David Veitch - Chief Executive Officer Adesh Kaul - Chief Corporate Development Officer Marc Engelhardt - Chief Medical Officer Donato Spota - Chief Financial Officer

Bob Pooler - ValuationLAB Brian White - Cantor Fitzgerald Brigitte de Lima - goetzpartners Securities Limited

Ladies and gentlemen, good morning or good afternoon. Welcome to the Basilea Pharmaceutica’s Half Year Results 2018 Conference Call and Live Webcast. I’m Alister, 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. After the presentation there will be 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 of Basilea, and I welcome you to our conference call and webcast reviewing our financial results and key achievements for the first half year 2018. We will also update you on our upcoming milestones and provide guidance for the full year. This morning we issued a press release and financial report on our half year results and these are on our Web site at basilea.com. This is the first time our earnings call is supported by a webcast presentation. At the end of the presentation, we will provide an opportunity for you to ask questions. Just be reminded that to ask questions you have to be dialed in by phone using the dialing details provided in the press release. That can also be found in the Investor Calendar on our Web site. 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. I would also like to mention that this call contains forward-looking statements. For those on the call who are less familiar with Basilea, we are one of few companies focused on new medicines to overcome resistance in the areas of hospital antibiotics, hospital antifungal and oncology, our three strategic pillars areas. Basilea has a proven track record of bringing brands from research through clinical development to the market. We have brought two anti-infective brands to the market, our antifungal Cresemba and Zevtera, our broad-spectrum antibiotic that also covers MRSA. We are very pleased with our progress during the first half of 2018. We saw continued strong revenue growth, made significant progress in our clinical stage programs and have been able to strengthen our pipeline through in-licensing activities. I would like to provide a summary of the important milestones we achieved. We significantly increased our revenue by 30% to almost CHF60, driven by our two marketed brands, Cresemba and Zevtera. We further strengthened our R&D pipeline by in-licensing the oncology drug candidate derazantinib from ArQule. Derazantinib is currently in phase 2 registrational study. In addition, we entered into licensing and research collaboration in oncology. The preclinical compounds covered by the agreement target an important kinase involved in cell division. We have started the two cross supportive phase 3 studies for ceftobiprole, which are required for future new drug application in the U.S. For Cresemba, our licensing partner Asahi Kasei Pharma started a pivotal phase 3 study in Japan. And, we also made further progress in our phase 1/2 clinical programs in oncology. Mark will cover the more detailed progress here later in the call. However, I will highlight that we have started a phase 2a expansion study for our tumor checkpoint controller BAL101553 in patients with our current glioblastoma and in patients with platinum-resistant ovarian cancer. Adesh will now give you more insight into our commercial activities and partnerships; then Mark who will provide you with more detailed information on the newly in-licensed derazantinib and the progress of our clinical development programs; after which Donato will provide you with financial highlights for the first half year and also our guidance for the full financial year 2018. I will now hand over to Adesh.

Thank you, David. In the first half of 2018, our partners continued to make significant progress in the commercialization of our two hospital anti-infective brands, Cresemba and Zevtera. The most current in-market sales numbers available for Cresemba showed that in the 12 months period, ending March 2018, global sales of Cresemba doubled to $120 million compared to the 12 months period ending March 2017. This impressive performance is driven by a continued strong sales uptake in the U.S. and the early launch countries in Europe, such as Germany and France, as well as increasing contributions coming from countries where Cresemba has been launched more recently, such as Spain. The strong sales dynamic continued through the second quarter this year. You may have seen that Astellas, our license partner for Cresemba in the U.S., reported $54 million of Cresemba sales for the period of January to June 2018, which is a year-on-year increase of 59%. While there is significant growth potential from the existing markets and the important factor for maximizing the value of our brands is to expand their geographic reach. We are pleased with the progress that our partners have made in 2018 in this respect. Pfizer continued to rollout of Cresemba across Europe, leveraging the existing centralized regulatory approval for the brand in the EU. Grupo Biotoscana received the first approval for Cresemba in Latin America, triggering a CHF 2 million milestone payment to Basilea. For Zevtera, our partners in Latin America, the MENA region and Canada, have successfully launched the brand in the first markets in their respect regions. We are very pleased with the regulatory progress and expect to be seeing a large number of new launches of Cresemba and Zevtera around the world over the coming months and years. We have strong regional and global partners covering most of the commercially relevant markets. Our license and distribution partnerships for both 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 Cresemba and Zevtera through royalties or our transfer structure. In addition, we could receive up to $1.1 billion in total milestone payments from our partnerships. One of our key priorities for Zevtera is to gain access to the U.S. market. The U.S. clearly is the most important region for the commercialization of branded hospital antibiotics, and is estimated to account for around 80% of the global sales based on value. For individual products, the share may even go up to 90% as with daptomycin, which is a standard drug for the treatment of MRSA infections in the hospital. Marc in his section 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.

Thank you, Adesh. Let me continue with our antibiotic ceftobiprole. Under the BARDA contract, we have initiated 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. Enrolment into the study started in February this year, and we anticipate that it will be completed in second half of 2019. The bacteremia study is called eradicate, it is also a global study. We recently initiated the study that will enroll approximately 390 patients. And we currently anticipate that the study will take around three years to complete. Both the skin study and the bacteremia study are required for a filing in the U.S. I would also like to mention the progress with our anti-fungal Cresemba also known as Isavuconazole. In Japan, our license partner Asahi Kasei Pharma has initialed a phase 3 study earlier this year to support the future regulatory filing in Japan. Now, moving on oncology. As David pointed out, we strengthened our R&D pipeline by in-licensing the clinical stage oncology drug candidate derazantinib from ArQule. 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. It is currently in a registrational phase 2 study and intrahepatic cholangiocarcinoma or iCCA. Derazantinib has previously demonstrated favorable clinical data in a biomarker driven phase 1/2a study in iCCA. The current phase 2 study could allow for an accelerated approval in the U.S. The study is anticipated to enroll in approximately 100 patients and an interim analysis is expected in the first half of 2019. Derazantinib targets important signal transmission pathways, which are considered to be relevant for various tumor types for which only limited treatment options exist. FGFR mediated signaling is involved in many important pathways associated with cancer. Alterations in the genes coding for FGFR, such as mutations, translocations or gene amplifications, may lead to increased activation of the tyrosine kinase domain of the FGFR receptor and the activation of downstream signaling pathways, such as the well-known MOP kinase or PI3 kinase pathways. iCCA is an indication with high medical need, because patients with unrespectable advanced iCCA who relapse after first time chemotherapy have limited treatment options. However, there is also significant potential for panFGFR inhibitor, such as derazantinib in other tumor types, including urothelial cancer, breast cancer or gastric cancer. We anticipate to start an additional phase 2 study with derazantinib and FGFR driven solid cancer types around mid-2019. Moving to our tumor checkpoint controller, BAL101553. Basilea continues its activity 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. Basilea is currently conducting three clinical study with BAL101553 in this indication. In Switzerland a phase 2a expansion study in patients with recurrent glioblastoma was started in June 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 in the second half of 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. This study is primarily designed to assess the safety at various dose levels and is anticipated to complete in the second half of 2018. Finally, at the beginning of this year, Basilea started a phase 1 study in the U.S. in patients with newly diagnosed glioblastoma in a first-line setting using oral BAL101553 in combination with radiotherapy. This study is conducted in collaboration with the Adult Brain Tumor Consortium or ABTC, which is funded by the U.S. National Cancer Institute. These studies will contribute to an assessment of efficacy signals and Basilea expect that initial results become available during 2019. Moving to our third oncology drug candidate, the panRAF/SRC kinase inhibitor, BAL3833. The first in human dose escalation phase 1 study conduct by our partner, The Institute of Cancer Research in UK, enrolled patients with solid tumors including metastatic melanoma. Patient recruitment was recently completed, a broad dose range was investigated and the maximum tolerated dose was not defined. The study is currently in the analysis phase, including biomarker data and results are anticipated to be published at a future scientific conference. In addition to the three ongoing clinical programs, we have entered into another licensing and preclinical research collaboration. This project focuses on the biomarker driven development of potential first-in-class selective inhibitors of a kinase in both controlling the process of chromosomes segregation during cell division. I will now turn over to the Donato.

Thank you, Marc. I will highlight some of the financial key figures that were published in today’s press release and in more detail in the half year financial report. I would like to mention that all the figures I will refer to are in Swiss Francs. Half year 2018 financials are characterized by a continued strong revenue growth, driven by strong in-market sales performance as well as increased investments in our existing clinical pipeline and is expansion through the in-licensing of derazantinib. Total revenue increased by 30% year-on-year and amounted to CHF59.9 million with contributions from our two marketed and brands, Cresemba and Zevtera, growing by 25% year-on-year to CHF27.8 million. This is particularly based on Cresemba’s strong sales performance resulting in royalties more than doubling to CHF10.8 million. The change in the commercialization model for both our products for Europe, which we implemented in the second half of 2017, is now also reflected in the revenue mix with lower amounts recorded in product revenue and higher amounts recorded in contract revenue. The first major revenue item other revenue increased to CHF13.3 million, including CHF13.2 million BARDA reimbursements, compensating for major part of expenses incurred related to our ceftobiprole phase 3 program. Moving to expenses. Operating expenses in the first half of 2018 mainly reflects, on the one hand our investments and 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 as mentioned before. Total operating expenses amount to CHF80.3 million in the first half year 2018 compared to CHF65.3 million for the same period in 2017. The increase is primarily driven by our R&D expenses, which grew to CHF57.8 million in the first half of 2018. Key drivers of such increase were primarily the ongoing ceftobiprole phase 3 program, which started enrolling patients earlier this year to $10 million, up from payments for the in-licensing of and the clinical development activities related to the derazantinib, as well as the ongoing pediatric programs ceftobiprole and isavuconazole. SG&A expenses decreased substantially by 54% or CHF18.7 million to CHF15.9 million for the first half year of 2018. The decrease reflects the change in the commercialization model for both our products, Cresemba and Zevtera for Europe. This change was implemented in the second half of 2017, following our agreements with Pfizer and Correvio. Subsequently, our partners took over responsibility for the majority of commercial activities, including sales and marketing in their respective territories. While we maintain a core commercial function to support our partners’ activities. The operating loss in the first half of 2018 amounted to CHF20.4 million and the net loss was CHF22.5 million, resulting in a basic and diluted loss per share of CHF2.07. Our operating activities consumed cash of CHF60.4 million and the combined cash and investments amounted to CHF247.3 million as of June 30, 2018. Coming to the financial guidance for the full year. Based on our performance in the first half and our key priorities for the second half of this year, we update our guidance as follows; we anticipate to increase total revenues to between CHF120 million to CHF130 million. Despite [indiscernible] related deferred revenue recognition ending in August reducing its revenue contribution to CHF4.9 million for the second half of 2018 from CHF18.8 million in the first half. We expect the further acceleration of revenue growth from Cresemba and Zevtera taking the full-year estimate to CHF75 million to CHF85 million. With both ceftobiprole phase 3 studies now ongoing and the derazantinib program cost, we anticipate an increase in R&D expenses. Thus, the operating loss in 2018 is estimated to be in the range of CHF25 million to CHF35 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 growing our revenues and advance in our R&D portfolio. We will continue to build on internal and external innovation in the areas of hospital antibiotics, hospital antifungal and oncology, to optimize our portfolio and create the basis for sustainable long-term growth. We are confident that revenues from our approved products will continue to grow significantly, providing us with the financial flexibility to selectively invest in internal and external innovation in order to expand and advance our R&D portfolio. Since the beginning of the year, we've make good progress against our objectives for 2018. Operationally, for the remainder of 2018 and into 2019, we will continue to support our partners in order to grow revenues from both our marketed brands Cresemba and Zevtera. We expect to see many new country-launches this year and through next year. We will progress our phase 3 studies with ceftobiphrole for potential registration in the U.S., and expect to see top line results from the skin study in the second half of 2019. We look forward to the interim analysis of the registrational phase 2 study with derazantinib in the first half of 2019, and anticipate to start an additional phase 2 study with derazantinib in FGFR-driven solid tumors in mid-2019. We expect top line results from the phase 2a study with BAL101553 in platinum-resistant ovarian cancer and recurrent glioblastoma in the second half of 2019. And finally, we will continue to focus on selectively strengthening our pipeline in our core areas of hospital antibiotics, hospital antifungal and oncology to both internal and external innovation. Thank you. We will now open the line for your questions.

We will now begin the question-and-answer session [Operator Instructions]. The first question comes from Bob Pooler, ValuationLAB. Please go ahead, sir.

Hi, Good afternoon gentlemen. First of all, congratulation on the excellent first half and the upgraded full year progress view. I have three questions, if I may. The first on the operating expenses and then two on Cresemba, first the operating expenses. Could you provide a little bit more background on the first half, the operating expenses because there were some one-offs? And then also could you look into the expected cash flow and going forward the operating expenses there and cash burn as well. Then, second question is on Cresemba in Europe. Could you shed some more light on the background of product sales and royalties, because you have the transition there? So basically what is the underlying growth of Cresemba in Europe? And then the third question, my final question is Cresemba in U.S., extra deployments by Astellas. What are the key drivers behind the performance? And do you expect Astellas to update its fiscal year guidance, it’s now CHF100 million and they’ve already achieved CHF54 million in the first half. Thank you.

Why don’t Donato you take the first one on the expenses for the first half year and the cash burn?

So with regard to operating expenses, I think operating expenses and particularly the R&D expenses in the first half actually characterize the progress that we’re making in our existing clinical pipeline. And here particularly with regard to ceftobiprole phase 3 program we have started enrolling patients earlier this year and this means we basically saw that the most expensive part of the phase 3 program, so that is a driver for the increased R&D expenses. On the other hand side, the second more important element is of course the in-licensing of derazantinib. You may recall that we paid $10 million upfront and we were incurring some cost of course also regarding the ongoing programs. So this is second major element that adds to the expenses in the first half year. And as mentioned also some minutes ago, we have also in-licensed some preclinical assets. And this to a lesser degree also adds to us in the first half. So to put that I think in a bit more context, you also should look at the SG&A expenses in that regard. And then we will see that we have actually substantial reduced expenses on that hand side. So this compensates to some extent for the increase in our R&D expenses. And a second element which is important to note and keep in mind is actually the reimbursements that we get from BARDA. They are shown on the other revenue amounted to CHF13.2 million for the first half and basically also help compensating for the R&D expenses in this case particularly with regard to the ceftobiprole phase 3 program for the U.S. I think the second half of your question was with regard to cash burn. Here I will also say that as I mentioned, and particularly some onetime events like the in licensing of derazantinib and the preclinical assets on the one hand side, but also the increase in working capital has contributed to a higher cash burn in the first half of the year. For the full year, though, we expect slowing the cash burn down quite significantly. Overall, we expect about CHF7 million cash burn on average per month. And going forward of course here we expect further increasing revenues. You can see that from the full-year guidance that we've just updated and increased in terms of revenue, but also then with new country launches coming going forward. Overall, the cash burn should benefit also from that angle.

And then the question around the Cresemba performance in Europe, I mean first of all I would just say that -- and those on the webcast could have seen this. But you can see that the in-market performance of the European markets that are -- Pfizer market has been very good start in Europe as it has been in the U.S. So the in-market performance has been very strong. Maybe Donato you can comment on the product versus contract revenue split in terms of our figures.

I think, since Dave mentioned, I think we can see both in the U.S. and in Europe strong in-market performance of Cresemba; with regard to the U.S. that we participate through warranties and milestone payments; with regard to Europe and particularly there in the price re-agreement, we participate actually through product sales. So we’re selling products to Pfizer but on the other hand side we, also participate through milestone payments and royalties and for our distribution partners. We participate through a transfer price and we provide product to them or sell product to them. So overall, I think if you look at the P&L, you have to look at both line items, product sales and contract revenue together, feeling of how the in-market performance of these products actually translate into revenues to Basilea.

And then Bob your final question around Astellas and the performance in the U.S. Maybe Adesh, you can comment on that?

So we are very pleased with the -- I think the performance in the U.S. We have no indication of any slowdowns. If you look at half year sales or half year year-on-year sales of 60%, they’re still quarter-on-quarter sales. So what we can point to is really just that we have seen the pattern before that Astellas oes out with the guidance initially. And then in the last two years at least six months down to their fiscal year, which would be at the end of September, they update their guidance. So we are very confident that that the trajectory in the U.S. will continue. We have no indication of any slowdown and maybe that fits then into our own guidance that overall you may have seen that we have increased our guidance for Cresemba contributions for the full year to CHF75 million to CHF85 million for this year from -- actually compared to CHF27.8 million in the first half of the year. So that's I think also underscore the dynamic that we’re seeing in the performance.

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

First one is a clinical question and then couple of strategic and commercial questions. So just thinking about derazantinib and what you're looking for, for this to be a pivotal registration study next year and file it on the clinical trials Web site we see that ORR as a primary endpoint [indiscernible] secondary endpoints. I just wondered there what else that you’re looking for in terms of what can -- the primary and all the secondary endpoints, just the primary? What magnitude of benefit would you like to see for this to be registration study? Secondly, then just looking at the importance of getting right partner in place for your products. Obviously, you’ve done a great job with respect to Cresemba; thinking about Zevtera, I know we’re offering data for the skin and the bacteremia studies. I was just wondering what are we hearing of it also the pharma industry generally towards antibiotics. And then just finally I just thought with respect to the development of [indiscernible] [panF] program. What we’re interestingly seeing is the triple therapy approach based here combination with an I/O and MEG inhibitor. How are you thinking about the future for that particular program? Thank you.

Let’s start with Marc. Do you want to comment on what are we looking for from the pivotal derazantinib study in terms of it potentially been on that acceleration approval track, et cetera…

What we’re studying with derazantinib is intrahepatic cholangiocarcinoma and molecular defined subgroup in there this dose will be FGFR2 fusions. And what’s been seen with derazantinib in phase 2a studies but also with a number of other compounds is that over response rates obtained are in the range of 20% to 25% and usually progression free survival on average about six months. And that’s basically the expectation for selective panFGFR inhibitors. In the setting of relatively smaller target population and a non-randomized study then that has to be put into historic comparison. And usually the published data on response rate in that population is low, so below 10%. So one will need to put the observed response rates, the duration of response and also progression free survival data into context of what these patients would have had with conventional chemotherapy. So that’s for the first question. The other question was around how we’re thinking of panRAF in terms of maybe combination therapy with immuno-oncology put a MEK inhibitor. How we’re thinking of panRAF in terms of its future development.

I think that’s something which we will decide once we have the full read out of the phase 1 dose escalation study that was just completed. This study has been performed by our partner, The Institute of Cancer Research in the UK, which also responsible for the study. So we’re currently evaluating that study, including biomarker data and then we’ll make a decision on the next steps. And then your final question about we’re thinking about the U.S. in terms of Zevtera. I think you are right it’s a little late before we would get an approval, because obviously we need the two studies, both studies to complete be positive and then we would file with an approval with both the studies. I mean I think what I would say is that as we’ve done -- through our life actually, we’re keeping open at the moment to the -- we're activity talking to potential partners with regard to being the commercial partner for the U.S., but also we would consider also looking at doing like we did in Europe maybe launch in ourselves. So that's also an option we’re considering, especially if there is a scenario and Marc explained there is one scenario where derazantinib in the U.S. if it got accelerated approval could be on a similar time line to the ceftobiprole U.S. approval. So we could end up in a situation is obviously better than expected, but we could be in a situation where we have both products approved within a similar time frame and we might decide to launch ourselves. So we’re keeping our options open at the moment is broadly the strategic answer to that question. So we’re considering a number of options with regard to Zevtera in the U.S.

[Operator Instructions] The next question comes from Brigitte de Lima, goetzpartners. Please go ahead.

I’ll start up with three questions, the first one is on derazantinib, you showed a very nice picture with all sorts of possible indications you could develop the product the drug in. And I was just wondering how you’re thinking about the next [indiscernible] indications you’re going to go after. Is it a question of unmet needs, level of competition any additional data we have seen? Just wondering if you could shed any light on how you're going to make your decision. The second would be on Cresemba, interesting that the first country in the Latin America, Peru. I would have thought it's one of the biggest Argentina, Brazil. So just wondering if you can shed some light onto why Peru and what the next countries will be, now that the first approval has been received. Should we expect additional countries to come online faster? And then the third question is on the ceftobiprole development program in the U.S. Just curious why the bacteremia study is expected to take so much longer even though it's a bit smaller than the skin study. Does it happen is there anything to do with the inclusion criteria being different or the patient pull being smaller? I’m just hoping you can explain that? Thank you.

I think, Marc if you took the ceftobiproble bactereia question and that derazantinib other tumor questions.

So I think the first question was regarding additional indications with derazantinib. Our main guidance is biology and medical need here. So we will be looking into high medical areas and then we’ll consider indications where there is a general proof of concept established and that's in our view currently iCCA so intrahepatic cholangiocarcinoma and [indiscernible] cancer. And then we’ll also look at other high medical indications where we have -- where there is or we have built non-clinical evidence that treatment with derazantinib could help patients and benefit patients with their cancer disease. So this will be the main guiding principles to define the cancer types we will be looking in. The ceftobiproble question regarding the ABSSSI study, I think for the ABSSSI, there is well-established clinical trials and a structure as a couple of ABSSSI approvals have been seen in the last year. This is highly prevalent disease that's easy to detect basically upon visual inspection. So these trials are generally easier to enroll. The SAB study has a high complexity, the patients are usually sicker and the diagnosis made in the microbiology lab basically based on the blood culture. So it’s the complexity of the study that makes it take longer. And the two year estimate is based to some extent on the previous experience. For example, in the daptomycin registration study and we’ve extrapolated their enrollment and then made the estimate that the SAB study will take approximately three years.

And then the final question was around Peru and other potential countries in South America. So they have been very efficient in Peru. But just in general, I think the sequence of approval does not necessarily reflect the sequence of the submission. So the regulatory process in all these countries across Latin America and actually also in Asia Pacific is very different. And how this works is that we have actually defined a set of countries that are being pursued as high priority countries but all these countries have different procedures for making submissions for the regulatory review. And that’s why while we are working with our partners on the submissions simultaneously and the end result comes at different times. And Peru has I think just introduced a concept of a fast track review for particular for orphan drugs and that’s what Cresemba was benefiting from basically, which led to a quite quick review period and approval. To answer your second question, so there is nothing particular about Peru, it was just part of the first priority list countries of a whole group of countries and the procedure, but just finished faster than anywhere else. But, to answer your second part of the question, yes, over the course of the next really month and throughout 2019 potentially then even into 2020, we’ll be seeing many more or we anticipate to be seeing many more approvals and subsequently also launches as there are really a whole set of different procedures ongoing and we expect to have regulatory decisions in the coming months and years in many countries in Latin America, in the MENA region and Asia Pacific.

Thanks. Do you mind if I throw in one more question on the revenue guidance. It’s quite a big step up and I know you talked about how Cresemba has being in Europe and the U.S. But where it was the biggest surprise compared to your thoughts at the beginning of the year when you first provided guidance. Which regions have been outperforming your expectations?

Well, I think we’ve seen good performance through all regions and countries where the drug is launched. And I think particularly I think it’s worth mentioning to U.S. I think it’s fair to say that the U.S. is doing better than what we expected and so this is reflected in the updated revenue guidance for Cresemba and Zevtera for the full year, which we increased CHF75 million to CHF85 million.

The next question is a follow-up question from Bob Pooler by ValuationLAB. Please go ahead.

Just two more questions. In the first half, we also saw externally something is happening on one hand Novartis dropped their anti-infective research and on the other hand, we saw the FDA and I think that's really -- so first time an FDA commissioner coming with an incentive for anti-infective research by proposing a fee for product proposals like a software the hospitals actually have like a fee service program instead of just paying for prescription there. So my two questions are, do you see with first the big pharma still continue to drop out on anti-infective research, some nice business development opportunities? And secondly, whether you think that this proposal of Scott Gottlieb of coming with like a software subscription plan compared to what we traditionally have pay for prescription plan? Thank you.

So first of all on your first point about big pharma, more examples of -- Novartis, there was Aligen who are divesting away from antibiotics. But clearly, yes, that does create opportunities in terms of if there are assets that are interesting to us. And clearly as I think we said we’re actively looking in the field of external development in terms of both antibiotics, anti-fungal and oncology. So in the antibiotic space, yes, we look at big pharma for assets as well as biotech and university establishments et cetera. We look across the whole range. So yes that does provide opportunities I think is a short answer to that question. And we will consider all those opportunities, so that’s first key. In terms of the incentive you talk about, we firmly believe that the future will get better in terms of there will be I think full incentives one day in place. I mean the example you mentioned about the countries like the U.S. providing the concept of a license where hospital will have the license to use some antibiotic, they pay a license fee and it's independent of volume. I mean that clearly is a neat and clever trick to balance commercial incentives and balances and more progressed stewardship, it's a clever idea. Obviously, it's not in place at the moment it was a comment from the FDA commissioner, but it's not in place. I mean similarly there was this revamp act that you may have seen that that was potentially going through Congress in the U.S. Again, most of these are -- I think the better idea is seen to becoming from the U.S. But this revamp act didn’t actually come into place this time, but maybe in the future it will do and that would be the concept of a transferable exclusivity voucher, which then a antibiotic company could exchange or sell to a big pharma company to use for whatever they wish. And again these are I think good ideas and we think are good ideas. And we think one day in the future, which I think exactly when but when they do see the light of day then that will be a positive element for I think all antibiotic companies. I think in the meantime, it's very prudent I think to be focused on a number of strategic areas, so antibiotic is one of our areas. But we haven't got obviously clearly as you can hear from today's half year results, we haven’t got all our eggs in the one basket, we have antifungal, we have antibiotics and oncology. But yes, these are interesting ideas, Bob.

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

So I've got two more questions, if I m ay. One is on the derazantinib on the additional indications again June 10th to wait until we get the interim analysis for the cholangiocarcinoma study before starting additional trials to de-risk the whole program. And then the second one if we look at the R&D expenses, clearly there’s been a step up related to derazantinib. And have we just seen the tip of the iceberg or do you expect to see another leg up as we made into 2019 with regard to expenses related to the derazantinib development program?

Maybe Marc you pick up on the timing of the phase 2 other tumor study with derazantinib.

So moving forward with an additional phase 2 study in additional indications is not dependent on the interim analysis outcomes. So we are moving this forward regardless I think as part of our development program that several activities come in parallel to speed up and broaden the development of derazantinib.

And then Brigitte with regard to the R&D expenses, I think it’s fair to say that we do not expect any significant increases beyond what we’ve guided for, for this year. I think we are -- with the spending that we guide for this year, I think it’s fair to assume that this may continue at similar level over the next 12 months to 18 months, reaching the inflection point that David mentioned before, based on the spending level. There are some -- the costs for the skin trials for U.S. program will go away so that should reduce the spending. And in any case while the spending, we want to maintain the spending flat, we of course anticipate increasing revenues, which then should also have with reducing our loss and the cash burn.

So would it then be fair to assume that R&D expenses for next year would be roughly at the same level as for the full year this year, i. e. somewhere I don’t I’m just clicking my model, somewhere between the CHF105 million to CHF110 million?

Well I think from today’s point of view, yes I think this is a fair assumption, Brigitte.

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

Okay. Thank you everyone for your attention and your interest in Basilea. We’ll continue to work hard on delivering on both our revenue growth and investing in advancing our R&D portfolio to the next inflection point. So thank you all for your interest. And I wish you all enjoyable rest of the day. Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call and thank you for participating in the conference. You may now disconnect your lines. Good bye.