Basilea Pharmaceutica - Anti-infective refocusing on schedule

Management has provided an update on Basilea’s strategy to refocus the business on anti-infectives, as part of which, the company will cease all oncology activities by end-2022. Basilea now intends to engage in separate transactions for the oncology asset BAL0891 (a dual TTK/PLK1 inhibitor) and other preclinical assets, which will be concluded in H222. In addition, management has confirmed it will not expand the ongoing Phase II biomarker-driven trial investigating the use of lisavanbulin (a tumour checkpoint inhibitor) in treating recurrent glioblastoma. The company continues to explore partnering options for lisavanbulin. Finally, the rights to derazantinib (a pan-fibroblast growth factor receptor inhibitor) will be transferred back to Merck by the end of the year. Management has reiterated guidance that oncology-related expenses will not be material beyond 2022 and sustained profitability will be reached in 2023. In our view, the recent strategic update supports this guidance. We value Basilea Pharmaceutica at CHF847.7m or CHF71.6/share.