Ladies and gentlemen, welcome to the Basilea Pharmaceutica’s Full-Year Results 2018 Conference Call and Live Webcast. I’m Andre, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Mr. David Veitch, Chief Executive Officer. Please go ahead, sir.

Thank you. Hello. This is David Veitch, CEO at Basilea, and I would welcome you all to our conference call and webcast reviewing both, our financial results and key achievements for the full-year 2018 and also review our upcoming milestones and guidance for 2019. I would like to mention that this call contains forward-looking statements. This morning, we issued a press release and financial report on our 2018 results, and these documents are available on our website at basilea.com. Joining me on this call today are Adesh Kaul, our Chief Corporate Development Officer; Dr. Marc Engelhardt, our Chief Medical Officer; and Donato Spota, our Chief Financial Officer. Before we start with the presentation proper, please allow me to say thank you to Donato. You may have seen the recent press release that after 16 years of Basilea, Donato is leaving to become CFO of another biopharmaceutical company and that Adesh Kaul is going to succeed him at the time of our AGM in April. I would like to thank Donato for his commitment and contributions to Basilea. We wish him all the best for the future, but also welcome Adesh who is ideal successor, and they are both currently working together during this transition period. For those on the call who are less familiar with Basilea, we focus on the research, development and commercialization of innovative medicines that address the medical challenges in the therapeutic areas of oncology and anti-infectives. Basilea has a proven track record of progressing brands from research, through clinical development to commercialization. We have successfully brought two anti-infective brands to the market. Our antifungal Cresemba and Zevtera, our broad-spectrum antibiotic that also covers MRSA. We continue to make great progress in establishing Cresemba and Zevtera as global brands. In 2018, we saw continued strong revenue growth driven by a substantial increase in the revenue contributions from Cresemba and Zevtera. We made significant progress in our clinical stage programs and we have been able to strengthen our pipeline through in-licensing collaborations. I would like to provide a summary of the important milestones we have achieved. We significantly increased total revenue by 31% to a CHF 133 million. I must say, this was driven by contributions from Cresemba and Zevtera, which amounted to CHF 82 million in sales, an increase of 56%. We further strengthened our R&D pipeline by in-licensing the oncology drug candidate derazantinib from ArQule, and entering into a licensing and research collaboration for preclinical oncology compounds. For ceftobiprole, we are currently enrolling patients in the two cross-supportive Phase 3 studies, which are required for future new drug application in the important U.S. market. We also made further progress in our Phase 1/2 clinical programs with BAL101553, which is now being evaluated in patients with glioblastoma, and advanced ovarian cancer. We are also already off to a good start in 2019. The positive interim data reported from the derazantinib Phase 2 registrational study in intrahepatic cholangiocarcinoma are encouraging, and the recently announced collaboration for a combination of derazantinib with Roche's immuno-oncology drug Tecentriq in urothelial cancer adds further evidence to its potential in multiple types of cancer. We are also looking forward to more value inflection milestones during the course of 2019. Adesh will now give you more insight into our commercial activities and partnerships. Then, Marc will provide you with more detailed information on the derazantinib R&D programs and the progress of our other clinical development programs. And then, lastly, Donato, will provide financial highlights for the full-year 2018, and also our guidance for 2019. I will now hand over to Adesh.

Thank you, David. In 2018, we, together with our partners, continued to make significant progress in the commercialization of our two hospital anti-infective brands, Cresemba and Zevtera. The most current public in-market sales numbers available for Cresemba showed that in the 12 months period, ending September 2018, the global in-market sales of Cresemba grew by 65% year-on-year to $147 million. This impressive performance is driven by a continued strong sales uptake in the U.S. and the early launch countries in Europe, as well as increasing contributions coming from new markets where Cresemba has been launched more recently, such as Spain. In the U.S., Astellas reported sales for the full-year of 2018 of $113 million, which is a year-on-year increase of 47%. We are pleased to report that we achieved several important milestones across our partnerships, underscoring the progress that we are making in the global rollout of our brands. We received a $3 million upfront payment in 2018 related to the extension of our Cresemba agreement with Pfizer to China and Asia Pacific. In addition, the continued geographic market expansion led to a regulatory milestone payment of CHF 2 million from Grupo Biotoscana for the approval of Cresemba in Peru, the first market in Latin America. In addition, for the second year in a row, sales milestones were triggered based on the strong sales performance of Cresemba in the U.S. by Astellas. After CHF 5 million in 2017, a CHF 10 million sales milestone was triggered in late 2018. Furthermore, we reported in January 2019 that the first sales milestone by Pfizer amounting to $5 million was triggered based on strong Cresemba sales in Europe. While there is significant growth potential from the existing markets, an important factor for maximizing the value of our brands is to continue to expand the geographic reach. We are pleased with the progress that our partners have made in this respect in 2018. The continued rollout of Cresemba across Europe, leveraging the existing centralized regulatory approval for the brand in the EU, the first approval for Cresemba in Latin America, the first approval for Cresemba in the MENA region and the approval for Cresemba and the launch of Zevtera in Canada. In total, Cresemba and Zevtera were launched in 10 new countries in 2018. We expect a large number of new launches of Cresemba and Zevtera around the world over the coming months and years. We anticipate that the number of countries in which Cresemba is launched will double by the end of 2019 and increase three folds by the end of 2021. We have strong regional and global partners covering most of the commercially relevant markets. Our license and distribution partnerships for both our products now cover more than 100 countries worldwide. They play an important role in the execution of our global commercialization strategy and provide a strong basis for the future revenue growth of our brands. Basilea continues to participate in the commercial success of both Cresemba and Zevtera through royalties or a transfer price structure. In addition, we could receive up to $1.1 billion in total potential regulatory and sales milestone payments from our partnerships. Turning now to ceftobiprole which is marketed in most countries under the brand name Zevtera. One of our key priorities for Zevtera is to gain access to the U.S. market. The U.S. clearly is the most important country for the commercialization of branded hospital antibiotics and is estimated to account for more than 70% of the global sales based on value. For individual products, the share may even go up to 90% as for daptomycin, for example, which is the standard drug for the treatment of MRSA infections in the hospital. Marc will provide you with an update on the status of our Phase 3 program to support a potential U.S. filing for ceftobiprole. I will now hand over to Marc. Dr. Marc Engelhardt: Thank you, Adesh. Let me continue further on our antibiotic ceftobiprole. We are enrolling patients in two cross-supportive Phase 3 studies, one in the acute bacterial skin and skin structure infections, also known as ABSSSI, and one in staphylococcus aureus bacteremia. The skin study called TARGET is a global study with an enrolment target of approximately 680 patients. Recruitment is advancing well and we anticipate that it will be completed in the second half of 2019. The staphylococcus aureus bacteremia studies is called ERADICATE. It is also a global study and will enroll approximately 390 patients. And we currently anticipate that the study will be completed in the second half of 2021. The Phase 3 program for ceftobiprole is funded up to approximately 70% by the Biomedical Advance Research and Development Authority, BARDA, which is part of the U.S. Department of Health and Human Services. This allows us to advance the development of ceftobiprole for the U.S. market in a cost-effective way. Both the skin study and the bacteremia study are required for filing in the U.S. Now, moving on to oncology. As David pointed out earlier, we've strengthened our R&D pipeline by in-licensing the clinical stage oncology drug candidate, derazantinib. Derazantinib is a targeted, orally available small molecule inhibitor of the fibroblast growth factor receptor or FGFR family of kinases. Derazantinib is a panFGFR kinase inhibitor as it inhibits all four members of the FGFR family with the strongest inhibition seen with FGR 1, 2 and 3. FGFR genetic aberrations have been identified as important therapeutic targets for various cancers, and we are currently conducting a registrational Phase 2 study with derazantinib in FGFR2-fusion positive intrahepatic cholangiocarcinoma or iCCA. Derazantinib also inhibits the colony-stimulating factor 1 receptor or CSF1R kinase, which is involved in the regulation of tumor-associated macrophages and immune response in cancer. CSF1R kinase inhibition may thereby improve the susceptibility of tumors to immunotherapy. To this end, we entered into a collaboration with Roche to explore Basilea’s derazantinib as monotherapy and in combination with the Roche's PD-L1-blocking immune-checkpoint inhibitor atezolizumab, which trade name is Tecentriq, in a biomarker-driven clinical study in patients with urothelial cancer. In January 2019, we reported interim results from a registrational Phase 2 study in the second line treatment of FGFR2-fusion positive iCCA. The analysis was based on 42 enrolled patients of whom 29 were evaluable for efficacy. The objective response rate, defined as the proportion of patients in the study that experienced at least the 30% shrinkage of the tumor was 21%, with six confirmed partial responses. These are encouraging results, considering that the literature cites objective response rates of less than 10% for patients receiving second line chemotherapy. The interim analysis also confirmed the safety and tolerability profile of derazantinib observed in previous clinical studies. The ongoing is being continued and anticipated to enroll 100 patients. We expect that final data will be presented mid-2020. If the results are positive, this may allow for accelerated approval in the U.S. in iCCA. In order to assess the potentially expanded utility of derazantinib in the treatment of iCCA, we are planning to extend the study by adding a separate cohort of patients with other FGFR gene aberrations. FGFR aberrations play an important role in many other cancers beyond iCCA or urothelial cancer, including breast, gastric and lung cancers. We are currently conducting significant preclinical translational work. This is done in order to identify and prioritize further indications and patient populations, which may benefit from treatment with derazantinib as a single agent or in combination with other cancer therapies. Let me also briefly explain our rationale for combining derazantinib with immuno-oncology approaches. CSF1R in addition may down regulate immunosuppressive macrophage activity, restore T-cell activity and thereby improve susceptibility to PD-1, PD-L1 inhibitors, such as Tecentriq. In urothelial cancer, patients with low PD-L1 expression, which has been associated with reduced responses to immunotherapy, show frequent FGFR genomic abnormalities. Therefore, derazantinib, combined with PD-L1 inhibitors, like Tecentriq, may address several oncogenic mechanisms at the same time. In addition to inhibiting FGFR as an oncogenic driver, the inhibition additional CSF1R may improve the response to immune checkpoint inhibition. This concept may also be useful in other tumor types and may support combination studies in other cancer types. We expect to start the clinical study with derazantinib and Roche Tecentriq in patients with urothelial cancer mid-2019. This will be a biomarker-driven multi-cohort study. Moving to our tumor checkpoint controller, BAL101553. We continued our activities in the field of glioblastoma, the most common and aggressive form of primary malignant brain tumors and also an area of high medical need with very few treatment options available. We are currently conducting three clinical studies with BAL101553 in this indication. In Switzerland, a Phase 2a expansion study in patients with recurrent glioblastoma is ongoing using weekly 48-hour infusion. A separate arm in this study includes patients with platinum-resistant ovarian cancer. This study is anticipated to be completed around yearend 2019. In the UK, the Phase 1 dose escalation study is ongoing in patients with recurrent or progressive glioblastoma using daily oral administration of BAL101553. Several dose escalation cohorts have been completed. And Basilea anticipates that the study will reach its primary goal, the definition of a maximum tolerated dose, in the first half of 2019. Finally, a Phase 1 study is ongoing in the U.S. in patients with newly diagnosed glioblastoma, using oral BAL101553 in combination with radiotherapy. This study is conducted in collaboration with the Adult Brain Tumor Consortium, ABTC, which is funded by the U.S. National Cancer Institute. Enrollment into the study could be completed by mid-2020. Moving on to our third oncology drug candidate, the panRAF/SRC kinase inhibitor, BAL3833. In 2018, the first in human Phase 1 dose escalation study with daily oral administration of BAL3833 in patients with solid tumors including metastatic melanoma was completed. A broad dose range was investigated in the study without defining a maximum tolerated dose. Following detailed analysis of the available data, it was concluded that an alternative formulation of the drug candidate would be required to achieve appropriate and consistent drug levels in patients. Preclinical activities to explore alternative formulations have been initiated as BAL3833 continues to show very encouraging anticancer activities in preclinical models. Also, the medical need for cancer patients RAF and RAS-driven tumors remains high. I'll now turn over to Donato.

Thank you, Marc. I'll highlight some of the financial key figures that were published in today's press release and in more detail in the annual report. I would like to mention that all the figures I'll refer to are in Swiss francs. The 2018 financials are characterized by a continued strong revenue growth, particularly driven by the strong sales performance of Cresemba. This performance further accelerated in the second half of 2018, mainly driving the outperformance in total revenue and operating result compared to the guidance. We also made selective investments in our existing clinical pipeline and its expansion for the in-licensing of derazantinib. Total revenue increased by 31% year-on-year and amounted to CHF 132.6 million. Together, product and contract revenue continued to grow to CHF 105.9 million, which represents a strong performance, considering that deferred revenue recognition from the past sale of Toctino ended in August 2018. Most importantly, the contributions from the two marketed products, Cresemba and Zevtera, increased by 56% to CHF 82 million. The third major revenue item, other revenue, increased to CHF 26.5 million, including CHF 25.9 million BARDA reimbursements, compensating for a major part of the expenses incurred related to our ceftobiprole Phase 3 program. Moving to expenses. Operating expenses in 2018 mainly reflect, on the one hand, our investments in our clinical assets, including the in-licensing of derazantinib, as well as on the other hand, substantial reductions in SG&A expenses, following the change in our commercialization model for Europe. Total cost and operating expenses amounted to CHF 156.7 million in 2018 compared to CHF 118.6 million for 2017. The increase is mainly driven by our R&D expenses, which grew to CHF 104.9 million in 2018. This increase primarily reflects the following. The progress we are making in our two Phase 3 studies with ceftobiprole which are enrolling patients; the $10 million upfront payment for the in-licensing of and the clinical development activities related to derazantinib, and the ongoing pediatric programs for ceftobiprole and isavuconazole. The increase in R&D expenses is to a large extent compensated by a significant reductions in SG&A expenses, which decreased by 42% to CHF 31.4 million, and the reimbursement of a substantial portion of ceftobiprole Phase 3 development costs under the BARDA agreement. The operating loss in 2018 amounted to CHF 24.1 million, outperforming our guidance, and the net loss was CHF 31.4 million. Our operating activities consumed cash of CHF 79.2 million, mainly reflecting the progress in and the expansion of our R&D pipeline. While the cash consumption in the first half year 2018 amounted to CHF 60.4 million and was also driven by one-time and working capital effects, we significantly reduced cash consumption in the second half year to CHF 18.8 million. As of year-end 2018, Basilea's combined cash and investments amounted to CHF 223 million. Coming to the financial guidance for 2019. Based on our key priorities for 2019, which David will outline shortly, we expect the following financial results. We anticipate to continue strong revenue growth from Cresemba and Zevtera to between a 100 and CHF 110 million, which is approximately a 22% to 34% year-over-year increase. We expect a significant reduction in our net cash consumption to between 55 and CHF 65 million in 2019, as compared to roughly CHF 80 million in 2018. As indicated before, Toctino revenue recognition ended in August 2018. 2019 total revenue is therefore expected to amount to between CHF 128 million to CHF 138 million. After the completion of the non-cash generating deferred revenue recognition from Toctino, this compensated by cash generating revenue growth from our two marketed products. In 2019, we expect operating expenses to remain at approximately the same level as 2018, as we continue to support the growth of our revenues and invest in our R&D assets, primarily derazantinib and ceftobiprole. Thus, operating loss for 2019 is estimated to be in the range of CHF 20 million to CHF 30 million. I will now hand back to David.

Thank you, Donato. We are on track with the execution of our strategy in terms of both significantly growing our revenues and advancing our R&D portfolio. We will continue to build on internal and external innovation in the areas of oncology and anti-infectives, and to optimize our portfolio to create the basis for sustainable long-term growth. Operationally, we will continue to focus on increasing our cash generating revenues from both our marketed brands, Cresemba and Zevtera. We will progress our two Phase 3 studies with ceftobiprole for potential registration in the U.S. and expect to see topline results from the skin study in the second half of 2019. We anticipate to expand the ongoing registrational Phase 2 study in iCCA for derazantinib by an additional cohort with patients with other FGFR gene aberrations in the first half of 2019. Mid-2019, we plan to start the additional Phase 2 study with derazantinib as monotherapy and in combination with washes Roche Tecentriq in urothelial cancer. We expect the completion of patient enrollment in the Phase 1 study arm with BAL101553 in recurrent glioblastoma in the first half of 2019 and topline results from the Phase 2a study in platinum-resistant advanced ovarian cancer and recurrent glioblastoma in the second half of 2019. And finally, we will continue to focus on selectively strengthening our pipeline with the right assets in our core areas of oncology and anti-infectives through both internal and external innovation. We will now open the line for your questions. Thank you.

[Operator Instructions] The first question comes from the line of Paul Verbraeken from Research Partners. Please go ahead.

Good afternoon, everyone. Thanks for taking the questions. I have two on the progress of Cresemba and Zevtera in other regions, so China and Japan. Can you elaborate a bit on the progress there? And maybe one additional question on Cresemba. Can you confirm that the royalty rate in the U.S. exceeded to 20% in the second half, so a step up compared to the first half?

Paul, thanks. It’s David here. So, maybe Adesh, you answer the first one about the China, Japan rollout, and then, Donato if you comment on the royalty question?

Yes, sure. Hi, Paul. So with regard to Cresemba in Japan, our partner Asahi Kasei is running a Phase 3 program, which they anticipate to have completed by 2021. And subsequently, then they would be subject to a successful completion then file and await a regulatory decision in 2022. With regards to China, I think the timelines are much more inflow because the regulatory environment is much more inflow. So, our partner goes Gosun for Zevtera have made a submission in China for ceftobiprole. And it remains to be seen what kind of clinical trials, if any, will be required, whether there will be a possibility for a waiver, so we will have to just await what the feedback from the discussions of Gosun with the CFDA is going to be. And for Cresemba, our partner Pfizer is in the midst of preparing the corresponding submission, and the same thing as for Zevtera, applies for Cresemba. It will be a matter of discussions with the CFDA, what kind of trials may be required, whether trials will be required, and this will eventually then drive the timelines for a potential launch in China.

Okay. This is Donato speaking, Paul. Hello. I’m taking the second question, the royalty rate of Astellas. As we communicated before, the royalty rate under the agreement with Astellas is a staggered rate that starts mid-teens and goes up into mid-20s. So, you are probably not completely wrong with your assumption that the second half it was in the 20s.

The next question comes from the line of Louise Chen from Cantor. Please go ahead.

My three questions are as follows. First question I had was based on our diligence on the mechanism for derazantinib, and speaking with physicians, it looks like there are a lot of other indications outside of iCCA which your drug may be relevant for. So, just curious, what your reasoning is behind first, pursuing iCCA, and then, which new indications you plan to add over time? Second question I had was with respect to the fact that you talked about exploring new opportunities, expand your oncology portfolio, just curious how much capital you have to deploy towards that and what areas you are interested in, are we going to see more a combination products like you did with Tecentriq or is this something totally different? And then, the last question, just back on derazantinib, you talk about just being a first in class product, and you did mention some statistics on why it is better than standard of care. But just curious, how this would compare to other products development and how you plan to make this a leading product, given other competitors in the space? Thank you.

Okay. Hello, Louise. Thank you for those questions. So, just -- I mean, Marc, you are probably best to quick -- to answer the question about why did we chose iCCA and then what's the plan for future tumor strategy? Dr. Marc Engelhardt: Yes, correct. Thanks, Louise, for the questions. I think, the two indications that are really -- that have come out quite clearly as indications where FGFR inhibitors really work is intrahepatic cholangiocarcinoma, specially with FGFR2-fusions and urothelial cancer where the FGFR3 mutations are predominant. So, the iCCA indication is, if you wish, a proof of concept indication, it’s also an interesting indication too if we can obtain a marketing authorization for this early and certainly also from a commercial size an interesting indication. But, it is, for us primarily a proof of concept. And then, the second indication that we've now published is urothelial cancer. This has a specific biological rationale because derazantinib also inhibits CSF1R kinase and thereby may improve the susceptibility to immunotherapy. And immunotherapy is quite established in urothelial cancer. Although, the efficacy may be lower when the PD-L1 expression is low. So, this seems to be, from a biological perspective, really good indication. Then, how we move on? Whether we further follow CSF1R immunotherapy combination approach or we look out for other cancer types or even an agnostic approach, will be reviewed once we have progressed our quite extensive preclinical program that we started when we licensed the drug from ArQule. So, that's for the first question. The differentiation versus other compounds, there is no head-to-head comparison currently. So, comparing numbers across studies is by the nature of the game, difficult for that reason. What we’re seeing and what we are working towards is really to try to obtain a differentiation, based on the inherent characteristics of the compound, meaning its pharmacology, the kinase inhibition profile, and also the safety profile. And, we have done comparative kinase cleans in-house, and we clearly see differences there. Also, when one looks at the published data, there are differences in the safety profiles between the various FGFR inhibitors and clinical testing. So, this is not a uniform class where we could exchange one compound versus another. We are quite confident that we can kind of profile derazantinib versus the other FGFR inhibitors to find the best place for derazantinib and the best indications that brings the highest benefit to patients.

And just your other question was related to the sort of allocation of capital towards sort of like the acquisition or licensing of new candidates. And what I would just stress there is that we’ve currently got with our cash on hand that Donato talked about, the 223 million and the burn rate this year and I think the next two years, we’ve got enough funds to fund the value inflection points definitely over the next two years 2019, 2020 into 2021. So, clearly, though if we did spot -- that’s excluding the licensing of any additional assets, which to your point, we are very clear about the sort of things that we are interested in looking for, like derazantinib that fitted out sort of sweet spot very well. We are very clear that we are looking at small molecules, we are looking in oncology, we are looking at targeted compounds that we can have a biomarker-driven development program for. So, we are actively looking but -- and then, clearly, if we found the right candidate, we would look at the candidates in the preclinical through to Phase 1, Phase 2. Derazantinib was Phase 2. We -- also last year, we licensed in preclinical compounds in oncology. So, we look at the sort of -- the range from preclinical through to Phase 2. Currently, we have enough money to fund all our programs in terms of if we found another asset that needed more funds than we would think about that if we found the asset and depending on the terms we would negotiate while -- with the other company.

The next question comes from the line of Bob Pooler from valuationLAB. Please go ahead.

First question on Cresemba. Next to the global expansion, what are the key drivers behind the strong growth of Cresemba? And what kind of peak sales do you see?

In terms of the drivers behind the growth and then maybe the future, I'll let Adesh answer as well. But, in terms of the drivers behind the growth, I mean, this is a -- Cresemba operates in a very different market than for example antibiotics. The antifungal market is not a saturated market in terms of numbers of competitors. There is only a few drugs that are actually approved in the area of aspergillosis and mucormycosis, and basically isavuconazole took on head-to-head the previous gold standard voriconazole and showed that it was significantly better in terms of safety profile versus voriconazole. So, one of the key drivers for the success of the brand is actually the profile of the product -- the clinical profile of the product and the fact that it can be used in rarer moles like mucormycosis infections as well as aspergillosis. So, the profile of the product that is one key driver to the success of the product. And then, additionally, as I think you are aware, we actually have got a very good network of partners, commercial stage partners who then can maximize the success of the brand. I mean, in Astellas and Pfizer to name the two, we've got two partners, covered a large part of the world for Cresemba who actually have got a lot of experience selling antifungal products. So, in a way, we've chosen ideal partners as well as having an ideal product. But in terms of the future, Adesh do you want to add to that?

Sure. So, I think. what we can say is that I think we're really just scratching the surface at this point in time. So, we're looking at a really relevant market, the whole market is around 3 billion we have seen that other drugs in this category can reach 800 to 900 million in peak sales. And from everything that we are seeing so far where Cresemba is really on a good start. Growth is really is really coming from various factors. So, the in-market sales in the existing markets continue to grow. We are seeing contributions from new launches and that you may have heard in my presentation that only in this year, we are looking at 20 new countries that we’ll be launching and our partners will be launching in. We're looking at, at least another 20 countries by the end of 2021. So, we have a lot of growth drivers there. And so, all-in-all, without giving you now a number, I can just say that we believe that Cresemba can be quite significant and history proves that drugs in this category that are really differentiated can really be quite significant.

Thank you. I’m also looking to the 800 to 900 million just looking at the uptake and all the -- actually the factors behind the growth there, it looks like that is really achievable. Now, switching just to antibiotics, what do you think of the new initiatives from the UK government to combat antimicrobial resistance? And also in particular, the new subscription payments scheme, which is an incentive for manufacturers actually to conduct more research in this area. Scott Gottlieb, the FDA Commissioner also proposed something similar last year. Do you think also the EU is going to fall there as well?

Yes. It’s a very good question. I mean, obviously, the ideas that came out of the UK I think a couple weeks ago in terms of their five-year and 20-year AMR plan, were in some ways not dissimilar to some of the ideas coming from the U.S. last year. And we view it as -- I mean, at the moment -- it’s good ideas and I think it’s clearly -- I think the global awareness, the antimicrobial resistance is a global issue. And in relation to companies developing antibiotics and being incentivized in terms of so-called pull incentives to keep investing in antibiotic research, that's good -- that's gaining more and more public traction I think globally. And so, we obviously are engaged in that debate and we fully support that debate. I think, it’s fair to say, as of today, the U.S. ideas and the UK ideas, they need more meat to the bones in terms of the coming to fruition and in terms of concrete actions. But, in terms of the direction of travel, it's clearly globally going in the right direction as we think it should do. I think, that's all I can probably say at the moment.

Thank you. Then, just my final question on derazantinib, what kind of objective response rate and disease control rates do you believe it has to show to meet -- and to gain accelerated approval in iCCA?

So, the data will be reviewed in what's expected in terms of patient benefits that they would be receiving from the second line chemotherapy. And based on literature data, these are objective response rates of less than 10%, and progression free survival range of three months. So, we believe that a substantially higher objective response rate and the demonstration that the quality of these responses is good, meaning that patients have long duration of responses or they have long, really good stable-disease causes together with the safety profile probably would make it and will be required to convince FDA to grant accelerated approval.

Looking at the interim results, it seems that you are in that direction where you’re substantially higher than what standard of care has to offer basically these no option patients. So, fingers crossed on that one.

Thank you.

The next question comes from the line of Brian White from Cantor Fitzgerald. Please go ahead.

A couple of questions on derazantinib, if you don’t mind. Firstly, we’ve seen I think quite a stable sequential development so far, first, in iCCA and now in BARDA cancer. Is this -- you have given the dates you had so far and the encouraging data we’ve had so far. Do you expect to see or can we expect to see more parallel development, or is it going continue to be sequential? And then, secondly, on the combination with checkpoint inhibitors, is this -- if these data positive? Is that the way that you would prefer to see derazantinib developed, just given the current enthusiasm for immunotherapy? And then, just finally, a question on the strategy behind M&A. And I guess the particular question I’d like to ask would be, would you consider marketed products in the -- and the cancer fuels the potential breach out ahead of the obviously the potential approval of derazantinib in a few years time?

Thanks, Brian, for the question. I'll kick off and then Marc or Adesh you might want to jump in. But, in terms of the sequential versus parallel development track for derazantinib, I think that is very much the initial -- I think you could say, the initial sequential approach was because of the nature we licensed the compound in. And really, as far as I'm aware, ArQule has really only done mostly iCCA work, clinical work on the compounds. So, therefore, it does look as if therefore we are thinking of it sequentially, but it’s just the fact that we licensed it in with an iCCA program. What we've done both from our research and our development teams is we’ve been doing lots of analysis to try and understand where we think the full utility of the compound is. So, actually, I think what you'll see now is that if we're moving from the sequential to a parallel road, if you can call it that, in terms of the urothelial study, as Marc said I think earlier, will start in the middle of 2019, whilst the iCCA program is still ongoing. And actuality we are only now adding another cohort of other FGFR aberrations into -- in addition to the FGFR2-fusion aberrations in the core element of the registrational study. So, I think, we're going to see very much more parallel cohorts going on. But, Marc, do you want to add to that? Dr. Marc Engelhardt: Absolutely, we've put this on a parallel track now. And our decisions, we try to do -- decisions based on biological rationale. And that's also developing -- we've in-licensed derazantinib last April. And we immediately started really substantial preclinical program to do the profiling. And as mentioned before these FGFR derazantinib are different from their kinase inhibition profile, they are different from the pharmacology profile, from the safety profile. One of the aspects, as we've indicated now is that there may be a biological rationale with the CSF1R inhibition to preferentially combine with immune checkpoint inhibitors. Now, in urothelial cancer, there is an overlap of low PD-l urothelial cancers with FGFR alteration. So, that’s kind of a biological ideal place for that combination, whether that takes us further and other counter types needs to be seen. And as I said, we will be facing this on the evolving, preclinical data and rationalize it for them.

Thanks. Do you want to take, Adesh, the question around M&A strategy on oncology and anti-infectives?

And I'll take this as a broader and say that in essence we are looking currently at assets primarily and ideally at assets more on the clinical side in order to expand our portfolio in our two focus areas and primarily on the oncology side because there is simply not as much around on the anti-infective side that would really meet our high bars with regard to innovation and requirements to the profile. I would just say that with regards to M&A, with regards to a commercial infrastructure in light of derazantinib, it would be acquired - from my perspective, it will be a rather risky strategy before we sort of know exactly where derazantinib is moving to build infrastructure or to acquire infrastructure for the commercialization and more or less already define how we're going to commercialize and optimize the value. So, I think at this point in time, the idea is we see significant potential in derazantinib and not only in iCCA but as we discussed in urothelial cancer and potentially other cancer types. And probably, we should wait a little bit to see what is the ideal strategy to optimize the value of derazantinib, whether that involves participating, whether that involves commercializing ourselves in certain indications in certain regions, I think that will all follow the data at the end day.

The next question comes from the line of Brigitte de Lima from goetzpartners. Please go ahead.

Three questions as well. So, the first one is on the 5 million milestone from Pfizer related to Cresemba. I think, what puzzles me here is what exactly triggered it? Because it seems -- it just sounds -- it just looks a bit odd that it was triggered by the sales in 2019, when it should have generated more in 2018. So, could you just explain how that pressure was created? And then, the second one is on the guidance, on the expectations for operating expenses. How should we see the different lines developed? Should we anticipate further declines in SG&A as you continue to sort of trend down the commercializations, operations and increase in R&D and COGS or all the lines going to remain pretty stable versus last year? And then, the third question would be on derazantinib regarding the collaboration with Roche. Is it sort of a very standard clinical trial and supply collaboration where they provide atezolizumab for free and you do everything else or is it a little bit more to that? And then, perhaps you can thread that question, any particular reason why you selected Tecentriq and not Keytruda, given it's the market leader? I'll stop here.

Okay. Thanks. I appreciate it. Okay. Donato, why don’t you take the royalty and Pfizer question and the expenses question.

Hello, Brigitte This is Donato speaking. So, sorry for huddling you, it was not our intent. And the 5 million, the reason why this is triggered in January is because we have maybe a structure that is not so common with regard to milestones -- sales milestone payments as this business based on the cumulative sales that are achieved actually over the lifetime of the agreement with Pfizer. So, there are factors which are not calendar year based, as you see very often. In this case, it’s just the cumulative sales that Pfizer has been achieving since we have entered into the agreement. And that has triggered a milestone payment now in January. This is actually something, which we have structured. My intent on that, as you may recall, the mechanics there in the Pfizer agreement, there is a fixed mid teens percentage royalty rate, different than with Astellas for example where we have staggered royalty where the royalty rate increases and how do we compensate for that that is based the sales milestone payments and not on annual sales levels that are being achieved but on cumulative sales levels. And so with that structure, we anticipate that on a 12 to 18 month basis that should actually trigger then the respective sales milestones. Then, your second question was with regard to -- on the operating expenses. I think, generally speaking, you could say -- one could say, the research and development expenses probably more or less -- going to be more or less at the comparable level as ‘18. The cost of product sold will increase to some extent as we expect that the revenue from Cresemba and Zevtera is going to increase. And on the selling, general and administrative expenses, we expect a little bit of more reduction but not significant but still a bit of a reduction still going forward. And then, for the third question, I may hand over to Marc or Adesh to take that.

So, I'll take that one and then Marc can just chip in. So, it is in general a clinical supply agreement, as you pointed out. So, there are no rights or anything else being transferred or any kind of other activities. And, I think the second part of your question was why basically Tecentriq, why not another PD-1 inhibitor of PD-L1 inhibitor. In essence, I think to start out with, given the mechanism that we are exploring the CSF1R inhibition and FGFR inhibition, we believe there is no reason to believe that the combination with one or another PD-L1 inhibitor or PD-1 inhibitor would work better or worse. However, I think, if you look at the different compounds, they have differences. So, there are differences with regard to the label, there are differences with regard to the safety profile, administration schedules, and so on and so forth. And therefore, I think, when you're thinking of that combination, it all has to be taken into consideration. So, we, in essence, looked at this, we shared our scientific hypothesis with different potential partners, and at the end felt that the best alignment is basically in combination with Tecentriq and the collaboration with Roche.

The next question comes from the line of Sean Conroy from Edison. Please go ahead.

I just wanted to have a little bit of a quick question surrounding 833 and the Phase 1 readout you have there, and just gauge a little bit more as to what happened there and what sort of timelines you're going to put down to the preclinical reformulation work that you've got planned for that? And whether or not you would consider going back to the drawing board and bringing through another one of the compounds that you in-license from CR UK? Dr. Marc Engelhardt: Thanks, Sean. This is Marc. I can answer that question. So, we feel really very convinced about biology of 3833. I mean, we view this on a continuous basis, and this is a unique profile with the panRAF inhibition and the SRC inhibition. What happened in clinical studies that we've seen quite variable drug levels in the blood that we thought would not allow really to directly go into a Phase 2 development. So, in essence, we made one step back and looking onto the reformulations. We cannot define an exact timetable at this point in time before it can potentially be brought back into a clinical testing, but we're certainly not going to go back to the drawing board and look for a new compound because we believe in 3833.

The next questions is a follow-up question from Paul Verbraeken from Research Partners. Please go ahead.

Yes. But that question just got asked by my Edison colleague; it also concerned 3833. So, I'll drop back. Thank you.

We have another follow-up question from Brigitte de Lima from goetzpartners. Please go ahead.

I'd like to ask three more questions, if I may. A quick one on the financials. I think, you completed CHF 6.2 million in stock repurchases. Is there a plan to do more of this sort of from dilution from, I guess, stock options from employees? The second one is on Zevtera. It is a little bit difficult to understand how much of your sales and milestones related to Zevtera. So, could you just maybe qualitatively let us know if sales -- in-market sales ramped up materially in the second half of 2018 compared to the first half? And when I say materially, let' say more than 50%. And then, final on derazantinib. I was a bit puzzled that the interim analysis was done in 29 patients. You were actually ahead of schedule with respect to what the market was anticipating when the results were coming. So, just curious why you didn't wait to have a few more patients and have a sort of more significant readout on a larger number of patients?

Okay. Thank you, Brigitte. Donato, you take the question.

Yes. I’ll take the first question on the -- you were referring to the CHF 6.2 million. This is actually not related to the employee stock option plan. That’s related to basically increasing the liquidity of the stock in the Swiss market through market making activities. We have mandated that to a bank. We’ve announced that actually in a half year when -- in our half year results when we presented the half year results back in August 2018. And that’s now the value of the shares that we were holding end of the year in the context of these market-making activities.

And then, Zevtera.

With regard to Zevtera, I think, it is fair to say that the majority of our sales already coming from Cresemba. And I think not surprisingly, given that the commercially most relevant market for Zevtera is clearly the U.S., as we indicated probably around 70% of the potential based on historic data, we would expect to be coming from the U.S., second most important market probably be in China. Nevertheless, I think, what we can say is that by your definition of sales ramp-up, certainly there were also significant sales ramp-up. So, the in-market sales in the second half versus the first half, at least doubled.

And for the question about the interim analysis, Brigitte. So, the previous Phase 2a study had 29 patients, and this was one of the reasons, looking at the efficacy obtained in their Phase 2a study done by ArQule, which was recently published in the British Journal of Cancer. We basically wanted to look whether the figures we have done are on track with the prior data and also to assess utility of the trial. And when we saw in 29 patients the amount of responses we had, we could conclude already with confident that we were on track with the study, and that's why we did the interim analysis at an earlier timeline.

[Operator Instructions] There are no more questions at this time.

Okay. Thank you for your questions. And I wish you a good remainder of the day. Thank you.

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