BPMUF (BPMUF) Q2 2026 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to the Basilea Pharmaceutica Half Year Results 2026 Conference Call and Live Webcast. I'm Kate, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to David Veitch, Chief Executive Officer. Please go ahead.

Thank you. Hello, I'm David Veitch, CEO of Basilea. Thank you for joining us today on our conference call and webcast. We'll be reviewing our financial results and key achievements for the first half year 2026 as well as highlighting our priorities going forward. For further detailed information, please see the ad hoc announcement issued this morning and our half year report. These documents, together with the webcast presentation are all available on our website at basilea.com. I would like to mention that this call contains forward-looking statements. Joining me on our call today are Adesh Kaul, our Chief Financial Officer; and Dr. Marc Engelhardt, our Chief Medical Officer. We have had a great start to the year, delivering strong financial results and continued execution across the business. Let me briefly summarize some of the key highlights from the first half of 2026. Starting with our strong financial performance. Basilea's total revenue grew 14% year-on-year to CHF 119 million, resulting in an operating profit of CHF 32 million, an increase of 32% year-on-year. Our net cash position doubled to CHF 105 million. During the first 6 months of 2026, we were awarded $61 million of non-dilutive funding, which offsets a significant proportion of our R&D costs. Portfolio highlights include continued strong in-market sales of our lead commercial product, Cresemba, which are now close to $800 million and growing almost 30% year-on-year. The Phase III program of fosmanogepix, our lead antifungal in development is progressing as planned, evidenced by the recent BARDA funding award for achievement of a particular enrollment milestone. Also, our novel antibiotic, BAL2420 has started its first-in-human Phase I study. We also continue to invest in our earlier pipeline. In this context, we signed a collaboration agreement with Prokaryotics for the preclinical development of a novel broad-spectrum antifungal candidate. Basilea's pipeline today combines 2 commercial products, Cresemba and Zevtera, with a diversified portfolio of development stage anti-infective assets, all added over the last 3 years. We have now 2 Phase III assets, fosmanogepix and Ceftibuten-ledaborbactam, which together have the potential to generate peak sales of approximately $1.5 billion, roughly doubling our current in-market sales level. Our earlier-stage programs, BAL2062 and BAL2420 continue to advance towards their next decision points, adding further depth to the pipeline. Overall, we have built a balanced anti-infective portfolio, combining commercial growth drivers, late-stage value creation opportunities and early-stage innovation. Behind these assets, we also have preclinical research programs developed both internally and from external collaborations. We announced 2 early-stage collaborations in the last 8 months that further expand our innovative research pipeline. The first is a partnership with Phare Bio, which applies generative artificial intelligence to the discovery of novel antibiotics, aiming to improve the efficiency of identifying and developing a new antibiotic candidate. Then we entered the collaboration with Prokaryotics to develop a first-in-class broad-spectrum antifungal candidate. The program aims to deliver an effective, safe and easy to administer treatment for severe invasive fungal infections. Together, these partnerships expand our access to innovative technologies and new approaches with limited upfront investment from Basilea. I'll now hand over to Adesh for the commercial and financial update.

Thank you, David. Starting with Cresemba, which remains the cornerstone of our current commercial business. Global in-market sales in the 12-month period to the end of March 2026 amounted to USD 782 million. This 27% increase year-on-year underscores the continued strong demand across all key markets and is driven by continued gain in market share even in markets where Cresemba is already market leader. Let me turn to Zevtera, which was commercially launched in the U.S. about a year ago by our partner, Innoviva Specialty Therapeutics. For novel hospital antibiotics, the key focus in the initial 12-month period of launch phase is on establishing broad market access and on supporting positive clinical experience. The KPIs we track in this early phase reflect these focus areas. Zevtera continues to make good progress in securing access across the healthcare system with important wins in group purchasing organizations, formularies and reimbursement programs, helping to support future uptake. At the same time, increasing account numbers and repeat ordering trends, combined with encouraging medical community feedback, provide early evidence of positive clinical experience and acceptance. Innoviva has also further expanded its field force to increase hospital coverage from which Zevtera is expected to benefit. We are, therefore, pleased with the progress in this launch phase and are looking forward to seeing these encouraging key lead indicators translate into increasing adoption and sales in the quarters and years to come, especially as Zevtera has market exclusivity in the U.S. until April 2034. All of our clinical programs continue to be supported through BARDA and CARB-X agreements, which provide nondilutive funding for our R&D portfolio. Across these contracts, more than USD 440 million has been committed to Basilea. Approximately USD 165 million has been awarded to date, out of which USD 61 million was awarded in the first half of 2026. This nondilutive funding enables us to advance our clinical programs in a capital-efficient manner. Moving now to the financial results for the 6 -- first 6 months of 2026. Unless otherwise stated, all numbers are in Swiss francs. Cresemba and Zevtera revenue totaled CHF 92.3 million. This included royalty income of CHF 57.8 million, which grew by about 11% year-on-year. Milestone and upfront payments were CHF 4.7 million. Other revenue, which includes mainly reimbursements from BARDA and CARB-X, rose to CHF 26.7 million. This brings total revenue to CHF 119 million, an increase of 14% compared to the first half of 2025. Cost of products sold decreased to CHF 15.4 million in the first half of 2026, positively impacted by the customer and product mix. Operating expenses amounted to CHF 72 million, increasing mainly due to costs associated with the progress of the fosmanogepix Phase III program, preparations for the ceftibuten-ledaborbactam Phase III program as well as the Phase I study for BAL2420. As a result, we achieved an operating profit of CHF 31.6 million and a net profit of CHF 27.9 million, both significantly increasing year-on-year. Finally, cash and cash equivalents and restricted cash rose to CHF 176 million. The cash flow from operating activities amounted to CHF 19 million, including the impact from a temporary increase in receivables and inventory, reflecting the continued growth of our commercial business and strong operational execution in the first half of the year. The receivables are expected to be collected within their respective due date in Q3 2026, and the inventories will allow us to address the increased product demand in the second half of 2026. We also continued to strengthen our balance sheet through debt reduction. During the reporting period, we repurchased CHF 5 million in nominal value of our convertible bonds, reducing the outstanding nominal balance to CHF 71 million. The convertible bond is due to mature in July 2027. Let me now turn to our updated full year guidance. Based on the strong performance in the first half of this year and the continued positive outlook, we now expect total revenue for full year 2026 to grow by approximately 15%. Within this, Cresemba and Zevtera-related revenue is expected to reach around CHF 210 million compared to our previous guidance of around CHF 200 million. This is expected to translate into a cash contribution of approximately CHF 180 million from our commercial business. We continue to expect an increase of 20% year-on-year of our investments into R&D. Driven by the higher expected revenue, we are raising our operating profit guidance and now expect an increase by approximately 40% year-on-year compared with our previous expectation of around 20% increase. This demonstrates the strength of our business model and our ability to maintain solid profitability while increasing investments in our growth pipeline. Looking at the components of our full year guidance on Cresemba, Zevtera-related revenues, we expect approximately CHF 125 million from royalties, CHF 35 million from milestone payments and CHF 50 million from product revenue. We expect the revenue mix to keep on shifting towards higher-margin royalties and milestones, resulting in a significantly higher cash flow contribution from our commercial business in the second half of the year. I will now hand over to Marc for the portfolio update.

Thank you, Adesh. As David mentioned earlier, we currently have 2 Phase III programs, fosmanogepix and ceftibuten-ledaborbactam. Advancing these programs efficiently and successfully through development remains a key priority for Basilea. Ceftibuten-ledaborbactam, which we in-licensed in August 2025 is now in preparations for a global Phase III program with study initiation expected in mid-2027. This program benefits from a well-established study design aligned with published FDA guidance for complicated urinary tract infections. Fosmanogepix is currently being evaluated in 2 global Phase III studies, FAST-IC in invasive candidiasis and candidemia and FORWARD-IM in invasive mold infections. We expect both studies to read out in 2028. Importantly, the fosmanogepix Phase III program is supported by a growing body of real-world experience, which I will discuss in more detail shortly. Fosmanogepix has truly differentiated profile, combining a first-in-class mechanism of action with broad spectrum activity against both molds and yeast, and in addition, it has demonstrated excellent tissue penetration and offers both intravenous and oral formulations, providing important flexibility for patient management. We continue to make good progress with the Phase III development program that I mentioned earlier, which remains on track. At the same time, we continue to gain valuable real-world experience with fosmanogepix through a global expanded access program. This program provides access to fosmanogepix for patients with serious or life-threatening invasive fungal infections who have limited or no alternative treatment options. To date, nearly 600 patients have been treated across 22 countries and the continuous increase in patient numbers and the geographic reach reflect the significant global medical need addressed by fosmanogepix. Additionally, this growing body of real-world experience may complement the clinical data package and support future market access following regulatory approval. BAL2420 is our first-in-class antibiotic targeting highly resistant pathogens. These infections remain a major global health challenge, including those caused by carbapenem-resistant Enterobacteriaceae, where treatment options are often limited and patient outcomes can be poor. BAL2420 offers a novel mechanism of action based on inhibition of LptA, which then leads to rapid bacterial cell death. Importantly, this mechanism is distinct from existing antibiotic classes, creating the potential to overcome resistance. We've initiated the first Phase I first-in-human dose escalation study in the first quarter of 2026. I'm pleased to report that the study is progressing as planned. In addition to fosmanogepix and BAL2420, we are also progressing our other clinical stage antibacterial and antifungal programs towards the next milestones. The antibiotic ceftibuten-ledaborbactam is being developed as a potential first oral beta-lactam beta-lactamase inhibitor combination for complex tract infections caused by [indiscernible]. The program addresses a significant need for new treatment options for multidrug-resistant or negative infections and benefits from both fast track and QIDP designations from the FDA. L2062 is a novel antifungal candidate for the treatment of invasive aspergillosis, including resistant strains. Following encouraging Phase I safety and tolerability data, discussions with regulatory authorities regarding the optimal Phase II and Phase III development pathway are ongoing. With this, I'll hand back to David.

Thank you, Marc. Building on what Marc showed you, we expect our commercial portfolio to expand over time. Cresemba will continue to generate substantial revenues, while with the U.S. launch of Zevtera, we expect increasingly meaningful revenues over the coming years. Assuming successful clinical and regulatory outcomes, Fosmanogepix could become our third commercial product in 2029, followed by ceftibuten-ledaborbactam as our fourth commercial product approximately a year later. Together, these 2 assets are expected to become important future growth drivers for Basilea and diversify our revenue streams. At peak, they could generate combined in-market sales equivalent to approximately twice the level of today's sales, illustrating the significant value creation opportunity in our late-stage pipeline. Earlier this year, we announced our Agenda 2030, our road map for Basilea's next phase of development. We communicated that at the end of 2025, we had CHF 162 million in cash, and we expect approximately CHF 600 million in cumulative cash flow from Cresemba and Zevtera alone between 2026 and 2030. In addition, more than $350 million of potential non-dilutive R&D funding remained available under existing agreements. These resources provide the foundation for the next phase of growth of Basilea. They allow us to advance Fosmanogepix and ceftibuten-ledaborbactam towards commercialization, continue investing in our earlier-stage pipeline and further strengthen our portfolio through targeted business development opportunities. Currently, we are fully on track to deliver on these targets set out in our Agenda 2030. This is evidenced by our progress in the first half of 2026. We delivered another strong operational and financial performance with double-digit growth in Cresemba revenue leading to an increase in our full year operating profit guidance. Across the pipeline, both Fosmanogepix Phase III studies continue to advance as planned. Also preparations for the ceftibuten-ledaborbactam Phase III program continue, and we initiated the first-in-human study of BAL2420. We entered into a new preclinical collaboration and secured $61 million in non-dilutive funding for our clinical programs. With a strong first half of 2026, we look forward to continue building on this momentum for the remainder of the year. Thank you for your attention, and we'll now open the line for your questions.

[Operator Instructions] The first question comes from the line of Brian White from Cowen Partners.

The first one is on Fosmanogepix and just thinking about the commentary on enrollment. And we still are seeing quite an explosion of resistant candida in the U.S. And I just wondered that if you're seeing a positive impact on enrollment there. And just also if you could remind us if you need both studies to read out for filing and approval or if one was faster than the other, could you go ahead with one ahead of the second? And then also on the ceftibuten-ledaborbactam program. And we're obviously looking forward to the initiation of Phase III next year. It's early days since the approval of Utebzi in the U.S. And I wonder if you've seen anything from the label or the approval that has given you some insight into the positioning ceftibuten-ledaborbactam in cUTI.

Okay. Thank you, Brian. Actually, Marc, why don't you take the one about Candida auris and the impact potentially on our study and also the -- are both studies needed? You take that question first.

Yes, Brian, thank you very much for the question. So usually, outbreaks do not have such a great impact on clinical trial enrollment. They are often localized. And then for primary therapy of candida infection, which is the study it's restricted to no more than 48 hours of prior antifungal treatments. Otherwise, patients cannot be enrolled, and that's often a outbreaks, they have already started for a couple of days of treatment. So in principle, it could support enrollment. But in practice, the number of outbreaks is relatively small compared to the overall prevalence of candid infections. The second question was about the 2 Phase III studies. So we could file them separately, but we will need the candidemia study completed because of the required safety database for the NDA. So there are several options. We file candidemia and mold together or we file candidemia first and then mold infections depending on completion.

And then on your tebipenem question, actually, it's interesting. I mean, obviously, all we've read is what's public, but it looks like GSK, Spero are positioning tebipenem as an oral carbapenem, which obviously wouldn't directly overlap with ceftibuten-ledaborbactam as that's an oral beta-lactam beta-lactamase inhibitor. But obviously, in terms of the concept that the value proposition of an oral step-down or alternative to IV carbapenems, it will be similar. So actually, from that point of view, it would actually, I think, be quite helpful for us in terms of GSK, Spero doing a lot of the groundwork in terms of educating the market in terms of the oral complicated UTI concept, which I think we would benefit from if and when we come to market with Ceftibuten-ledaborbactam. So -- so that's how we're sort of initially thinking about it. But obviously, we'll see what happens when they launch and the positioning going forward and the response to that.

Next question comes from the line of Jyoti Prakash from Edison Group.

Congratulations on the strong first half. So my first question is related to the guidance, and I'm just trying to reconcile the numbers here. So the operating profit is now expected to go by 40% versus 20% previously, which is, if I do the math, around CHF 10 million increase and CHF 5 million of that would obviously come from the increase in royalties. So just trying to understand where the other growth is going to come from given that the milestone is -- payments are not expected to change from last guidance. That's the first question. And the second question is again on royalties. If you just look at the breakup of royalties in the first half, it looks to be -- the growth looks to be primarily driven by Astellas. How do we think about this for the second half of the year?

Thanks, Jyoti, for those questions. Adesh, do you want to take those?

Yes. Thank you, Jyoti. So maybe initially on the -- on your first question on how the guidance works, we are, in essence, guiding for an increase in CHF 12 million in revenues, you could say. And as you correctly pointed out, CHF 5 million is the increase in royalties that we expect, CHF 5 million in product revenues. So Cresemba and Zevtera related revenues are expected to increase from CHF 200 million previously guided to CHF 210 million in the new guidance. And then there is sort of the residual value of CHF 2 million that is coming from other revenues in essence. And out of those CHF 12 million, basically CHF 10 million flow all the way down to the operating profit. So as you correctly pointed out, our operating profit guidance increases from CHF 62 million to CHF 72 million. And I think the structure basically how this works reflects also how our business model works that we have actually quite high translation of revenue growth into profit. And then with regards to your second question on the royalty breakdown, I would point you simply to the -- first of all, to the full year guidance. So in essence, we are guiding for CHF 125 million in royalties for the full year. And hence, yes, there will be quite a lot of, I would say, positive dynamic in the second half of the year, driven by the underlying growth of Cresemba that we're seeing in the market. One point to bear in mind when you're just looking at the year-on-year comparison in the first half is that the first half of last year was, to some degree, positively impacted by some, I would say, mitigation measures that some of our partners took with regard to the tariffs and tax situation that was announced in April 2025. So the first half of the year saw some mitigation measures. Therefore, the royalties in the first half of 2025 as a baseline were probably a little bit higher than they would have been on a run rate that normalized in the second half. And now if you're comparing the full year '25 to the full year '26, you're seeing a healthy double-digit growth in royalties that reflects on the in-market performance that we also see with Cresemba.

Yes. So to build on that. So therefore, when you ask the question, with the second half of the year, the royalty rate growth come from Astellas, which you observed in the first half of the year. I think the point is it will come from more than just Astellas. It will come from both Pfizer and Astellas.

We now have a question from the line of Joris Zimmermann from Octavian.

Congratulations on the strong set of results in H1. Two questions, if I may. One is also related to revenues, specifically to product sales with almost CHF 30 million, those have been significant despite some of your partners actually shifting to in-house production. And I think also for the guidance -- full year guidance now, you expect a slight increase. Could you maybe talk a little bit to the drivers behind that? And then on ceftibuten-ledaborbactam and the Phase III initiation, which you confirmed for mid-'27. I was wondering where you stand in terms of the meeting with the regulators, FDA, EMA and then if you already have more clarity if indeed it will be one study or it might still be multiple studies?

Yes. Thanks, Joris, for those questions. I mean do you want to take on the product sales and why we have the levels we had in Q1 -- sorry, half year versus full year?

Yes, on the full year. So thank you, Joris, for your question. So maybe just giving a little bit of background initially. Indeed, Pfizer and Fosun as 2 big partners have moved to their -- largely to supplying themselves as it was always planned, and that was also reflected in our initial guidance for 2026. We had guided for product sales of CHF 45 million for the full year versus about CHF 50 million that we had in 2025. Now what we increased our guidance to basically CHF 50 million, so in essence, flat product sales, compensating fully for the product sales that we are no longer doing to Pfizer and Fosun. And that is really driven by the underlying demand that our distribution partners and other partners that we are supplying have primarily for Cresemba. So on the one hand, you're seeing the positive dynamic in the increase in royalties. So that's why the royalty guidance has gone up. And correspondingly, our partners are also ordering basically more, and that is then reflected in the product sales guidance. Product sales, just as a reminder, do not perfectly correlate with the in-market sales because we recognize product sales whenever we do the delivery. So they are sort of more distinct whenever we do a delivery, then basically we recognize the full amount. And that's why it's not a clear linear growth rate. But I think the dynamic is clear. Underlying demand is increasing, and that's why our product sales across the partners that we are supplying is increasing as well. Maybe as the last remark I would like to make, which you didn't ask, but I'm volunteering the answer is basically that our product mix on -- or our revenue mix on product sales is improving as well because we are selling more to partners where we have a higher margin in essence, and that's also being reflected in our overall guidance.

Thank you, Adesh. Hope that answers your question. Then the ceftibuten-ledaborbactam and Marc, maybe you're best placed to comment on discussions with FDA or EMA and how many studies are required, et cetera. Can you just comment on that?

Yes. So we've entered into an active discussion and the formal process with FDA and EMA for the program. The discussion include the overall scope of the program, critical design elements, regimen selection comparator endpoints. And our objective is to agree on a Phase III program that provides a clear and efficient path forward to registration and also to have the data to optimize commercial positioning. That is a process and program. So we have not yet come to a conclusion on, for example, the number of required studies, but we'll communicate once we have come to conclusion.

But the idea is that we -- this process goes in parallel with our other preparation activities so that we can start the study mid-2027.

So that's an ongoing process that runs in parallel with the operational preparation.

The next question comes from the line of Chien-Hsun Lee from Pareto Securities.

Congrats on the strong result. Just 2 questions from me. So one is a follow-up question on fosmanogepix enrollment. So earlier this year in your business update, you announced that you are activating 21 new centers in China for FAST-IC. Do you see any trends in this Chinese site? And do you see any impact on the overall time line? And the second question is about the cash position. So with this continue improving, how are you thinking about the allocation between bond buybacks, funding the clinical development and any additional BD activity.

So maybe, Marc, you could comment on has the inclusion of China in the invasive candidiasis fosmanogepix study changed the trend in any way. I think that was Chen's first question.

Yes, thanks for the question. I think we are on track with the program. There's no change really in the time lines. And as expected, opening China contributes to the enrollment of the study. So I think there's nothing really unexpected from that end.

I think on your cash position question and basically the use of capital, I think as we've said, at the moment for 2026, 2027, it's clear that our focus, as we laid out in Agenda 2030 is basically investing in our R&D, so both the late-stage programs and the earlier-stage programs and in addition to selectively in-licensing and acquiring assets like we've done for the last 3 years, assets that are both innovative but have what we believe is commercial potential. And that's the focus of our capital allocation now. And then what we've always -- what we've said publicly up until now, and it's still the current thinking is that when we get more visibility following the maturity of the convertible bond mid-2027, and we get visibility on the results, the initial results from fosmanogepix at the beginning of 2028 of the Phase III studies, then we'll be in a position to assess capital distribution in terms of whether it be buybacks or dividends in addition to the other uses of capital that I've just mentioned. That's the way we're thinking of it, Chen, at this moment.

[Operator Instructions] We now have a question from the line of Jasmin Sporri of Zurcher Kantonalbank. Jasmin Spörri: Also congratulations from my side. I have 2 questions. One is related to Zevtera and the other one to your Phase I asset, BAL2420. The first one about Zevtera is mainly that the U.S. launch of Zevtera appears to be progressing. Could you provide more details on maybe hospital adaptation and how you see this translating into revenue growth over the next 12 until 18 months? And second, BAL2420 has entered Phase I trials. Could you share any early insights or time lines for when we might expect initial data readouts? Or how do you see this asset fitting into your broader portfolio strategy time-wise?

Yes. Thanks, Jasmin, for the questions. I mean maybe, Adesh, you comment on the Zevtera sort of 12- to 18-month sort of vision.

Yes. So -- and I'll even go beyond that. So just as a reminder, Zevtera has exclusivity in the U.S. until April 2034. And the way that we have structured the transaction and also the way that we philosophically think about our assets is that we look at optimizing the value over the entire product life cycle. And hence, for us, the focus when we're looking at the key performance indicators that we are tracking at this point in time is, are we, together with our partner, of course, Innoviva Specialty Therapeutics, setting the ground for long-lasting success basically. And in this respect, we have done, indeed, as you indicated, we have seen a good progress. We believe that market access has been established very well. We believe that the hurdles have been overcome that may have been there or barriers with regard to affordability, broad adoption, positive clinical -- initial clinical experience and so on. And the expansion of the field force by Innoviva Specialty Therapeutics also plays into the expectation that we will see an increasing dynamic now going forward. However, to manage expectations, for us, again, more material impact or more material visibility on revenues from Zevtera are probably going to come in the '28, '29 time frame. That's when we start to really look at do these early indicators translate into tangible revenues that we're seeing and are we on a good trajectory to achieving our goal of maximizing the value.

And just the 2420 question Marc about where are we data readout time lines and thinking about next steps. Could you comment on that?

Yes. I think first-in-human study, time lines is always not exactly to be predictable because we don't know how many dose levels we will have to dose until getting to an effective and safe dose. But our current expectation is that this study could be completed in around mid-2027. But I said, it depends on the number of dose levels and dose cohorts. So this is single dose and multiple doses and they go on in parallel with the multiple doses starting sometime after the single doses have been qualified. From a portfolio perspective, it's a complete novel mechanism of action overcoming resistance. One of the indications we are currently thinking about for this compound resistant gram-negative bloodstream infections, which are frequent with a high unmet medical need. And I think that kind of describes the portfolio that would be our development Hopefully, that answers your question.

[Operator Instructions] Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to David Beach for any closing remarks.

Yes. Thank you. Thanks for your questions. Before we close, I'd just like to remind you of our Capital Markets Day, which will take place on October 28 in Zurich. During the event, we provide a more comprehensive update on our strategy, our development portfolio and future value creation opportunities. In addition, we'll have 2 globally renowned infectious disease physicians who will share their insights on the medical need in serious fungal and bacterial diseases, which underpins our portfolio's development programs. So hopefully, you can join us at that meeting. But thank you very much for your time today.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the Basilea Pharmaceutica Half Year Results 2026 Conference Call. You may now disconnect your lines. Goodbye.