trial initiation by mid-year expected). We forecast break-even at the operating profit level in 2021 and value Basilea at CHF1.10bn.
Basilea reported strong preliminary revenues of CHF134m for FY2019E, marginally above the upper end of company guidance (CHF128m - CHF133m) and our own estimate (CHF133m). This figure includes a 39% YoY increase in revenues from Basilea's two marketed products, antifungal Cresemba (isavuconazole) and antibiotic Zevtera (ceftobiprole), which totalled CHF114m. Key upcoming events for Basilea include (1) FY2019 financial results on the 18th of February and (2) top line results from the ongoing Phase II registrational study of oncology candidate derazantinib in intrahepatic cholangiocarcinoma ("iCCA") expected in H2/2020E. We maintain our OUTPERFORM recommendation and CHF105 target price ("TP").
Basilea Pharmaceutica is a revenue-generating biotech company that is on the cusp of breaking even (2021e) and sustainable profitability thereafter. It has successfully brought two anti-infective drugs to the market: Cresemba (severe mould infections) and Zevtera (bacterial infections). Combined revenue contributions (as reported by Basilea, both assets are commercialised through partners) are expected to exceed CHF105m in FY19. Longer-term value creation is also dependent on crystallising the mid/late-stage oncology portfolio. Basilea is investing for future growth; multiple datapoints on derazantinib are expected in 2020. If data from the registrational FIDES-01 are particularly positive, they could form the basis of an accelerated approval in iCCA. We value Basilea at CHF1.18bn.
Concerns about a potential revenue decline due to the absence of deferred revenue related to divested asset Toctino were allayed when Basilea reported H1/2019 revenue growth of 5.5% YoY, driven by strong contributions from antifungal Cresemba. Our 2019E estimates are broadly unchanged and in line with tightened financial guidance. Changes for 2020E and beyond reflect multiple adjustments including the impact of Pfizer taking over manufacturing of Cresemba in its territory during 2020E. We trim our target price to CHF105 (from CHF108) and maintain our OUTPERFORM recommendation, as the shares only appear to be pricing in Cresemba revenues in marketed regions. We anticipate multiple news flow items in the next 12-18 months – largely related to Basilea’s oncology pipeline – which coupled with steady revenue growth should drive share price performance. A key event in the longer term is Phase III data for ceftobiprole in S. aureus bacteraemia (“SAB”).
Basilea has reported good momentum in 2019, with positive clinical data from key studies on Zevtera/Mabelio and derazantinib. Cresemba sales have continued to grow, benefiting from international launches by partners in new markets and growth in existing markets. Despite significant R&D investment, operating losses have narrowed to CHF13.2m (H118: CHF20.4m). Basilea is well funded, with gross cash and investments of CHF177.9m sufficient to fund operations beyond 2020 to multiple R&D inflection points. Pivotal data in 2020/21 could lead to filings for derazantinib (oncology) and Zevtera (US NDA for the treatment of resistant bacterial infections). We value Basilea at CHF1,077m.
Basilea reported H1/2019 revenues of CHF63.2m, 10% ahead of our estimate, driven by robust performance from marketed products Cresemba (antifungal) and Zevtera (MRSA antibiotic). The latter more than offset the lack of deferred revenue from Toctino (vs. CHF18.8m in H1/2018), leading to revenue growth of 5.5%. Total operating expenses, which declined by 5% YoY, were in line with our forecasts, resulting in a smaller than expected operating loss of CHF13.2m vs. our CHF19.5m forecast and CHF20.4m in the prior year. Management updated its financial outlook for FY2019. Since our forecasts are in line with the tightened ranges, we expect limited changes to our estimates. With the shares trading well below our sum-of-the-parts derived target price ("TP") of CHF108 per share, suggesting the shares are only pricing in revenue from Cresemba in marketed regions, we maintain our OUTPERFORM recommendation.
Basilea has announced positive top-line data from the Phase III TARGET trial which is evaluating Zevtera/Mabelio (ceftobiprole) in the treatment of acute bacterial skin and skin structure infections (ABSSSI). Ceftobiprole, a broad spectrum antibiotic, met primary and secondary efficacy endpoints including non-inferiority to standard of care vancomycin plus aztreonam in the intent-to-treat population. While this news is positive, TARGET is one of two cross-supportive Phase III trials required for the US filing; top-line data from the second study in Staphylococcus aureus bacteraemia (SAB) bloodstream infections (ERADICATE) is expected in H221. A US launch date of 2022/23 for ceftobiprole could be feasible, with a focus on SAB and ABSSSI. We value Basilea at CHF1,082m or CHF100/share.
Basilea reported positive top-line results for the Phase III TARGET trial testing broadspectrum MRSA antibiotic ceftobiprole in severe skin infections. This is one of two Phase III trials required for the filing of a new drug application ("NDA") with the US FDA, both conducted under Special Protocol Assessment ("SPA") agreements. The second study (ERADICATE) in blood poisoning is on track to read out in H2/2021E. Although ceftobiprole is already marketed for pneumonia (HAP and CAP) in many European and RoW countries, the US is the key market for MRSA antibiotics and accounts for 56% of our peak sales estimate for the drug. We forecast launch in 2022E and peak sales of $225m in 2029E. Since ceftobiprole was designated Qualified Infectious Disease Product ("QIDP") by the FDA, we anticipate up to 10 years of market exclusivity from the date of launch. The ceftobiprole US opportunity accounts for c.10% of our CHF108 target price ("TP") for Basilea. We maintain our OUTPERFORM recommendation.
In its recent financial results, Basilea's partner Astellas reported Cresemba (isavuconazole, antifungal) Q2/2019 US sales of $37m, taking H1/2019 US sales to $67m (+26% YoY), slightly above our $65.5m forecast. The company also stated that it projects FY2019E (April 2019 - March 2020) sales to reach $143m, in line with our estimate for Astellas's fiscal year. This increases our confidence in our peak sales forecasts for Cresemba of nearly $230m in the US and $645m globally by 2026E, of which we expect Basilea to receive close to 40% over the life of the agreements with commercialisation partners. Basilea shares are trading well below our sum-of-theparts ("SoTP") derived fair value of CHF108 per share, of which Cresemba in marketed regions including the US and Europe accounts for CHF49 (46%). Hence, we feel that the shares are undervalued and see room for upside as the company continues to achieve upcoming milestones, including first Phase III data for anti-MRSA antibiotic ceftobiprole in the US in H2/2019E. We reiterate our OUTPERFORM recommendation.
Basilea Pharmaceutica is a Switzerland-based biopharmaceutical company established in 2000 as a spin-out from Roche with the divestment of its anti-infective portfolio. Basilea was listed on the SIX Swiss Stock Exchange in 2004 and is well funded through its key near-term milestones. Revenue growth will be driven from its two marketed anti-infectives: Cresemba (antifungal – for invasive mould infections) and Zevtera (antibiotic – for hospital infections), which are commercialised globally through partners such as Pfizer and Astellas. It has several oncology assets in clinical development, which represent the next pillar of growth, including derazantinib, a pan-FGFR kinase inhibitor, which is currently in a registrational Phase II study for bile duct cancer.
In this video, CEO David Veitch introduces the company, its assets and sets out the key near-term milestones.
The in-licensing of fibroblast growth factor receptor (“FGFR”) inhibitor derazantinib in April 2018 marked a turning point for Basilea: it brought in a late-stage oncology asset with potential across multiple cancers, thus complementing earlier-stage pipeline assets BAL101553 (Ph II) and BAL3833 (Ph I). The demonstration of proof-of-concept in intrahepatic cholangiocarcinoma (“iCCA”), a rare cancer of the bile duct, paved the way for the pursuit of larger indications. A Ph I / II trial in urothelial carcinoma (“UC”) (the most common form of bladder cancer, “BC”) in combination with anti-PD-L1 Tecentriq is due to start in mid-2019E. In this research report, we take a deep dive into the FGFR inhibitor landscape to elucidate derazantinib’s potential positioning compared to other molecules in the same class. We conclude that the compound’s profile should allow it to capture at least 25% market share in each iCCA and UC. Since our forecasts only reflect limited value for derazantinib in iCCA, we see upside from adding sales in UC as we gain more clarity on the design of the pending Ph I / II trial. We maintain our OUTPERFORM recommendation and nudge up our target price (“TP”) to CHF108.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Basilea Pharmaceutica.
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A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
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Laboratory Services Contracts Signed
Companies: Open Orphan
MaxCyte’s new clinical and commercial licence agreement with Apeiron Biologics allows the use of MaxCyte’s proprietary Flow Electroporation technology for manufacturing Apeiron’s gene-silencing siRNA therapy, APN401, for clinical studies. The deal is the latest in a series of clinical and commercia
Cambridge Cognition ("COG") has provided a trading update for the 6 months to 30 June and presented its growth strategy at an excellent Capital Markets Day. The Group continues to build on an impressive H1 2020, announcing additional contract wins that take the order intake to £4.9m (+88% vs H1 2019). COG is currently 'seeing unprecedented demand' for its solutions which enable pharmaceutical companies to continue clinical trials even while participants are unable to physically visit clinical trial sites.
Companies: Cambridge Cognition
Diaceutics is expected to report 20% YoY revenue growth in H1E. This strong performance against a difficult global backdrop reinforces the recession proof growth qualities of the business model. With the launch of the DXRX platform this year, we expect further operational benefits to flow through the business.
With CHF13bn ($14bn) annual sales, Roche is a dominant force in the global diagnostics market. Interestingly, in recent years, most diagnostics majors have witnessed material re-ratings – also a function of increased M&A euphoria. Now, in the backdrop of COVID-19, Roche has also emerged as a prominent player on the testing front. With big pharmas moving away from (low-growth) non-pharma offerings, is it time for Roche to consider unlocking value from Diagnostics?
Companies: Roche Holding
Today Ergomed held its annual general meeting (AGM). As expected, no new financial details were provided, although the executive chairman released a statement with a general business update. Q120 trading was good with ‘solid overall growth in revenue’ and cash generation ‘remained strong’. In Q220, Ergomed continued to grow the order book across the business and maintained its ‘revenue growth trend’. Its staff successfully adapted to remote working conditions and no employees were made redundant or furloughed. The H120 trading update will be released in July 2020 as usual, but Ergomed stated within its AGM update (June 10) that it is confident the results will be ‘in line with current market expectations’.
ReNeuron has released further follow-up data from the ongoing human retinal progenitor cell (hRPC) trial, which shows a robust sustained averaged response. This data set completes the six-month data on eight patients and extends, for one individual, to 18 months, who showed a good net gain. The next dose level, two million cells in nine patients, remains delayed due to COVID-19. A filing to start a pivotal study is expected in the second half of CY21. Our indicative value remains at £107m.
Companies: Reneuron Group
RenalytixAI (RENX.L): Proposed dual-listing on Nasdaq | e-therapeutics (ETX.L): Covid-19 project update | RedX (REDX.L): Appointment of Non-Executive Director
Companies: RENX ETX REDX
Inspiration Healthcare has announced its intention to acquire SLE Limited (SLE), a leading neonatal ventilator designer and manufacturer for consideration of £18.0m. Inspiration Healthcare has conditionally raised £16.5m (gross, ahead of an open offer) via an oversubscribed equity placing to support the acquisition. We believe the acquisition represents a transformation deal, virtually doubling the size of the business and providing significant new revenue growth opportunities. We expect the acquisition, on a 12-month proforma basis to be accretive to adjusted earnings in the near-term and increasingly so in the medium-term. We reiterate our Buy recommendation.
Companies: Inspiration Healthcare Group
Hutchison China MediTech (HCM) is on the brink of global launches of two assets from its internally developed oncology portfolio. In 2022 we expect US launches of surufatinib (broad NET indication) two years earlier than forecast as well as savolitinib (NSCLC). Recently the FDA granted fast-track designation to fruquintinib in mCRC and we forecast global launch in 2023. In China, HCM has laid the foundations to capitalise on the slew of additional novel oncology drugs (expected by end 2021). HCM is well funded (following the recent $100m equity investment from General Atlantic, plus warrants granted for an additional $100m in 18 months) as it accelerates the global development of its unpartnered assets and expands its global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. Our increased valuation is $6.3bn.
Companies: Hutchison China Meditech
Hutchison China MediTech (HCM) is on the brink of global launches of two assets from its internally developed oncology portfolio. In 2022 we expect US launches of surufatinib (broad NET indication) two years earlier than forecast as well as savolitinib (NSCLC). Recently the FDA granted fast-track designation to fruquintinib in mCRC and we forecast global launch in 2023. In China, HCM has laid the foundations to capitalize on the slew of additional novel oncology drugs (expected by end 2021). HCM is well funded (following the recent $100m equity investment from General Atlantic, plus warrants granted for an additional $100m in 18 months) as it accelerates the global development of its unpartnered assets and expands its global commercial outreach. Beyond 2024 we expect sustainable profitability and margin expansion. Our increased valuation is $6.3bn.
Collagen Solutions (COS.L): Supply agreement with NovaBone
Companies: Collagen Solutions
Many of the world’s best and most important products (eg Space exploration, nuclear medicine/power & the internet) were originally invented by the military. It’s happened again – but this time to combat airborne pathogens like Ebola, SARS/MERS and all manner of other biological nasties doing the rounds. You see on 10th December 2018, Kromek was awarded a $2.0m contract by DARPA (research arm of US Dept. of Defense) to develop a vehicle-mounted bio-threat detector. The idea being that this should be able to rapidly identify (within 1 hour) any dangerous germ that might have been released into the environment, say by terrorist groups, organised criminals &/or rogue states.
Companies: Kromek Group
Much has been written about the effects of the virus on the world and on the stock market. Here is one analyst’s take on some of the likely impacts on the way we should look at companies. This article was originally produced as a blog, “10 Changes Post Virus”, which was published a few weeks ago.
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