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EQS-News News vom 25.01.2019

Basilea Pharmaceutica AG (BSLN-CH): Derazantinib to enter combo trial with Roche's Tecentriq

goetzpartners securities Limited

25-Jan-2019 / 15:17 GMT/BST


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Published to the market and investors on 25th January 2019 @ 9.28am (GMT).


Basilea Pharmaceutica AG (BSLN-CH): Derazantinib to enter combo trial with Roche's Tecentriq
Recommendation: OUTPERFORM
Target Price: CHF112.00
Current Price: CHF52.30 (CoB on 24th January 2019)

KEY TAKEAWAY

Basilea announced a clinical trial supply collaboration with Roche to explore the combination of its in-licensed oncology drug candidate derazantinib with Roche's PD-L1 immune checkpoint inhibitor ("ICI") atezolizumab (Tecentriq) in urothelial cancer ("UC"), the most common type of bladder cancer and sixth largest cancer in the US. A Phase I/II biomarker-driven study is projected to start in mid-2019E. Derazantinib has already demonstrated activity as a single agent in shrinking tumours of patients with intrahepatic cholangiocarcinoma ("iCCA") and, based on its mechanism of action, is expected to enhance the effect of PD-1/PD-L1 immune checkpoint inhibition. A successful outcome for the planned trial could lead us to include sales in bladder cancer to our valuation, which currently only includes a small contribution for derazantinib based on sales in iCCA. The deal underpins Basilea's commitment to the oncology space, in our view. We reiterate and maintain both our OUTPERFORM recommendation and CHF112 target price.

Biomarker-driven, open-label, multi-cohort trial to start in mid-2019E

The detailed design of the study including targeted patient numbers and further details on the cohorts is expected to be published soon. We understand that biomarkers to be explored include FGFR aberrations as well as PD-L1 for some cohorts, and derazantinib will be studied both as single agent and in combination with Tecentriq. First interim results may become available 12-18 months after the start of recruitment.

Second cancer indication to be explored following positive interim data in iCCA

Derazantinib is a small molecule multi kinase inhibitor which targets the fibroblast growth factor receptor ("FGFR") family of kinases and has shown particularly potent activity against FGFR2. Based on early clinical trials conducted by licensor ArQule, Basilea chose to initially focus on iCCA, for which the company recently released positive interim data from the ongoing Phase II trial showing a clinically relevant overall response rate of 21% (in line with results observed in a previous Phase I/II trial). However, derazantinib has potential in other tumours beyond iCCA where FGFR2 and other FGFR genetic alterations such as mutations and amplifications have been shown to play a role, including bladder, breast, gastric and lung cancers.

Tecentriq already approved in UC, but room for efficacy improvements

The scientific rationale underlying the combination of derazantinib with Tecentriq is that in addition to its effects on FGFR kinases, derazantinib also blocks the colony-stimulating factor-1-receptor kinase ("CSF1R"), which has the potential to augment the response to Tecentriq monotherapy. Tecentriq was the first ICI to receive approval for advanced UC (locally advanced or metastatic) in May 2016 and was the first new therapy for bladder cancer in decades. However, response rates have been modest, and the drug failed to demonstrate a survival benefit compared to chemotherapy in patients who are ineligible for cisplatin-containing chemotherapy, suggesting room for improvement through combination therapy. This is in line with the general trend in the ICI field, as single agent therapy, while causing durable responses (in some cases >10 years), still only benefits <50% of patients.

CHF112/share target price does not include any value in bladder cancer

Our CHF112/share valuation for Basilea includes only CHF1 for derazantinib, based on sales in iCCA, a rare cancer affecting up to 17,000 individuals in the US and Europe p.a. of which c.3,000 are eligible for treatment with derazantinib. In contrast, bladder cancer is a large indication with c.80,000 new patients diagnosed in 2017 in the US alone, and therefore represents a much larger market opportunity. Other companies exploring the use of small molecule FGFR inhibitors include Bayer (Phase II/III) and J&J (Phase III). The latter's pan FGFR tyrosine kinase inhibitor JNJ-42756493 (erdafitinib) is currently in a Phase III trial in patients with advanced UC with FGFR genomic alterations.

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.

T +44 (0) 203 859 7725 | brigitte.delima@goetzpartners.com / healthcareresearch@goetzpartners.com

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