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.
The TARGET trial tested ceftobiprole against vancomycin plus aztreonam in 679 patients with acute bacterial skin and skin structure infections ("ABSSSI"). The primary endpoint was early clinical response based on a 20% or more reduction from baseline in lesion size at 48 to 72 hours after start of study drug administration. Ceftobiprole met the primary endpoint of non-inferiority within the pre-specified margin of 10%: 91.3% of patients achieved an early clinical response vs. 88.1% in the comparator arm. The drug also met the two secondary endpoints of clinical success at the test-of-cure ("TOC") visit 15 to 22 days after randomisation in both the intent-to-treat ("ITT") population (90.1% vs. 89.0%) and the clinically evaluable ("CE") group (97.9% vs. 95.2%). Ceftobiprole was well tolerated and drug-related side effects (mainly nausea, diarrhoea and headache) were similar in both groups (20% vs. 18%).
We expect the US to be the largest market for ceftobiprole, due mainly to the high incidence of MRSA in US hospitals and the higher propensity in the US to use novel products. Most antibiotics with MRSA activity achieve higher sales in the US vs. ex-US, such as Merck & Co.’s / Cubist’s Cubicin (daptomycin), which generated 91% of 2015 sales of $1.13bn in the US prior to patent expiry in 2016. Our peak sales forecast of $225m in the US in 2029E accounts for 56% of our estimate for global sales. We assume that Basilea enters a licensing deal for ceftobiprole in the US similar to the one signed with Astellas for antifungal Cresemba, which on our estimates would entitle the company to a blended royalty rate of 16% to 22% and at least $175m in milestone receipts.