Ladies and gentlemen, welcome to the Basilea Pharmaceutica's Half-Year Results 2019 Conference Call and Live Webcast. I'm Sandra, the Chorus Call operator. [Operator Instructions] 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, sir.

Thank you. Hello. This is David Veitch, CEO at Basilea. I would like to welcome you all to our conference call and webcast reviewing our financial results and key achievements for the first half-year 2019 and also review our upcoming milestones and financial guidance for the full year 2019. I would like to mention that this call contains forward-looking statements. This morning, we issued a press release and financial report on the results of the first half year 2019, and these documents are available on our website at basilea.com. Joining me today on the call are Adesh Kaul, our Chief Financial Officer; and Dr. Marc Engelhardt, our Chief Medical Officer. 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 infectious diseases. 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 establishing Cresemba and Zevtera as global brands. In the first half of 2019, we saw continued strong revenue growth including a substantial increase in the revenue contributions from Cresemba and Zevtera. We also made significant progress in our clinical stage programs and have been able to strengthen our pre-clinical pipeline through in-licensing collaborations. I would like to provide a brief summary of the financial results and development milestones we've achieved. We significantly increase the revenue from Cresemba and Zevtera by 91% year-on-year to CHF 53 million reflecting both the growth from the first launch markets, but also initial contributions from newly launched markets. We improved our operating results for the first half year 2019 by 35% compared to the same period last year. I'm also pleased to report a half year cash position of CHF 178 million which provides us with the necessary flexibility to continue moving forward towards additional value inflection milestones in 2019 and beyond. We also made significant progress in our late stage clinical development. We reported positive Phase 3 topline results for the TARGET study ceftobiprole in skin infections. This is a major milestone toward bringing ceftobiprole to the important U.S. market. We also expanded our derazantinib clinical program. After reporting positive interim results from the Phase 2 study in intrahepatic cholangiocarcinoma, we recently initiated the Phase 1/2 study in patients with advanced urothelial cancer in combination with Roche's immunooncology drug Tecentriq to broaden our therapeutic potential derazantinib. Adesh will now give you an update on our commercial progress and also present financial highlights for the half year 2019, as well as our financial guidance for 2019. Then Marc will provide you with more detailed information on the progress of our clinical development programs. And then lastly, I'll provide you with an outlook for the remainder of 2019 and beyond. So I’ll now hand over to Adesh.

Thank you, David. In the first half of 2019, we together with our partners continue 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 show that in the 12-month period ending March, 2019 the global in-market sales of Cresemba grew by 43% year-on-year to approximately US$170 million. This impressive performance is driven by a continued strong sales uptake in the U.S. and early launch countries in Europe. Going forward, we expect growing contributions from new and recently launched markets adding to the continued growth in the more established markets. In the U.S., Astellas reports Cresemba sales for January to June 2019 of US$67 million. For its fiscal year 2019 from April 2019 to March 2020, Astellas guided for US$143 million in Cresemba sales representing an expected 20% growth year-on-year. Cresemba sales are increasing in Europe too. As reported in January, the strong sales performance in Europe triggered a US$5 million milestone payment from Pfizer. Whilst there is significant growth potential from the existing markets, an important factor for maximizing the global value of our brands is to continue to expand their geographic reach. We are pleased with the progress that our partners have made in 2019 so far in this respect. In the first half year 2019, Cresemba was launched in 14 additional countries. It is now marketed in 33 countries globally. Zevtera was launched in Jordan and has now been launched in a total of 17 countries and we expect further launches of Zevtera around the world over the coming months and years. Our partners are well on track to reach the goal of 40 launched countries for Cresemba by the end of 2019. This would double the number of countries from the end of 2018. We anticipate this number of launched countries will increase to 60 by the end of 2021. Our license and distribution partnerships for both our marketed 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 future revenue growth of our brands. Basilea participates in the commercial success of both Cresemba and Zevtera through royalties or a transfer price structure. In addition, we already realized around US$245 million in upfront and milestone payments, and could receive up to US$1.1 billion in potential future regulatory and sales milestone payments from our partnerships. Turning now to ceftobiprole, our anti-MRSA broad-spectrum antibiotic which is marketed in most countries under the brand name Zevtera. Our key priority for Zevtera is to gain access to the U.S. market. MRSA remains an important healthcare issue, and resistant rates are still high. In the U.S., MRSA rates of 45% have been reported which are among the highest in the world. The U.S. clearly is the most important country for the commercialization of MRSA branded hospital antibiotics. For individual products their value share may go up to 90% as seen for daptomycin, which is a standard drug for the treatment of MRSA infections in the hospital and also for Ceftaroline which is a patent protected anti-MRSA cephalosporin hospital antibiotic. Marc will provide you with an update on the progress we have made towards our potential U.S. filing for ceftobiprole based on the positive results of the Phase 3 TARGET study. Moving on to financials, I will highlight some of the key financial figures that were published in today's press release and in more detail in the half-year report. I would like to mention that all the figures I'll refer to are in Swiss francs. The financials for the first half year 2019 are characterized by a significant increase of the revenue contributions from our two marketed products Cresemba and Zevtera. This increase more than offset the impact from the completion of the non-cash revenue recognition related to our former hand eczema brand Toctino. Total revenue increased by 5% from CHF 59.9 million to CHF 63.2 million. The increase was mainly driven by higher revenue contributions from Cresemba and Zevtera, which increased 91% from CHF 27.7 million to CHF 52.9 million. Our total cost and operating expenses declined by 5% from CHF 80.3 million to CHF 76.4 million. The operating loss in the first half year 2019 improved by 35% from CHF 20.4 million to CHF 13.2 million. Net cash used in operating activities was reduced significantly by 25% to CHF 45.4 million compared to CHF 60.4 million in the first half year of 2018. This improvement is a result on the one hand of the significant increase in cash flow generated from Cresemba and Zevtera and on the other hand of Basilea's continued focus on managing it operating expenses by continuously optimizing its preclinical and clinical portfolio and targeting its investments into its R&D pipeline. As of June 30, 2019, Basilea's combined cash and short-term investments amounted to CHF 177.9 million. In the first half of 2019, we lost CHF 18.8 million in revenue from the non-cash deferred revenue recognition related to the Toctino transaction. We're able to more than offset this decreased to a CHF 25.1 million increase in revenue contributions from the two marketed products Cresemba and Zevtera. In addition, we reported CHF 3.2 million lower BARDA revenues in the first half of 2019. This decrease is a result of lower costs related to the completed ceftobiprole Phase 3 skin infection study resulting in lower reimbursements from BARDA in the first half year 2019. Moving to expenses. Total costs and operating expenses decreased from CHF 80.3 million in 2018 to CHF 76.4 million in the first half year 2019. The decrease is mainly driven by a CHF 7 million decrease in R&D expenses. Cost of product sold, increased by CHF 2.9 million, largely reflecting increasing product deliveries to our partners. SG&A expenses remain basically flat. Coming now to our financial guidance for the full year 2019. Based on our key priorities for the second half of 2019, which David will outline shortly, we provide the following guidance for the full-year 2019. Total revenue is expected to amount to between CHF 128 million and CHF 133 million. This is at the lower end of our previous guidance because of the lower than previously anticipated BARDA reimbursements, due to the lower than anticipated costs for the successfully completed Phase 3 skin infection study with ceftobiphrole. Most importantly, we anticipate continued significant revenue growth from Cresemba and Zevtera in the range of CHF 105 million to CHF 110 million for the full-year 2019, which is an anticipated increase of 28% to 34% over 2018 and at the high-end of our previous guidance. For the full-year 2019, we expect operating expenses to remain at approximately the same level as 2018, leading to an anticipated operating loss of CHF 22 million to CHF 27 million, narrowing our previous guidance around the same midpoint. We anticipate net cash used for operating activities to further decrease in the second half of 2019 as compared to the first half year, resulting in an anticipated net cash consumption of CHF 62 million to CHF 65 million for the full-year I will now hand over to Marc for the clinical development update.

Thank you, Adesh. Let me continue further with our antibiotic ceftobiprole. We have just reported positive top line results from the so-called TARGET study, a Phase 3 study in patients with the Acute Bacterial Skin and Skin Structure Infections, also known as ABSSSI. The TARGET study was a randomized, double-blind, Phase 3 non-inferiority study and enrolled 679 patients. It was conducted at more than 30 clinical centers in the U.S. and Europe. Patients received either ceftobiprole given intravenously three times daily or the compared regimen of twice-daily intravenous vancomycin plus aztreonam. Ceftobiprole met the pre-specified primary endpoint of early clinical response at 48 to 72 hours after start of study drug administration in the intent to treat population. This is the key endpoint according to the FDA guidance for the U.S. and includes all randomized patients. To treat at endpoint, the initial skin given size had to decreased by 20% or more from baseline. Response rates we’re 91.3% with ceftobiprole versus 88.1% for the competitor. Ceftobiprole also met the pre-specified secondary endpoints of investigator-assessed clinical success at the test-of-cure visit, 15 to 22 days after randomization. This is the key endpoint for the EMEA and Europe. In the ITT population, clinical success for shown in 98.1% versus 89% and in the clinically evaluable or CE population 97.9% versus 95.2%. The CE population is a subset of patients in the ITT population with no major protocol deviations. In the TARGET study the CE population was approximately 85% of the ITT population. In summary, ceftobiprole was non-inferior to vancomycin plus aztreonam for the treatment of ABSSSI and the key endpoints for the FDA and NDA both meant success rates showed a trend in favor of ceftobiprole in the lower bounds of the 95% confidence intervals were all within the pre-specified non-inferiority margin of 10%. Positive results were consistent in an analysis by region for the USA and Europe. Ceftobiproble was well tolerated in the TARGET study. The overweights of drugs related adverse events were 20% for ceftobiprole and 18% for vancomycin plus aztreonam and similar between the two treatment groups. The most common drug related adverse events in both treatment groups were nausea, diarrhea and headache and the safety profile of ceftobiprole in the TARGET study was consistent with the non-safety profile from earlier studies. The successful TARGET study is a major milestone towards the filing in the U.S. Importantly, the second Phase 3 study in Staphylococcus aureus bacteremia or bloodstream infections a study called ERADICATE is well on track and is expected to deliver top line result as planned in the second half of 2021. The Phase 3 program for ceftobiprole was 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 Bacteremia study is also positive broadly applies to submit a new drug application to the U.S. FDA, ceftobiprole has a designated a qualified infectious disease product by the FDA for these indications. If approved, ceftobiproble will be eligible to receive 10 years of market exclusivity in the U.S. from the date of approval. Now moving on to oncology, our lead oncology drug candidate is derazantinib, which we inlicensed in 2018 from the U.S. company ArQule. derazantinib is a targeted orally available small molecule inhibitor of the fibroblast growth factor receptor or FGFR family of kinases, with a strong inefficiency seen with FGFR1 2 and 3. Derazantinib also inhibits the colony-stimulating factor 1 receptor or kinase or CSF1R kinase, which has been identified as an important target in the modulation of the tumor immune microenvironment and this supports combination studies of derazantinib with immune checkpoint inhibitors. In January 2019, we reported encouraging interim results from the registrational Phase 2 study, called FIDES-01, in the second line treatment of FGFR2-fusion positive iCCA. The FIDES-01 study is expected to report topline results in mid-2020 in iCCA patients with FGFR2 fusions. This could potentially allow for accelerated approval in the U.S. in iCCA. We have furthermore expanded the FIDES-01 study in June with a new cohort of iCCA patients with FGFR2 gene mutations or amplifications in their tumors. Through this new cohort, we intend to further define the full therapeutic potential of Derazantinib in patients with iCCA. As mentioned earlier, 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. Preclinical data has shown that tumor macrophage modulation through CSF1R blockade, renders tumors more responsive to T-cell checkpoint immunotherapy, including approaches targeting PD-L1 and PD-1. CSF1R kinase inhibition may thereby improve the susceptibility of tumors to immunotherapy. Additionally, 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 may address several oncogenic mechanisms and provide a new therapeutic paradigm. The inhibition of CSF1R by derazantinib seems to be a unique feature for derazantinib compared to other FGFR inhibitors. And this is supported by chemical structure analysis which show that derazantinib fits better into the CSF1R binding pocket and other FGFR inhibitors, such as atezolizumab. The CSF1R inhibition maybe important in the treatment of urothelial cancer, but may have a broader utility to spot combination studies in other cancer types. We have recently started a Phase 2 study with derazantinib as monotherapy and in combination with Roche's PD-L1 blocking immune-checkpoint inhibitor atezolizumab or Tecentriq, in a biomarker driven multi cohort clinical study in patients with the advanced urothelial cancer. The name of the new study is FIDES-02. FGFR operations play an important role in many other concerts beyond iCCA or urothelial cancer; including, gastric, breast and lung cancers. We are currently conducting significant preclinical translational work. And this is being 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. Moving now 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 in area of high unmet medical need with very few treatment options available. We are currently conducting preclinical study with BAL101553 in this indication. In Switzerland, the Phase 2a expansion study in patients with recurrent glioblastoma is ongoing, using weekly 48-hour infusions. A separate arm in this study also includes patients with platinum-resistant ovarian cancer. This study is anticipated to complete enrollment around year end 2019. In the U.K., the Phase 1 dose escalation studies ongoing in patients with recurrent or progressive glioblastoma, using daily oral administration of BAL101553. The study is close to completion with the aim to define maximum tolerated dose. 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 this study could be completed by mid-2020. For BAL101553, we had previously identified a potential response predictive biomarker called end-binding protein 1 or EB1, based on comprehensive preclinical studies in glioblastoma models. In the ongoing clinical Phase 1 study with daily oral dosing of BAL101553 in patients with recurrent glioblastoma, we have seen an exceptional tumor response with a patient who is ongoing for more than 15 months in the study and showed an approximately 70% area deduction of the TBM tumor. The TBM tissue investigations performed in this study showed a strong EB1 expression in the TBM tissue of this responding patient, while non-responding patients did not show this pattern of strong EB1 expression. We are therefore assessing the potential utility of EB1 to support a biomarker driven clinical program in TBM and potentially other concept types and the use of BAL101553 as a targeted therapy in patients with too much or high EB1 expression. Moving onto our third oncology drug candidate, the panRAF/SRC kinase inhibitor BAL3833. As previously reported, the first in human Phase 1 dose escalation study with the oral formulation of BAL3833 in patients with solid tumors was completed without declining a maximum tolerated dose. The oral formulation explored in this study did not achieve consistent drug levels in patients. Based on the observed pharmacokinetics in the Phase 1 clinical study, we do not intend to move forward in clinical development with this formulation. However, pre-clinical activities are ongoing to see if there are alternative ways forward with reformulated drug candidates. Finally, Basilea has entered into a licensing and research collaborations for preclinical compounds in its strategic focus areas of oncology and infectious disease. Thus we are strengthening our pipeline to provide potential clinical assets for the future. I will now turn it over to David.

Thank you, Marc. In summary, 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 have already achieved the majority of the development goals we set for 2019. For this second half of the year, there were two additional milestones for BAL101553. As Marc indicated, we anticipate to complete enrollment into the Phase 1 for the oral formulation in patients with recurrent glioblastoma, and we also expect to complete the Phase 2a study with 48-hour infusion in patients with ovarian cancer and glioblastoma. Operationally, we will continue to focus on increasing our cash generating revenues from both our marketed brands, Cresemba and Zevtera. We will advance the derazantinib registrational Phase 2 study in intrahepatic cholangiocarcinoma and the Phase 1/2 study in urothelial cancer towards data readouts in 2020. We've progressed the Phase 3 study with ceftobiprole and staphylococcus aureus bacteremia towards topline results in the second half of 2021. And finally, we will continue to explore opportunities to selectively expand our clinical and preclinical oncology portfolio through both in-licensing and internal development. We will now open the line for your questions.

[Operator Instructions] The first question comes from Louise Chen from Cantor. Please go ahead.

So my first question is the primary mechanistic advantage and disadvantages of the FGFR mechanism for the treatment of cancer, and what makes derazantinib safe and different from the other ones that are on the market or in development? Second question I had is back on derazantinib again. What other new indications will you pursue? Looks like you've already moved here on two and I know there are others in the wings here, so anything on that front will be helpful. And the last one here is on BAL101553, for the treatment of glioblastoma. Is there any interest in combination therapy with this product?

Actually given the questions you've asked, I'll ask Marc, could you start off with the FGFR mechanism in cancer, the comment on any different indications we might be looking at - actually they're probably all for you initially. And then 101553 the combination potential. Maybe Marc you could do.

So as I have understood the first question was about again mechanistics of the anticancer effect in FGFR to economically ulcerated tumors and the differentiation derazantinib. So I think today we know that at least two tumor types are really have actually are as a strong oncogenic driver which is iCCA and urothelial cancer where several FGFR inhibitors have shown significant and really substantially therapeutic benefit. There are other indications that are currently being explored. Some companies do basket study others look at indication. We've done a lot of translation work and also feel confident to expand our region in terms of cause indications beyond urothelial and iCCA and we will update on these plans later in the year. In terms of the differentiation, we believe when looking at the various FGFR inhibitor and clinical development that there is differentiation between these compounds on their kinase inhibition profile. And one of the points we've made during our presentation is that there is un-loss inhibits CSF1R which may be quite important in the combination therapy with immunotherapy agents. We also see differences in the safety profile of the various compounds. There are some compounds which cause a higher rate of timing events including written events. There is difference in renal toxicity and hand foot syndrome. And this may all impact the ability to combine these compounds clinically. So in short, the tool really establish indications currently is iCCA and urothelial cancer. There are additional indication that we are in the process of moving into at least one other indication based on the substandard pre-clinical work. The differentiation is really about pharmacology kinase inhibition profile and safety profile.

And then the 101553 combination potential?

It's certainly there we have preclinical data that have looked at combination with radiotherapy. Remember we're conducting a study in the U.S. with the ABTC in newly diagnosed glioblastoma in combination with radiotherapy and the support by the ABTC that we obtained was really based on the preclinical data in combination with radiotherapy. And we also have studies with triple combinations including temozolomide which are very promising. In addition, we have several preclinical studies combining with Herceptin or Avastin that may become relevant when we talk about GBM. I said this would be future plans at the moment we are looking into the combination with radiotherapy and as we've indicated during the presentation, we’re looking into strong [embryonic tumors] and may use this as a potential enrichment biomarker in the programs.

Next question will come from Bob Pooler from valuationLAB. Please go ahead.

Congratulations with the excellent first half results and also the positive topline TARGET results there. My three questions if I may first on Cresemba at the moment most of the sales generated in the U.S. do you expect that the global rollout that's Europe and rest of the world will overtake that and become more than the U.S. going forward. Second question is on Zevtera now with the TARGET results in the pockets, do you expect to start negotiations on commercialization rights in the U.S. Are you still going to wait for eradicate them - results there. And then the third question is on derazantinib, what is the expected trial duration of this FIDES-02 trial in the urothelial cancer and could you indicate what kind of peak sales you're presenting for this indication?

So I’ll kickoff with the sales of Cresemba and then I’ll hand over to Adesh and Marc for some of the other questions. But in terms of yes, you're correct if you look at the sales now and you can look at this from the IQVIA sales that Adesh alluded to the 170 million of 12 months sales to the end of March that more than half of them are off in the U.S. And that’s largely because of the fact that the market access in the U.S. is quick but also the U.S. you may remember the FDA approval was before the EMA approval. So we launched in the U.S. or Astellas launched in the U.S. in March/April 2015 where it wasn't really launched Cresemba in 2016 in Europe. So the U.S. got off to a strong start and it's growing still nicely but it's a significant part of the sales. Ultimately to come back to your question the other part of your question ultimately if you look at voriconazole which I guess you could say the best benchmark for us in terms of the previous gold standard for invasive aspergillosis. Voriconazole global sales at peak were about 25% in the U.S. so actually unlike what Adesh was commented on Zevtera where we believe the U.S. is clearly the most important market. For Cresemba ultimately a peak if we mirrored voriconazole then the U.S. would be about a quarter of the global sales. Obviously for us the materialized for that to happen we need to launch in all the other major markets of the world which we’re currently planning to do. But that gives you an indication of ultimately the U.S. if it was to follow the voriconazole pattern should be around the 25% of global sales was at the moment its significantly more than that because of the reasons I have said. That’s a comment on voriconazole maybe Adesh you could take the Zevtera commercializations strategy.

Yeah sure and as you already implied Bob in your question our preferred option for the commercialization of Zevtera in the U.S. we’ll be partnering. So absolutely confirmed and we are constantly as you know from our past discussion – in discussions with potential partners as part of our strategy we will also discuss the positive TARGET study results with partners. But we’re not necessarily in a rush because from a registration perspective the driving factor or the timing is driven by the bacteremia study read out which will be in the second half of 2021. For us it will be important rather to find the right partner that will allow us in the right financial structure to optimize the value of the asset rather than rushing into a partnership.

And then Marc do you want to comment on the derazantinib FIDES-02 trial duration.

Yes so this is a study that will have several sub study or cohorts in different therapeutic setting including a second line post chemotherapy post immunotherapy patients but also percent platinum ineligible and we have a cohort in patients who had progress on prior FGFR inhibitors to see how does on the books and that setting. So the entire study – if we run our cohorts including [indiscernible] go for approximately three years, but we expect in the next 12 to 18 month to have readouts from the ongoing cohorts. So this will be a staggered approached with a staggered set of readouts, but the total trial duration is probably about three years.

And then the final point was around the peak sales potential of derazantinib in the urothelial cancer indication?

So as for other products I will take a question Bob this is Adesh as for other product other indications will not reflect peak sales estimates. However, I think it is safe to say that urothelial cancer is a significant market representative, significant market opportunity. It’s the sixth most frequent cancer type in the U.S. there about 80,000 cases reported in the U.S. on an annual basis. Of those about 20% have an advanced diseases or metastatic disease and within that population I think there is some variance about estimates. How many are FGFR positive, but I would guess somewhere in the range of 20% is a safe between. So we’re talking about 3,000 new cases in the U.S. alone on an annual basis and if you take sort of the G7 countries, you take that number probably too close to 8000 cases per year, so that should give you some indication, I think the peak sales at the end will then depend on the clinical benefit provided in these patient population the duration of response how long are they being treated and then ultimately the pricing which is also then the function of the clinical benefit that we will be seeing out of the clinical trial. So therefore there is sort of some guesswork that you would have to do.

The next question comes from Victor Floc'h from Bryan, Garnier. Please go ahead. Victor Floc'h: Actually I have two question about BAL101553. First one, I was wondering if you add any epidemiology data regarding the frequency of the EB1 expression in inpatient with glioblastoma and then the second question, when are you expecting to present from the Phase 2a study. Thank you.

Okay. Thank you. Marc, I guess there yours.

Yes. So I’ll start with the second question with results from the Phase 2 a study with a 48-hour infusion towards the end of the year. The other question about the EB1 epidemiology that's currently something we are looking into. That is not much published on this topic and it also depends on the methodology of the staining method. We believe that from what we've seen so far in the clinical trial that this is not a very frequent condition which supports but this could be quite something specific and targeted. So this is not – this doesn't have a massive abundance and we've been staining couple of samples from the clinical trials except which continue direction this is quite specific and these are very good conditions to run. Biomarker enrichment design because it could be quite a very specific biomarker for BAL101553.

But it’s a very -- just to reinforce what Marc said, it’s a very good question and it’s clearly the question. One of the key questions we’re asking at the moment we're trying to find the answer to that and do the analysis to understand what is the epidemiology of EB1 incidence in GBM and for that matter other tumor types.

Correct. And to also understand whether there is a genomic underlying pattern for strong EB1 expression, so we’re not looking at this purely from the staining epidemiology but would also like trying to understand the underlying genomic patterns of it.

The next question comes from Brigitte de Lima with Goetzpartners Securities. Please go ahead.

I'd like to ask three questions on the portfolio. The first would be on Cresemba. Can you remind me if you expect Cresemba to be launched in the APAC region this year? And specifically I'm wondering if that would trigger milestone payment as well. And then the other two questions on ceftobiprole. Can you remind me if it was ever on the cost to file the skin infection and in Europe as our lead expansion given the data so strong maybe he discusses in the past but I'm just wondering if your competitive environment conduces to adding another antibiotic to skin infections? And then the third question would be on the recent initiative announced in July with the NHS test subscription service for anti-infectives, so we've been seeing this coming, the FDA talked about this, it seem to be happening now. s To what extent might you be involved if ceftobiprole potentially one of the antibiotics that could be trialed and have you heard anything about the health system other countries are planning to do something similar in the near future? And then I'll stop here.

Thank you, Brigitte. In terms of Cresemba and the APAC launches, Adesh you want to comment on that point?

The regular process in many countries outside of Europe and the U.S. is not as clearly defined timing-wise. So it’s difficult to point to anything that is equivalent to PDUFA date, so it’s hard to say when exactly we would see launches in the APAC region. However, what is important is that our partner for the region, Pfizer has made submissions in really a number of countries in the APAC region and therefore we are expecting to really see a launch in the very near future in the first countries in that region. With regard to milestones, what I'd say is that the milestone in our transaction with Pfizer predominantly sales milestone.

Just to add one thing. So Adesh commented on Pfizer been our partner for APAC, the only – it depends if you call in the definition but Japan is not with Pfizer. Japan is with another partner, Asahi Kasei and we previously explained that we’re actually carrying out. It’s on track and we’re carrying out Phase 3 our partner Asahi Kasei is carrying out Phase 3 study in Japan with regard to a potential filing in Japan for Cresemba. So that just in addition to what Adesh said with regard to the rest of Asia Pac.

Thank you, David. And in that collaboration because that's more like a license agreement that we have, you would actually see regulatory and development milestones as well.

And then the comment about the skin with the strength of the TARGET data, would we file…

I can take that as well. So from a positioning perspective, just to be clear for the U.S., we believe that the bacteremia study will be really the differentiator. However, as you pointed out correctly, the TARGET data is actually quite positive and given just the number of patients with skin infections, we believe that even in the skin indication there maybe an interesting market opportunity. So that’s generally speaking with regard to the U.S. strategy. Outside of the U.S., we are evaluating with our partners on a more or less by country-by-country basis on the best strategy to leverage the data. So their considerations on the one hand of what kind of incremental sales would you be creating, on the other hand you have to take into consideration what will be market access considerations, post-regulatory requirements that you may have and so on. So that will be -- that's really very individual from country-to-country and we discussions with -- in discussions with our partners. What we can do in any event is we can of course leverage and our partner can leverage the data in appropriate medical communication in the territories. So we anticipate to publish the data, and as such, it will be available to the appropriate channels in the markets.

And just -- and the comment, your comment about the U.K. policy initiative on antibiotics and how other countries come up with or are thinking of coming up with other similar initiatives, I will try and say this very briefly because it’s quite a big topic but the so-called sort of pull incentives the antibiotic manufacturers are looking for from policy changes in terms of stimulating a sort of greater commercial return for antibiotics. The two, that we’re aware of that have been sort of announced are the U.K. one that you mentioned in July, there was also U.S. policy initiative mentioned in August, both are trying to deal with this issue, are trying to separate the commercial return from the volume usage of the products and try and make it more financially viable for companies bringing out new antibiotics. The U.K. one, we are working with our partner, we obviously have a partner for commercial stage partner in the U.K. [indiscernible] and we are working with our partner and exploring the potential for Zevtera to be included and as I mentioned it’s a pilot phase, the U.K have announced those yes, two compounds that would be in the pilot phase of their initiative. I mean, it’s probably just worth saying, whether or not we are included or not in the pilot phase, the U.K. commercial potential for Zevtera is very small because of MRSA rates and looking at analogs for MRSA hospital antibiotics in the U.K. The U.S. becoming more friendly, if you want to put it like that environment for antibiotics is much more important for the reasons that Adesh said, of the potential of MRSA agents in the U.S. and so therefore, the U.S. policy initiative that was mentioned in August, and there are other ones currently going through Congress, the potentially equally add to a more favorable commercial environment for antibiotics in the U.S., they are much more meaningful for us. And actually to the question about other countries like France or Germany or anywhere else, other countries might be taking part in discussions but we haven't yet -- as yet seen any results of those policy announcements that have come out of the U.K. and U.S. I hope you that in essence somewhat attempts to answer your question Brigitte?

The next question comes from Brian White, Cantor Fitzgerald. Please go ahead.

I was wondering just on – well, a couple of questions on derazantinib and the urothelial cancer indication and also another one of the study itself. Just thinking about the recent positive results for the Tecentriq IMvigor130 in urothelial cancer. I know that there was no indication of response by PD-L1 type, but I wondered if there was a risk that might resolve some of the concerns that the regulators have with the use checkpoint inhibition in urothelial cancer. As, I guess, I jump to my question, I presume that you're measuring PD-L1 status in the Phase 2 study as well. And then the final question I guess is that this is an open-label study. So I presume you are able to just see some interesting data as and when you have it?

Yes, it's an open label study, so we are seeing the data as they emerge. For the other question, the - I think the Tecentriq data is in combination with chemotherapy. I mean, it's all the targeted treatment for FGFR alterations. So what we're seeing in urothelial cancer is that in the PD-L1 low part of the urothelial cancer state is nested in enrichment of FGFR alteration. That's what we're primarily targeting and trying to see whether we can leverage the potential synergy of derazantinib and atezolizumab, based on the CSF19 inhibiting properties of derazantinib. So we feel that this has quite limited impact on any potential patient pool being accessible to derazantinib, because we're really looking specifically at this combination of PD-L1 low and FGFR alteration. And this was not the scope of the Tecentriq study. And we are looking in every patients at the beginning at the PD-L1 stages.

The next question comes from Paul Verbraeken, Research Partners. Please go ahead.

Gentlemen, two questions if I may. The first one about Cresemba in Europe. When do you expect Pfizer to take over manufacturing and is it going to be a gradual process per country, or will it take place in one stroke? And then the second about BARDA. BARDA revenues went down following the Phase 3 expenses I guess, should we going forward peep around this level or do you think the BARDA revenues are going to go down any further going forward?

So on your question about the Pfizer deferred revenues, as a matter of fact you may have seen the footnote in our half year report that we are expecting to complete remaining portion of the upfront payment to be recognized within the next 12 months. And that in essence correlates with the timeframe anticipated for Pfizer assuming responsibility for manufacturing. So that will happen in the course of 2020 or is anticipated as of today in the course of 2020. Having said that, it is gradual in the sense not that country by country but step-by-step. Because as you may know, manufacturing is like a multi-step process; starts with starting materials, API, drug products, secondary packaging and so on. So this is a gradual process stepwise, but not country-wise. I hope this answers your question on the Pfizer manufacturing handover. The second question about BARDA is it is hard to really define in advance on a 6-month period how much exactly we'll get sort of reimbursed by BARDA. Because the mechanism is simply that we are incurring costs and then we're being reimbursed for the costs. And the costs correlate or are driven by the progress that we're making on the studies, including the geographic mix, how many sites are active and so on and so forth. Generally speaking, we wouldn't expect that portion to go down, because with the SAP study, which is continuing, we're still expanding sort of on the number of sites being included in the study. So we expect some ramp up in the costs related to SAP in order to ensure that we have the study completed and the top line results available as an answer to the second half of 2021. So overall, I would think that the safest assumption is about flat going forward and then with a winding down starting in the first half of 2021 and then with the remainder in second half of 2022.

The next question comes from Sean Conroy from Edison. Please go ahead, Sir.

Just going to start off with a couple on Cresemba. How do you see pricing strategies evolving as Pfizer looks to launch in additional market? And can you provide any more guidance on how the sales milestones are based on cumulative sales, how they're staggered? And then I've got another question about derazantinib afterwards.

So in terms of the pricing strategies and the evolution of pricing strategies, I mean, the market – obviously, we don't get involved in detail pricing discussions with our partners. But what I would say is that the pricing has been usually benchmarked the isavuconazole Cresemba. Launch price is usually benchmarked at the original branded price definitely in the U.S. and across Europe. And obviously based on the fact that the data was superior in terms of safety and the pivotal invasive aspergillosis study and the fact that in the mucormycosis indication, the key drugs that's really used there apart from isavuconazole is liposomal amphotericin B which is highly priced, even though it's off patent. It's still highly priced in the market. So actually that supports us having a good fair price for Cresemba. Actually, like I said, sort of similar level to the old, the original [indiscernible] branded price. And this is sort of like what we've noticed is the price across the globe that we've known so far. So in terms of also - has that affected the uptake? And the answer to that is: No. You can see that from the market sales that the CHF 170 million and 12-months sales to the end of March that we referred to earlier, that's in an environment where generic voriconazole is obviously as you would usually expect with a generic pricing is coming down all the time. But I think it's clear to say that the physicians see the benefit of isavuconazole. And so it hasn't precluded the uptake that we've seen so far of isavuconazole. So in terms of the pricing strategy, that's probably what I'd comment on. In terms of Pfizer sales milestone and how that works and when they're hit, Adesh, do you want to comment on that?

Yes. So you may have seen in our press release that we announced that the Pfizer milestones work on cumulative sales from the start of our agreement. They are set up in a way that they're triggered on average every 12 to 18 months. But given that they're on cumulative sales, the individual milestones are sort of lower. So you can think about them as being more frequent, coming every 12 to 18 months, but being lower than what you would be expecting on an annual sales basis or with Astellas for instance. And just as a add up, just as a reminder, the total for both territories together is still CHF 645 million in milestones that are outstanding from Pfizer. So that's for the APAC region and for Europe.

And then if I could just ask one question about derazantinib; how do the development milestones in royalties ArQule eligible for? How did they vary as you expand the clinical developments beyond iCCA?

Again, as a reminder, the milestones or the total milestones are of CHF 326 million. They are predominantly sales milestones, which are not indication-specific but they are also relating to the sales level that you'll be seeing for derazantinib. When it comes to the pre-sales or pre-commercialization milestones, they are largely separated by indications but then also by territories. So that’s sort of the level of granularity that we can give that they are predominantly really sales milestones. So if you think about the split, certainly it's more than 50% -- sales milestones.

We have a follow-up question from Brigitte de Lima from Goetzpartners Securities. Please go ahead madam

Hi. I’d like to ask I'd like to ask two housekeeping questions if I may. The first one is on back to Cresemba, the licensing deal and the deferred portion recognized editions you mentioned. Quite a lot was already recognized in H1. My numbers tell me it was around 16 maybe you can comment on that. And then the questions more, should we see a similar amount in the second half and then the balance next year or should we assume the smaller amount in the second half and then a bigger balance next year? And then the second question is relating to the total costs associated with the clinical trial for derazantinib. Just wondering if you can give us a very rough estimate of how much the UC trial [indiscernible] may cost?

Okay. So that’s a simple question but it will take a little bit time to explain. So you’re right. So maybe I’ll start with the different buckets of deferred revenues. At Pfizer, so Pfizer, we indeed if you do at that calculation you will conclude that we recognized CHF 15.7 million in deferred revenues in the first half of 2019. The portion that we will be recognizing over the next 12 months is as I was alluded to in my response to Paul would be the remaining CHF 36.7 million, so that's the current portion of deferred revenues that is still sort of outstanding. And how this will split between the second half of 2019 and the first half of 2020, remains to be seen, because that correlates at the end of the day with the product deliveries to Pfizer, so that’s not on a linear basis based on end market sales. So that's that sort of not maybe the perfect answer but gives you some indication but we’ve of course included our assumptions in our -- this is included in our guidance for the second half. The other deferred revenues that you're seeing are a little bit easier, because they are largely on a linear basis. So if you look at our deferred revenues related to the Asahi transaction, they are CHF 1.3 million on an annual basis, CHF 0.6 million per year. [indiscernible] is CHF 0.6 million on an annual basis, so CHF 0.3 million on a six-month period and then in essence on you will be looking at about CHF 1.4 million our distribution agreements on an ongoing basis for Astellas, they are deferred revenues of around that CHF 5.4 million in the first half of 2020 and 2019 and that’s also more or less on the linear basis. So until next year we’ll be recognizing CHF 8.4 million for Astellas. Did this answer your question?

Yes, the first that was specifically interested in Pfizer 1 because it's -- the others are quite straightforward that the Pfizer 1 did surprise me a little bit. I thought it would be recognize over next three years, so it was quite a big chunk this year but your answer perfectly explains it with the whole on manufacturing process. So thank you.

Okay. And then Marc, do you want to get the one about the cost of the…

Yes, sure. As a framework, if you take everything together what the study costs and you basically bring this down on patient cost in general these type of studies cost in a range of CHF 50 to CHF 100, CHF 1000 for patient and this depends on the geographic mix, how many patient are included in this cohort, the duration. And as we have a clinical supply agreement with Roche related to Tecentriq one could assume that the average cost per patient over the entire study are rather in a lower to mid-range of this estimate of 50 to 100. Now, to then make a number, really depends on how many patients will be ultimately enrolled in the study. Because we've set this up as a series of different cohorts which are performed in two stages. So you start with stage 1, and if that stage 1 is successful then the stage 2 follows. And usually the size in terms of patient numbers stage 1 to stage 2 is roughly on average 1 to 2 percentage. So basically the higher costs will also imply that the study is successful in a way so that's how these studies are to risks.

[Operator Instructions] The next question comes from Ram Selvaraju, H.C. Wainwright. Please go ahead. Q –Ram Selvaraju: So firstly with respect to ceftobiprole, within the context of the United States, I wanted to know if you could comment on the advantages that ceftobiprole specifically might have as an IV administered antibiotic within the U.S. market environment, which historically has proven somewhat problematic for novel antibiotics that are administered intravenously.

Thanks, Ram. Marc, do you want to take that about the potential advantages of ceftobiprole?

Yes, there is couple of advantages that will certainly play out for these – staph aureus bacteremia indication. I think there the differentiation of ceftobiprole is easier than for the ABSSSI indication, where there is also some differentiation. But I think the SAB differentiation is quite straightforward. The first thing is if you compare it to - so there are only very few drugs that cover MRSA and MSSA at the same time. So this includes basically only vancomycin, which is considered to be not ideal from a safety perspective, but also has a weak activity for MSSA. And at the outset of patients being treated, physicians usually don't know what they are dealing with. And then daptomycin is the other. And daptomycin has several limitations. First, it isn't effective in pulmonary infections. And these patients often present in an ICU, at least with a rollout diagnosis of a pulmonary infection. And ceftobiprole is a proof of pneumonia in Europe. So it's clearly active in the lung, while daptomycin is activated in the alveolar. And that's the problem on the pulmonary side. Also people are looking for a staph response, traditionally drugs that are preferred by physicians in a setting of staph aureus bacteremia, they are bactericidal rapidly active. And then with daptomycin, what's been reported is a kind MIC creep of the staphylococcus aureus whilst patient are on treatment, they can develop resistance. And the last point, and that's really not been described much with ceftobiprole. The last point is that ceftobiprole covers the gram-negative spectrum compared to both daptomycin and vancomycin. So any patient with the suspected polymicrobial infection, including, for example, negative pathogens would be far better off with an initial imperial treatment with ceftobiprole. So these are, in summary, the differentiation points for SAB, some of which also apply for ABSSSI. But I said, the profile of ceftobiprole is certainly much stronger in a competitive landscape in the SAB indication. Q –Ram Selvaraju: Also wanted to ask about what you expect the length of the regimen to be in the ABSSSI and bacteremia settings once potentially ceftobiprole is approved in the United States, if you have some thoughts on that please?

So in the study, as usually, we - the regular time of treatment is 5 to 10 days for ABSSSI. And it's going to be four to six weeks for the SAB indication. Q –Ram Selvaraju: And then just one question on derazantinib please. If you could comment on specifically the potential of derazantinib in the breast cancer context and also if you expect over the course of the next couple of years any incremental clinical data to be generated by the other entity that holds some rights to derazantinib in China SINO event. And if you think that might potentially be incrementally beneficial as you continue to work on derazantinib?

So maybe I start with the breast, there have been few studies now with other FGFR inhibitor in FGFR amplified breast cancer population is relatively small studies. We are also in the process of looking at this preclinically and then make a decision whether we move forward in breast or in another indication. I said we acquired advanced with our plans and we’ll provide more information during the course of 2019.

Certainly we can't give direction on exactly which - whether which indication we are moving, but as Marc said we actually are planning on giving guidance later this year on our next steps in terms of as Marc said following a lot of the preclinical translation of work we are doing where we go next. So we can’t actually specifically answer your question. In terms of the partner for derazantinib, [indiscernible] we don’t cover yes. So SINO event covers Greater China and clearly any data we generate and any data they generate is available for both parties to be aware of. So actually any additional data they create on top of what we create can only be beneficial I would imagine.

[Operator Instructions] Gentlemen so far we have no more questions.

Okay, thank you very much. Thank you for your interest in Basilea and enjoy the rest of your day.

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