Currency in CHF
Last close As at 23/03/2023
CHF49.60
▲ −0.25 (−0.50%)
Market capitalisation
CHF653m
Research: Healthcare
Despite the challenging financial backdrop, Basilea Pharmaceutica has announced that it has secured a CHF75m senior secured loan from Athyrium Capital Management (a US-based asset management company). The combination of this non-dilutive financing and cash on hand will allow the company to repay its outstanding convertible bonds (ISIN CH0305398148 with a nominal value of CHF117m, due in December 2022), outlined as the first leg of management’s strategic plan. This short-term arrangement is anticipated to bridge the company until expected operational profitability in FY23. Our valuation of Basilea remains unchanged at CHF893.8m or CHF75.5/share.
Basilea Pharmaceutica |
To retire converts with senior secured and cash |
Financing update |
Pharma and biotech |
8 September 2022 |
Share price performance Business description
Analysts
Basilea Pharmaceutica is a research client of Edison Investment Research Limited |
Despite the challenging financial backdrop, Basilea Pharmaceutica has announced that it has secured a CHF75m senior secured loan from Athyrium Capital Management (a US-based asset management company). The combination of this non-dilutive financing and cash on hand will allow the company to repay its outstanding convertible bonds (ISIN CH0305398148 with a nominal value of CHF117m, due in December 2022), outlined as the first leg of management’s strategic plan. This short-term arrangement is anticipated to bridge the company until expected operational profitability in FY23. Our valuation of Basilea remains unchanged at CHF893.8m or CHF75.5/share.
Year end |
Revenue (CHFm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
127.6 |
(29.6) |
(288.5) |
0.0 |
N/A |
N/A |
12/21 |
148.1 |
(6.61) |
(56.9) |
0.0 |
N/A |
N/A |
12/22e |
110.0 |
(29.5) |
(249.5) |
0.0 |
N/A |
N/A |
12/23e |
128.8 |
14.5 |
164.6 |
0.0 |
26.4 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
The CHF75m senior secured loan has a two-year term and will be repaid in quarterly instalments starting from Q123. The CHF1.25m per quarter average interest payment implies an interest rate of 6.7% per year (excluding fees). Although at a higher interest rate than the current outstanding loan (2.75% pa), the refinancing reduces the likelihood of further shareholder dilution and is expected to bridge the company until it is anticipated to turn operationally profitable in FY23.
The loan proceeds will be used primarily to pay off outstanding convertible bonds due in December 2022. The convertible bonds maturing in 2022 had a nominal amount of CHF117.2m at end June 2022, net of the CHF6.6m repayment in H122. With break-even cash flow from operations in the first half of FY22, cash, restricted cash and short-term investments of CHF141.9m at end June and the latest CHF75m secured loan, Basilea is anticipated to repay its convertible loan balance, as planned, this calendar year.
This announcement achieves the first leg of the company’s strategy, which is to pay off its outstanding convertible bonds in a non-dilutive manner. Management also expects to complete the sale of its oncology assets in the near term so it can focus on its anti-infective assets, including Cresemba and Zevtera.
As a recap to the prior quarter, the company continued growth in Cresemba royalties. We continue to expect future revenue growth to be driven by global Cresemba sales (the approval for Chinese state reimbursement will be an important catalyst) and the potential approval of Zevtera in the US (expected NDA submission in H222), following positive Phase III results in bloodstream infections in June 2022.
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Research: Industrials
Cohort’s subsidiary, SEA, has continued its strong order intake momentum by announcing a major new £34m support contract for the Royal Navy. The order augments the improving prospects for SEA as sales activity normalises following the pandemic hiatus. It also further underpins future revenue visibility at the group level, which was already strong with order cover at 90% of FY23 market consensus sales estimates in July although supply chain issues remain a risk. As Cohort’s defence focus returns to organic growth in FY23, the rating looks undemanding and well below our DCF value of 684p.
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