Basilea Pharmaceutica — Third leg of strategy executed with debt repayment

Basilea Pharmaceutica (SIX: BSLN)

Last close As at 24/05/2024

CHF44.15

0.90 (2.08%)

Market capitalisation

CHF582m

More on this equity

Research: Healthcare

Basilea Pharmaceutica — Third leg of strategy executed with debt repayment

Basilea has announced the full repayment of the CHF113.8m outstanding amount under its 2.75% convertible bonds due on 23 December 2022, supported by growing cash inflows from marked drugs and the CHF75m senior secured loan raised in September 2022. The repayment reduces the company’s indebtedness from ~CHF287m to CHF173m and had been reflected in our estimates and valuation. FY22 has been characterised by Basilea’s efforts to right-size itself (focus on anti-infectives and sale of oncology assets) and the debt repayment should further improve investor sentiment. This news follows the recent announcement of licensing partner Asahi Kasei receiving marketing approval for Basilea’s flagship drug, Cresemba, in Japan, a key market for Basilea. Our valuation remains unchanged at CHF921.7m (CHF77.8/share).

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Basilea Pharmaceutica

Third leg of strategy executed with debt repayment

Funding update

Pharma and biotech

4 January 2023

Price

CHF45.8

Market cap

CHF543m

$1.07/CHF

Estimated net debt (CHFm) at 31 December 2022

73.1

Shares in issue

(excluding 1.15m treasury shares)

11.85m

Free float

90%

Code

BSLN

Primary exchange

SIX

Secondary exchange

N/A

Share price performance

Business description

Basilea Pharmaceutica is focused on treating infectious diseases. Its marketed products are Cresemba (an antifungal) and Zevtera (an anti-MRSA broad-spectrum antibiotic). The company plans to file for US approval for Zevtera.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Basilea Pharmaceutica is a research client of Edison Investment Research Limited

Basilea has announced the full repayment of the CHF113.8m outstanding amount under its 2.75% convertible bonds due on 23 December 2022, supported by growing cash inflows from marked drugs and the CHF75m senior secured loan raised in September 2022. The repayment reduces the company’s indebtedness from ~CHF287m to CHF173m and had been reflected in our estimates and valuation. FY22 has been characterised by Basilea’s efforts to right-size itself (focus on anti-infectives and sale of oncology assets) and the debt repayment should further improve investor sentiment. This news follows the recent announcement of licensing partner Asahi Kasei receiving marketing approval for Basilea’s flagship drug, Cresemba, in Japan, a key market for Basilea. Our valuation remains unchanged at CHF921.7m (CHF77.8/share).

Year

end

Revenue
(CHFm)

PBT*

(CHFm)

EPS*
(CHFc)

DPS
(CHFc)

P/E
(x)

Yield
(%)

12/20

127.6

(29.6)

(288.5)

0.0

N/A

N/A

12/21

148.1

(6.6)

(56.9)

0.0

N/A

N/A

12/22e

120.7

(14.6)

(123.2)

0.0

N/A

N/A

12/23e

131.3

9.0

66.0

0.0

0.72

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The 2022 convertible debt (initial aggregate principal amount of CHF200m; net proceeds of CHF194.7m) was issued in December 2015 to existing shareholders and institutional investor and was partially repurchased in July 2020 (CHF47.1m through a tender) and between Q420 and 2022 (CHF38.6m). The December 2022 repayment was financed by cash on hand as well as the CHF75m senior secured loan raised in September 2022 with Athyrium Capital Management. We see the company’s ability to honour its debt repayment obligations without resorting to equity conversion (and the associated dilution) as a positive catalyst for Basilea.

As a reminder, FY22 has been marked by Bailea’s focus to become a pure-play anti-infectives company, driven by its core assets Cresemba and Zevtera, as it continues to execute its strategy to dispose of and monetise its oncology pipeline. As part of this right-sizing, Basilea has out-licensed its kinase inhibitor BAL0891 to SillaJen and sold its PARG inhibitor discovery programme to Nodus Oncology as well as its preclinical CLK kinase inhibitors to Twentyeight-Seven Therapeutics.

We continue to expect future revenue growth to be driven by global Cresemba sales (global sales of US$352m in the 12 months between July 2021 and June 2022) and see the recent market authorisation received by partner Asahi Kasei in Japan as another key catalyst given the commercial potential for new antifungals in the market. In addition, potential approval of Zevtera in the United States (we now expect the new drug application submission in early 2023, from the previously communicated expectation of around year-end 2022), following positive Phase III results in bloodstream infections in June 2022, should be another key milestone as the company strives to turn profitable in 2023. We maintain our valuation of CHF921.7m or CHF77.8/share.

General disclaimer and copyright

This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison, in consideration of a fee payable by Basilea Pharmaceutica. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Basilea Pharmaceutica and prepared and issued by Edison, in consideration of a fee payable by Basilea Pharmaceutica. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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