DJ Basilea Pharmaceutica AG (BSLN-CH): Derazantinib has potential in iCCA and beyond
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goetzpartners securities Limited
Basilea Pharmaceutica AG (BSLN-CH): Derazantinib has potential in iCCA and
beyond
23-Apr-2019 / 11:26 GMT/BST
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*Published to the market and investors on 23rd April 2019 @ 6.38am (BST).*
*Basilea Pharmaceutica AG (BSLN-CH): Derazantinib has potential in iCCA and
beyond*
*Recommendation: OUTPERFORM*
*Target Price: CHF108 (increased from CHF107) *
*Current Price: CHF42.56 (CoB on 18th April 2019)*
*KEY TAKEAWAY*
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.
*Derazantinib is a spectrum-selective FGFR inhibitor with unique features*
The four identified FGFRs are transmembrane receptor tyrosine kinases ("RTKs")
that are involved in multiple essential cellular processes. It has been shown
that a variety of molecular alterations such as amplifications, mutations and
translocations / fusions are involved in many solid tumours. This has made
FGFRs attractive therapeutic targets, with small molecule tyrosine kinase
inhibitors ("TKIs") currently the preferred approach. Innovators have been
shifting towards selective inhibitors to improve safety and tolerability, but
this needs to be balanced against the development of resistance. Careful
patient selection is emerging as a key factor of success given the
heterogeneity in FGFR aberrations that drive individual tumours and
differences in FGFR inhibitor profiles. Derazantinib has strong affinity for
FGFR1-3, and additionally colony-stimulating receptor 1 factor ("CSF1R"),
which is unique compared to other selective FGFR TKIs and may play a role in
the context of combination therapy with immune checkpoint inhibitors ("ICIs").
Available clinical data also suggests a potentially more benign safety
profile.
*Proof-of-concept in iCCA paved the way to pursue larger indications*
Preclinical work showed that derazantinib is particularly active against FGFR2
fusions, as confirmed in a Ph I / II trial in 2nd-line iCCA in patients with
this type of genetic alteration: the compound demonstrated an overall response
rate ("ORR") of 21% and a disease control rate ("DCR") of 83%. The data was
recently matched in a planned interim analysis of the ongoing registrational
Ph II trial, which could thus form the basis of accelerated approval following
final data in mid-2020E (we conservatively model approval in 2023E following
Ph III data). Reasons underlying the decision to pursue UC in combination with
Tecentriq (atezolizumab) include: (1) Metastatic UC has a high percentage of
FGFR aberrations (15% - 20%), (2) UCs resistant to ICIs are predominantly cold
tumours with a high presence of FGFR3 genetic aberrations, (3) inhibition of
CSF1R may enhance the susceptibility to PD-L / L1 inhibition, (4) strong data
in preclinical bladder cancer models. We estimate the total addressable
FGFR-driven UC market at >$600m.
*Upside to valuation from successful development in UC*
Our valuation for Basilea currently only includes CHF1.7 per share (c.2%) for
derazantinib related to sales in iCCA, based on the assumption that the
company will develop and commercialise the compound on its own and pay
licensor ArQule a $5m approval milestone in 2023E and 8% royalties on sales.
We estimate peak sales in iCCA of c.$70m in 2034E. Hence, there is upside to
our estimates from (1) accelerated approval in iCCA based on the ongoing Ph II
trial and (2) the inclusion of sales for UC, which could also be approved on
positive Ph II data. There are many precedents in the oncology space for
approval on Ph II data, including other FGFR inhibitors: J&J recently received
approval for erdafitinib for advanced UC based on a 87-patient Ph II trial.
Incyte is planning to submit an NDA for pemigatinib for 2nd-line iCCA in
H2/2019E based on a 140-patient Ph II trial.
Kind regards,
Brigitte de Lima | Analyst
goetzpartners Healthcare Research Team | Research Team
goetzpartners securities Limited
The Stanley Building, 7 Pancras Square, London, N1C 4AG, England, UK.
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April 23, 2019 06:26 ET (10:26 GMT)
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April 23, 2019 06:26 ET (10:26 GMT)
