Basilea Pharmaceutica - Profitability sooner than expected

Basilea reported strong FY22 results following the successful execution of its strategic realignment to focus on anti-infectives. The top-line beat (c 21% ahead of the top end of guidance) was driven by accelerating global uptake of its marketed assets, primarily Cresemba, which recorded 22% year-on-year growth in royalties (to CHF65m). In combination with the receipt of milestone payments, lower-than-expected operating expenses and the sale of oncology assets, management was able to achieve profitability (FY22 net profit of CHF12.1m) a year earlier than anticipated. As Cresemba peaks, we expect additional support to come from the successful US launch of Zevtera (NDA expected in March/April 2023) and the introduction of novel late pre-clinical/clinical anti-infective assets in Basilea’s development pipeline. Our updated valuation is CHF785m or CHF65.7/share (previously CHF921.7m or CHF77.8/share), reflecting our revised estimates and the recent sale of oncology assets, partially offset by lower net debt (CHF46.7m at end-FY22) following repayment of the 2022 convertibles.