Basilea Pharmaceutica - Gearing up for the next growth phase

Basilea's H125 results reflected strong sales traction, with revenues up 36.3% y-o-y to CHF104m, underpinned by 21.7% growth in royalties. A key strategic milestone was the US launch of Zevtera, diversifying Basilea's revenue base and de-risking future sales. Post-period developments (initiation of the second Phase III trial for fosmanogepix and acquisition of a novel oral antibacterial) indicate growing pipeline momentum, with R&D support from BARDA. Full-year guidance has been updated, with revenues now expected to be CHF225m (CHF220m previously), albeit with a lower operating profit (CHF50m vs CHF62m previously), reflecting CHF15m in incremental R&D linked to the in-licensing transaction in August. With an improved net cash balance of CHF50.7m providing flexibility, we raise our valuation to CHF107.4/share (from CHF105.2 previously) with further upside to be unlocked from the new antibacterial programme.

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