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Basilea - H1 results and upgrade

The continued growth of the Cresemba franchise, along with a planned reduction in R&D spending, has taken Basilea into a period of sustained profitability and positive cash flow generation.

Basilea’s H1 reflected a particularly strong performance with revenues of CHF84.9m and a net profit of CHF31.8m resulting in an increased cash position of CHF112.9m. As a result, Basilea has modestly increased FY’23 guidance to total revenues of CHF147m-150m (from CHF145m-148m) and net profit to CHF41m-46m (from CHF36m-41m). Basilea has used this period of strong cash generation to pay down its senior secured loan, expecting to repay CHF37m in FY23.

Cresemba continues to deliver above expectations with strong sales in established markets such as the US (through Astellas), and new important markets coming on stream. In H1 2023, we note the receipt of several milestone payments from outside the US, including a significant $26.25m receipt from Pfizer. The underlying performance of Cresemba was reflected in a highly creditable 27% increase in royalty income to CHF36.7m. End-market Cresemba sales for the 12 months ended March 2023 were $393m. We expect growth to continue in the medium term, despite its maturity, largely due to an increasing number of at-risk immunosuppressed patients combined with Cresemba’s differentiated profile (broad-spectrum and benign safety profile).

Sales of Zevtera remain modest, reflecting its lack of approval in the key US market. With the NDA now filed for a combination of bacteraemia, severe skin infection and community-acquired pneumonia caused by Staphylococcus aureus (including MRSA), we look forward to the attraction of a suitable commercial partner before approval. In particular, we believe ceftobiprole promises to be a significant treatment option as part of empiric therapy for patients with bacteraemia, given its coverage of Gram-positive and Gram-negative infections and the lack of treatment options (particularly where resistance is suspected). Our forecasts suggest that peak sales in the US alone could approach $400m. Basilea is in a very strong financial position, and with that in mind, we expect any commercial agreement to maximise the long-term value of the ceftobiprole franchise. Securing a commercial partner able to maximise the sales potential of ceftobiprole in the key US market would represent a significant de-risking event, we believe.

With the renewed emphasis on the anti-infectives franchise, the approval of ceftobiprole in the US will be an important event to secure its future. At the same time, we expect the company to augment the key-anti-fungal franchise ahead of the expiration of exclusivity in key markets in 2027. We expect Basilea to renew its efforts to in-license novel anti-fungals to ensure the longevity of the franchise and believe that the company’s in-house expertise should be a strong attraction for potential licensors. We note management’s commentary today regarding discussions about acquiring or in-licensing novel anti-infective candidates, providing reassurance that plans are well underway. Hopefully, the company’s strong cash position and existing anti-infectives franchise should help in this regard. We believe that providing visibility on the future anti-fungal pipeline would represent another important de-risking event for Basilea.

We calculate a discounted cash flow fair value of CHF 91 per share for Basilea.

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Calvine Partners LLP is authorised and regulated by the Financial Conduct Authority.

Basilea Pharmaceutica is a client of Calvine Partners, and as such, this publication is not independent and should be considered a marketing communication under FCA Rules. None of the information in this publication should be considered as any form of advice.



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