Basilea niche antifungal focus hurts sale prospects
Swiss anti-infectives drugmarker Basilea [SWX:BSLN] would have hard time convincing potential buyers of its attractiveness due to its position as a niche antifungal producer, two health care bankers said.
CEO Ronald Scott said last month that he would consider the sale of Basilea if the offer created value for the company and its shareholders. But it will be a challenge to drum up interest for a company that only has a late-stage antifungal as it main attraction, the bankers pointed out.
Producing antibiotics is generally seen as less profitable than areas such as rare disease treatments. So, while larger players are still in the antibiotics market, it is not an area as the pharmaceutical companies are clamouring to buy, the bankers noted.
Big pharma players currently active in the anti-infectives space include Merck [NYSE:MRK], GlaxoSmithKline [LON:GSK], Sanofi [EPA:SAN], AstraZeneca [LON:AZN], Roche [VTX:ROG] and Actavis [NYSE:ACT].
Should Basilea have kept Toctino (alitretinoin), its drug for chronic hand eczema that was sold to GlaxoSmithKline in 2012, it would be able to build a story around having a broader European sales infrastructure, said one of the bankers. Instead, it has a late-stage asset that it shares rights to with Astellas Pharma [TYO:4503].
Basilea only has full rights to the EU, rather than the more lucrative, antibiotic-friendly US market, the other banker said, adding that even if isavuconazole obtains FDA approval in May 2015, this will only give Basilea royalties.
But, a person familiar with Basilea pointed out the company also has meticillin-resistant staphylococcus aureusis (MRSA) antibiotic ceftobiprole under brand names Zevtera and Mabelio. Following its EU approval in 4Q13, Basilea anticipates launching Zevtera in Germany in the second half of this year, followed by other European launches next year.
Also, if isavuconazole is approved next year, Basilea could have two hospital anti-infectives with European market authorization by the end of that year, giving the company significant commercialization synergies, the person said.
Basilea has previously been linked as a target to Astellas Pharma and Swiss respiratory drugmaker Actelion [ETR:ACT].
But Basilea would not add much to Actelion’s offering, which focuses on orphan diseases, said a third health care banker. Actelion is already spending a large amount of money on R&D and is unlikely to be able to afford Basilea. The banker noted that Astellas had long been rumoured as a possible bidder for Basilea but nothing has ever materialized.
While the Basilea management views the company as an attractive inversion target with a rarity value, there are very few US buyers that could actually successfully invert with the company, said the first banker. Basilea has a market cap of CHF 1.07bn (EUR 885.62m), limiting it as an inversion target for only relatively small players. Foreign target companies need to make up 20% of the new company in order for a US company to change successfully its tax domicile.
Switzerland is also not an attractive domicile to relocate the company because of laws limiting executive pay, said the second and third bankers. Swiss law gives company shareholders a say on managers’ pay and blocks golden handshakes and severance packages.
An American company that could conceivably make the numbers work is Cubist Pharmaceuticals [NASDAQ:CBST], which has a market cap of USD 5.23bn (EUR 4bn). But Cubist has not had a track record of buying on this kind of scale, the first banker said.
Basilea declined to comment on whether it had received any approaches.