Basilea Pharmaceutica AG (BSLN-CH): Derazantinib interim data in line with expectations

goetzpartners securities Limited

10-Jan-2019 / 15:36 GMT/BST


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Published to the market and investors on 10th January 2019 @ 2.31pm (GMT).

Basilea Pharmaceutica AG (BSLN-CH): Derazantinib interim data in line with expectations
Recommendation: OUTPERFORM
Target Price: CHF112
Current Price: CHF48.54 (CoB on 9th January 2019)

KEY TAKEAWAY

Basilea reported encouraging interim data for the derazantinib registrational Phase II trial in intrahepatic cholangiocarcinoma (“iCCA”), a few months earlier than we had anticipated. The overall response rate (“ORR”) of 21% is in line with the efficacy observed in a previous Phase I/II trial and clinically relevant given the poor prognosis of the disease and the lack of 2nd line therapies, thus paving the way for a potential accelerated approval upon completion of the study in mid-2020E. The data supports clinical development of derazantinib in other fibroblast growth factor receptor (“FGFR”) driven solid tumour indications, and one new trial is expected to start in mid-2019E. We conservatively forecast approval and launch in Q4/2023E based on Phase III data and peak sales of c.$70m in iCCA alone, with Basilea paying partner ArQule single-digit milestones related to iCCA. We maintain our OUTPERFORM recommendation and CHF112 target price (“TP”), of which derazantinib accounts for c.CHF1 per share, based on a 25% chance of success in iCCA.

ORR of 21% clinically relevant and in line with previous Phase I/II trial

The interim analysis was conducted following the enrolment of 42 patients (out of a total target of 100) with FGFR2 fusions and based on 29 evaluable patients who had at least one post-baseline imaging assessment. Six patients (21%) had a partial response (“PR”). The disease control rate (“DCR”), which includes all patients that experienced at least stable disease (i.e. no tumour growth greater than 20%), was 83%. All outcomes match those observed in the previous Phase I/II trial conducted by ArQule prior to Basilea in-licensing the compound. The data also confirmed the safety profile. We understand that the hurdle rate for approval in this indication is likely to be very low given the lack of options following first-line chemotherapy and hence believe that the observed ORR of 21% would be seen as sufficient for regulatory agencies in the US and Europe, Basilea’s key target markets.

Potential in other, larger tumour indications. Additional trial to start in mid-2019E

We remind investors that there are a number of tumours beyond iCCA where FGFR2 fusions and other FGFR genetic alterations such as mutations and amplifications have been shown to play a role, including large indications such as bladder, breast, gastric and lung cancer, where some of the competing FGFR inhibitors such as J&J’s JNJ-42756493 are being tested. Data published thus far for other FGFR inhibitors is still limited given the early nature and small size of the trials conducted, but the evidence so far points to important differences between agents with regards to kinase inhibition profiles, pharmacokinetics (“PK”), safety and other factors. Thus, Basilea is carefully evaluating which indication(s) to pursue in order to maximise the market opportunity for derazantinib in an increasingly crowded industry pipeline.

Solid 2018 revenues and cash position. Reiterate OUTPERFORM and CHF112 TP

The derazantinib interim data comes on the heels of a press release issued earlier this week disclosing that Basilea generated FY2018E sales of c.CHF133m, above the upper end of company outlook of CHF130m and our own estimate of CHF127m, driven largely by solid sales of antifungal Cresemba (isavuconazole), Basilea’s largest marketed product (c.67% of our valuation). Revenue from both Cresemba and antibiotic Zevtera (ceftobiprole) reached CHF82m vs. our estimate of CHF79m, based on in-market sales of Cresemba of more than CHF150m (under existing licensing and distribution deals, Basilea retains c.30% – 40% of Cresemba sales as revenue over the lifetime of the agreements). Basilea had a preliminary cash position of CHF223m at YE2018E which on our estimates allows the company to finance operations until at least 2022E when the outstanding CHF200m convertible bond matures. The next key events for Basilea are (1) FY2018 financial results on 19th February and (2) top-line results for the ceftobiprole Phase III trial in skin infections in H2/2019E.

Kind regards,

Brigitte de Lima | Analyst

goetzpartners Healthcare Research Team | Research Team

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