Ladies and gentlemen, welcome to the Basilea Pharmaceutica 2020 half-year results and publication of the half-year report 2020 conference call and live webcast. I am Alessandro, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. 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 of 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 2020 and discussing our upcoming milestones and financial guidance for the remainder of the year. I would also like to mention that this call contains forward-looking statements. Joining me on our call today are Adesh Kaul, our Chief Financial Officer, and Dr. Marc Engelhardt, our Chief Medical Officer. This morning, we issued a press release and our financial report on our results for the half year 2020. These documents are available on our website at basilea.com. I would first like to provide a brief summary of our key achievements for 2020 to date. Importantly, we've been executing to our plan despite COVID-19 and have remained fully operational during the pandemic.
Our two marketed drugs, Cresemba and Zevtera, are serving critical medical needs. Growing demand has led to an increase in revenue contributions of 17% first half year 2020 versus the prior year to CHF 62 million. We were able also to reduce our total expenses during the first half year by more than 6%, despite the fact that we successfully progressed our clinical pipeline assets towards the next development milestones. We also executed two strategic transactions. We successfully extended the maturity of a substantial part of our debt from 2022 to 2027 through both the issuance of a new convertible bond and the repurchase of 25% of the outstanding one.
We have also taken the first steps to move from two different locations in Basel into a new headquarters in mid-2022 by selling our current headquarter property and signing a lease agreement for the new headquarter site in the GRID Campus of Collaboration in Allschwil in the Basel area. This generated CHF 19 million in gross cash proceeds, but will also reduce our midterm operational and capital expenses. As of June 30th this year, Basilea's combined cash and investments amounted to approximately CHF 145 million. Importantly, we also made excellent progress with our clinical stage assets and have had no material COVID-19-related delay on the key clinical studies with our most advanced oncology drug candidates, derazantinib and lisavanbulin.
For our FGFR kinase inhibitor derazantinib, we completed patient enrollment into the first of two cohorts in the FIDES-01 phase II study in patients with bile duct cancer or iCCA and FGFR2 gene fusions. The preparation has also continued for the FIDES-03 study in patients with advanced gastric cancer, and this is planned to start in Q3 this year. For our tumor checkpoint controller lisavanbulin, we've been preparing to start the biomarker-driven phase II study in patients with the most common type of primary brain cancer, glioblastoma, one of the most lethal types of cancer. Finally, we are also pleased that the FDA approved the protocol amendment for our ceftobiprole phase III study, which can now expand enrollment to patients with the more difficult-to-treat Staphylococcus aureus bloodstream infections. To gain approval for the treatment of such patients will be beneficial for positioning ceftobiprole in the U.S. market.
Adesh will now give an update on our commercial progress and present more detailed financial highlights for the half year 2020, as well as provide our updated financial guidance for the full year 2020. Marc will provide you with more detailed information on the progress of our most advanced development programs. I'll now hand over to Adesh.
Thank you, David. In the first half of 2020, together with our partners, we continued to make significant progress in the commercialization of Cresemba and Zevtera. The most current public end market sales numbers available for Cresemba show that in the 12-month period ending March 31st, 2020, the global sales of Cresemba grew by more than 30% year-on-year to $220 million. Partnerships continue to play an important role in the execution of our global commercialization strategy and provide a strong basis for the future revenue growth. Since the beginning of 2020, Cresemba was launched in key countries in Asia-Pacific and gained regulatory approval in Russia. These triggered commercial and regulatory milestone payments of around CHF 6 million. In total, Basilea has received to date about CHF 255 million in upfront and milestone payments from its Cresemba and Zevtera partnerships.
Marketing application processes have been initiated in a number of additional countries, including in China, where the marketing authorization application for mucormycosis was recently accepted for regulatory review by the health authority. 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 will refer to are in Swiss francs. The financials for the first half year 2020 are characterized by a significant increase of the revenue contributions from Cresemba and Zevtera. Deferred revenue from Cresemba and Zevtera increased 11.8% to CHF 25.5 million, while non-deferred revenue, which more closely correlates with the actual in-market performance of our brands, increased 21.3% to CHF 36.5 million.
The increase in revenue from Cresemba and Zevtera more than offsets the already anticipated decrease in other revenue components, which is mainly driven by lower BARDA reimbursements due to lower costs incurred related to the completed ceftobiprole skin infection study and the impact of the slight delay in recruitment in the bloodstream infection study due to COVID-19. Total revenue increased by 9.7% to CHF 69.3 million. Cost of product sold increased by 39.4% to CHF 13.1 million, mainly reflecting the increase in product deliveries to partners. R&D and SG&A expenses decreased 12.8% to CHF 58.4 million, reflecting our continued focus on cost management, but also due to timing effects on clinical activities and the savings on travel and other external activities due to COVID-19. We reported an operating profit of CHF 12.8 million and a net profit of CHF 9.9 million.
Even without the CHF 15 million one-time positive impact from the sale of our headquarters property, we have seen a very strong underlying operational performance in the first half of 2020. Net cash used for operating activities was reduced significantly by 26.9% to CHF 33.2 million without considering the net proceeds from the sale of our headquarters property. As of June 30th, 2020, Basilea's combined cash and short-term and long-term investments amounted to CHF 144.7 million. The reported cash position does not include the net proceeds from the convertible bond transactions, which we completed in July. Turning now to points that may be relevant for the second half of 2020 and beyond. We had previously indicated that Pfizer would aim to assume full responsibility for its own supply of Cresemba in the course of 2020.
The plan has changed. Basilea will likely now continue to supply Pfizer with API and bulk vials through 2020 and into 2021. An extension of the supply period would have several consequences for us. Our product sales in CHF would be higher, especially in 2021. Correspondingly, we would anticipate an increase in cost of product sold in CHF. The reported gross margin in % of product sales would decrease in 2021, which, however, would be partially offset by economies of scale for product supply to distribution partners. We would expect a temporary increase in working capital, which would be expected to be reversed as we deliver product to Pfizer. In summary, an extension of the Pfizer supply period would result in an increase in net cash flow, especially in 2021. Turning the discussion to gross margins. Let me start with an overview of the distributor structure.
Distributors purchase product from Basilea at a transfer price, which Basilea books as product revenue. Basilea bears the manufacturing costs or COGS. The gross margin in % for Basilea is therefore COGS divided by the transfer price, not the net selling price. Let us now look at a licensing structure where Basilea supplies its licensed partner with product, such as currently in the case of Pfizer. In this case, Basilea books royalties and milestones under contract revenue with a gross margin of 100%. Basilea books separately product revenue on deliveries to its license partner, which in essence are COGS plus a small markup. The gross margin in % for Basilea based on COGS divided by product revenue is therefore significantly smaller as compared to the distribution setup. As a consequence, the gross margin in % largely depends on the partner mix.
Importantly, in any event, there is a positive cash flow in absolute terms for Basilea in both settings. Moving on to our convertible bond transactions, which were completed in July. The main purpose of the transactions was to improve the debt maturity profile by reducing the 2022 convertible bonds by approximately 50% and replacing it with a new bond with a maturity of 2027. To this end, we conducted two transactions. The first transaction concerned the issuance of a new convertible bond with maturity 2027. The provisional allocation was very successful, reflected by the fact that we were able to allocate the maximum targeted amount of CHF 125 million. The second transaction concerned using the proceeds from the new convertible bond to repurchase approximately 50% of the 2022 convertible bond.
Because many bondholders held on to their bonds rather than taking the opportunity to sell them at a cash premium, we reduced the size of the 2027 convertible bond as we had no intention of significantly increasing our debt level through the transactions. We were therefore able to reduce the 2022 convertible bonds by around 25% in a first step. We've earmarked the majority of the cash from the issuance of the 2027 convertible bond not already used to repurchase the 2022 convertible bond to further reduce the 2022 convertible bond by another 25% over the next two years. Hence, we remain confident that we will meet our initial goal of reducing the 2022 convertible bond exposure significantly, but over time, rather than in a single step. The updated guidance for full year 2020 is based on two important assumptions for the second half year.
We assume an average U.S. dollar-Swiss franc exchange rate of around 0.94, and we expect that there will be a gradual easing of the COVID-19 related lockdown measures. On these assumptions, we confirm our previous guidance for the revenue contributions of Cresemba and Zevtera, reflecting the continued significant growth of the end market sales by our partners. We assume a lower operating loss based on a one-time positive impact from the sale of our headquarters property. The underlying operating loss remains in line with our original guidance. Finally, we assume a strong cash position of around CHF 150 million at year-end. The positive cash flow impact from our convertible bond transactions in July is expected to be partially offset by a temporary increase in working capital at year-end. The working capital impact is expected to be reversed in early 2021.
I will now hand over to Marc for the clinical development update.
Thank you, Adesh. Let me start with our antibiotic, ceftobiprole. In Europe and several markets outside of Europe, ceftobiprole is approved for the treatment of community and hospital-acquired pneumonia. One of our key priorities for ceftobiprole is to gain access to the U.S. market, which is by far the most important country for the commercialization of branded hospital antibiotics and is estimated to account for up to 90% of global sales for anti-MRSA treatments as seen for daptomycin or ceftaroline. Based on special protocol assessment agreements with the U.S. FDA, two successful cross-supportive phase III studies are necessary for registration in the U.S. Our phase III program includes one study in acute bacterial skin and skin structure infections, and one study in Staphylococcus aureus bacteremia or bloodstream infections.
The program is funded up to approximately 70% by the Biomedical Advanced Research and Development Authority or 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. In 2019, we reported positive top-line results from the first of these studies, the so-called TARGET study, a phase III study in patients with acute bacterial skin and skin structure infections. The second phase III study in Staphylococcus aureus bacteremia is called ERADICATE. It is on track to report top-line results in the first quarter of 2022. If the bacteremia study is also positive, Basilea plans to submit a new drug application to the U.S. FDA.
As ceftobiprole is designated a qualified infectious disease product by the FDA for these indications, if approved, it will be eligible to receive 10 years of market exclusivity in the U.S. from the date of approval. Nearly 120,000 Staphylococcus aureus bacteremia or SAB infections have been reported in the U.S. in 2017. The ERADICATE study targets complicated SAB, which are characterized by concomitant or metastatic infections such as bone, joint or heart valve infections, persistent bacteremia or bacteremia in patients on dialysis. SAB is an area of high medical need with substantial morbidity and a 30-day mortality of approximately 20%, and there are limited antibiotic treatment options with only two approved treatments in the U.S., which are vancomycin and daptomycin, that cover both methicillin-susceptible and methicillin-resistant Staphylococcus aureus, or MSSA and MRSA. Ceftobiprole provides a number of key attributes supporting its use in SAB.
It is a beta-lactam antibiotic with rapid bactericidal activity against MSSA and MRSA, has shown a superior activity profile in preclinical models of endocarditis or heart valve infections compared to vancomycin and daptomycin, and has a low propensity for resistance development. It also provides gram-negative coverage in cases with polymicrobial infections. Efficacy has been demonstrated in phase III clinical trials in pneumonia where optimizers is not effective, and in complicated skin and soft tissue infections. Ceftobiprole has an established safety profile which is consistent with the cephalosporin class. Moving on to oncology. Our lead oncology drug candidate is derazantinib. Derazantinib is a targeted, orally available, small molecule inhibitor of the fibroblast growth factor receptor, FGFR, family of kinases.
FGFR genetic aberrations, for example, gene fusions, mutations, or amplifications, have been identified as potentially important therapeutic targets for various cancers, including intrahepatic cholangiocarcinoma, or iCCA, urothelial, gastric, breast, and lung cancer. Our development strategy focuses on achieving differentiation over other FGFR kinase inhibitors by leveraging the unique properties of derazantinib. Key differentiation factors include its unique kinase inhibition profile and its clinical safety profile. Besides FGFR, derazantinib also inhibits the colony-stimulating factor one receptor, or CSF1R kinase, which has been reported to play a role in immune response to tumors, and the vascular endothelial growth factor 2, or VEGFR2 kinase, which is known as a therapeutic target in the anti-angiogenic treatment in multiple cancers, including gastric cancer. Basilea's clinical development program currently comprises three studies. Two of them, FIDES-01 and FIDES-02, are ongoing in intrahepatic cholangiocarcinoma, which is a type of bile duct cancer, and in urothelial cancer.
We are planning to start the third study, FIDES-03, in gastric cancer in the third quarter of 2020. In January 2019, we reported encouraging interim results from the registration of phase II study called FIDES-01, in the second-line treatment of FGFR2 fusion-positive intrahepatic cholangiocarcinoma, or iCCA. Enrollment into this cohort has been completed in July 2020, and top-line results for this cohort are expected in the second half of 2020. We've expanded the FIDES-01 study with an additional cohort of iCCA patients with FGFR2 gene mutations or amplifications in their tumors. In this group of patients, clinical benefit has been observed in the earlier phase I/II study, and the aim of the additional cohort is to confirm these results in a larger number of iCCA patients in the ongoing study.
Through this additional cohort, we intend to further define the full therapeutic potential of derazantinib in patients with iCCA, as other FGFR kinase inhibitors in advanced clinical development have so far only reported very limited clinical activity in this patient population. Interim data from the second cohort will be presented in the second half of 2020. FIDES-02 is a phase I/II study with derazantinib as monotherapy and in combination with Roche PD-1 checkpoint inhibitor, atezolizumab, or TECENTRIQ. This is a biomarker-driven multi-cohort clinical study in patients with advanced urothelial cancer expressing FGFR genetic operations, first interim results are anticipated for the second half of 2020. In the third quarter of 2020, we are planning to start FIDES-03. This study will explore derazantinib in patients with advanced gastric cancer and FGFR genetic operations, will also include a cohort in which derazantinib is combined with atezolizumab.
We've decided to investigate derazantinib in gastric cancer based on its unique kinase inhibition profile, convincing preclinical in vivo data, and a high medical need in this indication. Clinical supply agreements are in place with Roche, who provides atezolizumab for both the urothelial and the gastric cancer studies. Moving to our tumor checkpoint controller, lisavanbulin, formerly known as BAL101553. We are focusing our clinical development activities with lisavanbulin on glioblastoma, the most common and aggressive form of primary malignant brain tumors, and an area of high unmet medical need with very few treatment options available. Lisavanbulin is a novel microtubule-targeting small molecule which induces tumor cell death through spindle assembly checkpoint activation, which impacts tumor cell division. It can be administered oral and IV, crosses the blood-brain barrier, and has shown potent activity in brain tumor models in monotherapy and in combination therapy.
In line with our approach to involve biomarkers early in clinical development, we have been evaluating a panel of biomarkers. One of those is end binding protein 1, or EB1, which was previously identified in preclinical models as a potentially response-predictive biomarker for glioblastoma. Based on our clinical and preclinical data with EB1, we will start a biomarker-driven clinical phase II study in glioblastoma in the next few months using EB1 positivity as a patient selection criterion. In our completed phase I glioblastoma clinical study with daily oral dosing, we have observed a profound and exceptional objective response in a glioblastoma patient whose tumor tissue was EB1 positive. This patient continues on treatment for more than two years now and shows a more than 80% area reduction in the brain tumor.
The final results from this phase I study will be presented at the upcoming ESMO Virtual Congress in September 2020. I will now turn over to David.
Thank you, Marc. To summarize, we are on track with the execution of our strategy. We are significantly growing our cash-relevant revenues from our marketed brands, Cresemba and Zevtera. We're also on track to have Cresemba launched in 60 countries by the end of 2021. We are continuing to advance our R&D portfolio towards the next milestones. The remainder of the year holds a number of important milestones, especially related to our oncology programs. For derazantinib, we're expecting the top line results for the FIDES-01 FGFR2 gene fusion cohort in the second half of this year, and the interim results from the second cohort with iCCA patients with other FGFR2 genetic aberrations. These are also expected in the second half of this year.
In addition, we're looking forward to the safety data and the recommended phase II dose for the combination of derazantinib and TECENTRIQ in the FIDES-02 urothelial cancer study. We believe that derazantinib could enhance the response to such immuno-oncology drugs, and are going to further explore this too in the FIDES-03 study in gastric cancer patients, planning to start in Q3 this year. For lisavanbulin, we're currently preparing the start of the biomarker-driven study in patients with glioblastoma in the next few months, with interim results then expected in the first half of 2021. I would like to thank you for your attention. We'll now open the line for your questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Only three questions might be asked in a row, then the line will be open to others. You can get back in line again for any follow-up. Anyone who has a question may press star and one at this time. The first question comes from Louise Chen from Cantor. Please go ahead.
Hi. Congratulations on the quarter, and thanks for taking my questions here. My first question is, what are your capital allocation priorities as you build upon this cash balance that you have? Secondly, can you give more color on how the expansion of Zevtera for bacteremia from four to six weeks really enhances your competitive advantage in the market? The last question I had for you was, what do you expect to see from the lisavanbulin biomarker study with patients in GBM? Thank you.
Hi, Louise, and thank you for your questions. Actually, in terms of where we allocate our capital, maybe I'll hand that over to Adesh. The comment on the four to six weeks of ceftobiprole, Marc can answer that question. Why don't you start, Adesh?
Yeah. Hi, Louise. If you think about where do we invest our resources at the moment, the key is the derazantinib program, almost at an equal level, we are with the ceftobiprole phase III program on a gross level, pre order reimbursement. I think purely from, let's say, allocation of costs and FTEs, internal and external costs, these are the biggest investments that we're making. The next level is the pediatric programs for ceftobiprole and for isavuconazole, especially for isavuconazole that would also result in a potential extension of exclusivity in Europe, especially by two years and by six months in the U.S. That's another important element, the last bit is that we keep on investing into the optimization of the supply chain. I think broadly speaking, these are sort of the priorities that we currently have.
To the second question about the expansion from four to six weeks, this has several beneficial components. First of all, there are a number of infections which, Peer guideline, require treatment that is longer than four weeks in Staphylococcus aureus bacteremia. These include, for example, osteomyelitis, so vertebral bone infections or central nervous system infections. Also for other infections that usually can be treated with four weeks of treatment, the flexibility to be able to expand to six weeks I think is quite beneficial. It just increases the versatility of the compound in treating more indications and just have the flexibility to increase the treatment duration if needed.
Your third question on the biomarker study in terms of what are we looking for in the GBM biomarker study. Marc, maybe do you want to comment on that?
As we will present at the virtual congress at ESMO, we've seen benefit in a subset of patients in the phase I study. We believe that the biomarker-driven approach will potentially enrich for patients that are more prone to respond to lisavanbulin. It's an enrichment by a selection biomarker, EB1, and we hope that we will therefore increase the number of responses and being able to predict which patients are more likely to respond to lisavanbulin.
I think the benefit of the way the study's designed is that because it's an open label study, we'll know the results pretty quickly in a couple of handfuls of patients. If we get a certain response rate, we'll know that we're onto something, and then we'll be able to expand it to bigger patient numbers. Actually, that's why I say the results of this study, the interim results we'll have in the first half of 2021.
Correct. Unfortunately, the GBM patients in the recurrent setting usually have a relatively short progression-free time. That's why from a clinical trial methodology perspective, it is possible to detect treatment effects relatively quickly by having patients not progressing.
Thank you.
The next question comes from Bob Pooler from ValuationLAB. Please go ahead.
Good afternoon, gentlemen. Congratulations on the excellent first half. Three questions on Cresemba. First of all, the strong uptake, is that due to volume growth? For the second half, do you expect any major country launches which might trigger sales milestones? Could you remind us maybe of what the Astellas sales guidance is for 2020? Thank you.
In terms of the Cresemba growth, it's coming from. Correct. It's coming from volume growth. It's not coming from price increases. It's coming from pure demand in the market. That's actually, for those of you who are on the slides, you'll see what used to be the IMS, the IQVIA sales uptake is directly related to the in-market volume, and that's causing the Cresemba growth in revenues rather than any pricing effects. In terms of major country launches, I think we're currently launched in 45 markets. We're still on track, as I said earlier, in terms of the 60-market target by the end of 2021. We've got a whole number of countries launching. In terms of the remainder of the year, are there any major country launches?
I mean, the big ones like, for example, the ones coming, the big next ones would be China and Japan, they're not planned for this year, Bob, to answer your question. There's an ongoing slew of countries that we'd be launching, not the biggest ones, but they're definitely launching during the course, like I said, of the next six months and then the next 18 months because we're on track, as I said, to be in 60 countries by the end of next year. In terms of the Astellas sales, maybe Adesh, you could comment on the U.S. sales from Astellas.
Maybe on the guidance and one important point is that there is some overlap, let's say, with regards to their fiscal year and our calendar year. Astellas reported $75 million in sales from January 2020 to end of June 2020. That's a 12% growth year-on-year. What they are guiding for in the period from April 1st, 2020 to March 31st, 2021 is for $155 million. As a matter of fact, what they have just recently done is, as you may have seen, they have updated sort of their whole portfolio to some degree to reflect the uncertainties and their assumptions around the uncertainties of the potential impact of the COVID-19 pandemic. I think from that perspective, we'll have to see where the sales will end up.
I think from an underlying health perspective, the key point is that in the U.S. we're seeing continued volume growth and also more from a global or aggregate level. I'd like to remind you that the U.S. represents about 25% of, generally speaking, the global potential, probably for newer antifungals. As such, on a global level, we're seeing growth in other regions. That is, in essence, reflected in our guidance. That's why we have been able to maintain our guidance overall.
Okay, very clear. Maybe you might get some additional sales milestones on reaching certain plateaus or levels in the Cresemba sales as well. Is that true?
I would say at some point in time, we'd certainly be-
Yeah.
Further sales milestones triggered. To some degree, I would have to also admit it's sometimes difficult to precisely predict whether a sales threshold is being reached in a given calendar year, and to some degree, that's also reflected then in the range that we are providing in our top-line guidance. That you know historically, we are providing a range for our top-line assumptions on revenues. That really reflects a little bit the uncertainty around timing.
Okay. Very clear. Thank you.
The next question comes from Ram Selvaraju from H.C. Wainwright. Please go ahead.
Thanks so much for taking my questions. Firstly, I was wondering if you could comment on, and this may be a long-term outlook topic, the potential advantage of exploring derazantinib in combination with both an anti-PD-1 or PD-L1 approach as well as an anti-TIGIT antibody therapy.
Ram, thanks for the question. We didn't quite hear. The PD-L1 we got. The second class of compound that you said was what?
An anti-TIGIT. TIGIT.
Okay. In terms of our strategy with derazantinib and combinations versus monotherapy, as you're probably aware, we are actually studying in iCCA as monotherapy and then in urothelial cancer and gastric cancer in combination and in monotherapy and in both urothelial and gastric, the focus is with PD-L1. We're exploring, because we think with the CSF1R inhibition, that we actually have a rationale for combining with a PD-L1. That's why we're exploring it in that setting there. In terms of the TIGIT, I'm not the expert in that area, I'll look to my colleague and ask Marc your thoughts around combination with PD-L1 going forward versus the TIGIT, Marc.
I think what we've discussed with Roche certainly was to go into a combination with atezolizumab to start with. This is mainly based on the biological rationale that derazantinib also inhibits CSF1R, which may change the immune microenvironment. We've set up that study clinically, and we're currently in the process of establishing the recommended phase II dose, which we will report out later this year. There would be mechanistically, certainly no reason why not to also explore a combination with an anti-TIGIT compound or even combining several compounds.
I think, as you say, it's a little bit of a long shot, and I believe we need to first maybe provide a proof of concept in terms of that really this potential synergy with derazantinib and atezolizumab plays out, and then we're certainly open to look into any type of other approaches combining derazantinib with immunotherapy, with a combination with checkpoint inhibitor or TIGIT inhibitor or other classes of compounds.
It's reasonable to expect that whether we think about this in combination solely with an anti-PD-L1 or in combination with both an anti-PD-L1 as well as some of the newer checkpoint inhibition modalities. derazantinib among the FGFR inhibitor compounds is really unique because it has the CSF1R activity modality as well, and therefore should be more readily combinable with these classical immunotherapy approaches as opposed to other FGFR inhibitors. Is that a fair statement?
That's correct. I think the CSF1R component is unique. What also is potentially advantageous in this context is the VEGFR2 component, which derazantinib shares with erdafitinib, but it is potentially playing into a combination of a CSF1R component and a VEGFR2 component plus. When we compare adverse event profiles across various FGFR inhibitors, within the limitations of cross-study comparison, the safety profiles in terms of side effects such as retinal events, dermatitis, nail effects or hand-foot syndrome, seems to be really lower with derazantinib. This may also be an advantage in combining with other compounds, including immuno-oncology compounds.
Okay, just two other quick ones. What would be the reason specifically to expect derazantinib to show better efficacy in patients with mutations and amplifications versus fusions from an FGFR perspective? I wanted to ask about this EB1 protein expression that you saw in the single durable responder with regard to lisavanbulin in GBM. If you could comment on whether this is likely to be a significant biomarker when you look at potentially selecting patients most likely to respond. If you could elucidate what the biological function of this EB1 protein is. Thank you.
Actually, Marc, it's coming your way. Why don't you comment on the FGFR other aberrations and why it might work there?
In iCCA patients with non-fusion genetic aberrations, the efficacy data that have been published so far were not striking. We had seen in a small number of patients in a study conducted by ArQule. We haven't seen a lot of objective response, but we had seen progression-free survival for more than half a year in these patients. That's why we started this cohort, and we will report data later this year. The potential mechanism why derazantinib and not other FGFR inhibitors would work on different mutations, we currently would not be able to really provide that explanation. Our research group is working on models looking at certain mutations where we had seen the benefit in patients to see whether we can elaborate on a differential mechanism of derazantinib versus other FGFR inhibitors. That explanation may be possible, provided that these models are not easy to run.
The other question you had about EB1. EB1 is a protein that's located on the plus ends of the microtubule. It is, if you wish, in the mainstream of the mechanisms of action of lisavanbulin, which is a microtubule interacting drug. They are key proteins for the dynamic turnover of the microtubules when they move to the kinetochore in the context of the mitotic cell separation. We have evidence from preclinical models from since 2015, that EB1 looked response predictive in a mouse model. This identification of an EB1 positivity in this exceptional responder in the ongoing phase I study was not a random pick. We had looked for EB1 and very few other biomarkers, and this patient came out strongly EB1 positive.
We've then done some additional work, some of which were presented at the virtual ESMO Congress, and we believe that strong EB1 positivity is an entity in itself. It's also probably genetically different to EB1 negativity. Whether it's response predictive for lisavanbulin in a clinical setting, I think the only way to get that answer is to actually run the clinical trial.
Understood. Thank you.
Thank you.
The next question comes from John Priestner from Edison Investment Research. Please go ahead.
Yes, thank you for taking my questions. Congratulations on the progress so far this year. I have two questions. The first question is around derazantinib. In addition to the three indications you've already mentioned, what is the next indication that you'll be looking to develop derazantinib in? Also whether any of these future combinations might include PD-L1 inhibitors other than TECENTRIQ or is there a exclusivity to Roche?
Yeah. Thanks for your question, John. In short, the indication question is quite straightforward, which is that we believe with our current plan, which is the ongoing iCCA, which has a number of cohorts, and with the ongoing urothelial cancer, which has a number of cohorts, and with the planned gastric cancer. That is sufficient for us to build a book of evidence across numerous tumors in different settings and different combinations in monotherapy. The concept for us, as we have done with our previous compounds, is that we would look to partner the compound. We believe with the current set of different studies we have ongoing and planned for derazantinib, that is sufficient to get us to the point of having a meaningful, differentiated partnering package.
Then we would subsequently, following partnering, then it would be in discussions with ourself and a partner to actually explore further the utility of the compound. We haven't announced, or we're not thinking of announcing another indication on top of those that we've already announced. In terms of the exclusivity comment and with the PD-L1 with the Roche compound, no, that's not exclusive. Just because we're working with Roche doesn't mean that we have exclusivity and we can only Roche and us agreed on a collaboration agreement very quickly across both the urothelial and the gastric cancer studies. That doesn't preclude us from doing other combinations with other PD-L1s or other combinations per se, is the short answer to your question.
That's great. My second question is, what is the current preference for the in-licensing of anti-infectives versus oncology assets? Really whether you would look to acquire an asset that you could potentially use in combination with derazantinib.
The short answer is we are looking, as we have done previously, at in-licensing to complement our own discovery efforts. We're looking at in-licensing in both anti-infectives and oncology. Having said that, it's fair to say that the oncology number of assets out there are much more numerous than the number of anti-infective assets, whether it be antibiotics or antifungals. Actually, the law of averages is probably why we do more in-licensing of oncology versus anti-infectives, just because the number of assets out there. In terms of if we're looking at oncology, are we looking to combine with derazantinib? I think, no. I think the fact is that the asset has to stand up on its own merits, and fit with our approach, which is small molecules, potential for biomarker-driven.
Actually in our half-year report, we outline the different types of target areas like the kinase signaling, the DNA damage repair, the transcription factors that we are focused on in terms of our own focus, and that very much also externally is what we would focus on as a first port of call. Definitely it doesn't have to be combined with derazantinib. There's an argument for, in terms of risk management, that we actually wouldn't drive being combined with derazantinib just in case down the line something went wrong. Then all our eggs are in one basket. Clearly it would make common sense, I think, to focus on things that stand up by their own merits, if you understand my point.
Yeah. That is very clear. Thank you for taking my questions.
Thank you.
The next question comes from Brian White, from Calvine Partners. Please go ahead.
Yes. Good afternoon. Just a couple of questions from me, actually. Thinking about FIDES-02 looks to be a very important data point for the company and your lead cancer asset coming up in H2. I just wonder if internally or in discussions with Roche, you had sort of a threshold for the benefit of adding derazantinib to TECENTRIQ in that particular setting, and what would it take to justify moving the program forward? Secondly, just understanding better, and taking into account the comments you made earlier about the extension of the treatment period for ceftobiprole. I wasn't quite clear, was this based on internal thinking? Was it based on guidelines? Was it based on conversations with regulators or conversations with potential commercial partners in terms of extending the treatment period? Thank you.
Yeah. Marc, actually, why don't you deal with the second one first, the reason why the four to six week happened. Yeah.
Initially, the health authorities had asked us to administer ceftobiprole for a treatment period of up to four weeks because although we had several phase III studies, we'd never tested ceftobiprole for more than two weeks treatment duration. The extension to the longer treatment period was a consequence of a safety data review, which didn't flag any problems, and that's when we could expand the treatment duration to a six-week duration, which, as mentioned before, provides a number of advantages in terms of versatility of using the drug in infections that require longer treatment duration or extend the treatment duration in patients if it turns out that after the 4 weeks, they need longer time of treatment.
Just to say, and I think I made this point earlier, that there is obviously a benefit to have the safety data for six weeks as well from a commercial perspective, as well as the fact that we can access extra different patient types. It's also beneficial having the safety data as well.
This was a predefined process that had been agreed with the FDA before we started the study.
Right.
If that's okay, in coming back to your first question around the FIDES-02, you're quite right. It's a key study. At the moment, just to be clear, the end of this year, the second half of this year, we'll have safety data and the recommended phase II dose for the combination of the TECENTRIQ with the derazantinib. That's this year. Moving into next year, there will come the first efficacy data, if you want to think of it as that, in terms of, first of all, will come the monotherapy interim data, later on towards the end of the year will come the interim combination efficacy data for TECENTRIQ and derazantinib. Did you want to add anything to that, Marc?
My understanding was that part of your question was how the study would move on and whether we had discussed any thresholds with Roche. I think this is more defined in the study design. These are randomized assignment two-stage designs where you look at a certain number of patients, and then these patients require a certain level of efficacy to then move the study on into a second cohort. This is less negotiation between companies. We have a clinical supply agreement with Roche. We are running the study, and we're running the study to a predefined study design with clear rules of what efficacy levels need to be fulfilled to promote the study in its next stage. If the study continues, we have the supply agreement with Roche that they will provide atezolizumab.
Right. Okay. I probably didn't ask it very well then. Have you disclosed what those thresholds are in terms of the benefit?
For the initial phase, I think for the safety, there is not a predefined. It has to be safe. I think there's no other threshold. The initial safety recommended phase II dose is purely driven by safety and not by any considerations about response.
Yes. I guess my question is that in terms of what level of response or ORR are you looking for to justify taking patients through to the next step?
Let's put it this way. We're orienting our efficacy threshold on published standard of care and comparative efficacy information available at the time. I'm not going to name a number now, but it's basically we're looking at efficacy in the kind of range that we've seen with erdafitinib.
Right. If I look at the BALVERSA label, that's the one to look at then.
Yes, exactly. Correct, Brian. For the erdafitinib urothelial cancer, you're correct.
Thanks.
That's in our thinking fully.
Also ethically, that's always the approach that's taken that one has to pick an efficacy threshold that's meaningful for patients.
Perfect. Thank you.
Thank you.
The next question comes from Paul Verbraeken from Research Partners. Please go ahead.
Hi, good afternoon. A question on Cresemba. I noticed Astellas is quite cautious for the remainder of this calendar year. Is that really COVID-19 related, the same effect that we saw in the second quarter, or are there other factors at work there as well?
First of all, thanks, Paul. First of all, the key point is there's continued growth in patient days and prescriptions are going up. From that perspective, there's not any issue with the underlying business. What Astellas indicated when they updated their guidance was, in essence, that they have taken a view on their portfolio to reflect that there's an increasing shift, for the time being at least, from inpatient to outpatient treatment, which affects, of course, primarily hospital drugs as such. That is in essence, that was one effect and the second effect that Astellas pointed to, not specifically for Cresemba, but across their portfolio, was a certain level of stocking that had been seen before and a certain level of destocking, of course, as a consequence related to the first wave.
Again, I think the health of the business can be seen in the actual number of prescriptions and patient days. There we have not seen any negative impact. Astellas has not indicated that there is a negative impact in terms of patient days.
Okay, maybe just to add on with Pfizer for Cresemba outside the U.S. Do you see the same trends at work there?
I think there are just many more countries as you can tell. Actually, as a matter of fact, there are some countries where you actually see a positive, almost like COVID-19 impact. There are other countries where you have maybe a similar pattern as you have in the U.S. There is this natural hedging across the country. If you look at just what we reported with regards to Pfizer is that the royalty rate, which correlates to some degree, at least with the in-market sales or quite directly with in-market sales, increased by I think it was almost at 40% year-on-year. The Pfizer kept on reporting faster growth than Astellas in the U.S., which is not surprising also given that the U.S. was the first launch country.
I don't know whether that really answers your question, but at the end of the day, there's not a unified view, and I think the most important part is, and that's reflected in our guidance, we think that overall the sales will remain in the level that we had anticipated at the beginning, so that somehow the levels will even out. That's why we maintained our top-line guidance for Cresemba and Zevtera.
Yeah. A different way of looking at it, which you've probably done yourself, looking at our press release, is that for the first six months of the year, the non-deferred which as Adesh said earlier, is more closely aligned to the in-market performance. The non-deferred for Cresemba and Zevtera performance for the first half of this year showed this 21% growth versus the same six months of last year. If you look at what we're guiding on, we're guiding for the non-deferred to 12%-27% growth. The 21 is nicely, strongly in that range. We haven't seen net-net overall across all countries us coming off our guidance, which is just to add a little bit more color to Adesh's comments.
Okay, the non-deferred revenues are largely Pfizer, aren't they?
No, the non-deferred revenues are really combined. I have to admit, it is complicated. It's royalties on the one hand, that means, of course, it's royalties from Astellas and from Pfizer, and it is product sales. Within product sales, the non-deferred part is primarily Pfizer. That's right. If you look at overall non-deferred revenues, it's Astellas and Pfizer that are mainly contributing both of them.
Okay. Got it. Thank you.
Thank you.
The next question comes from Olav Zilian from Mirabaud. Please go ahead.
Congratulations on your progress. I keep it very brief. Two questions, if I may. Firstly, as the bonds have only been partially tendered compared to what your plans have been, and you are now facing a situation where you have CHF 50 million excess in cash. The question would be, how will you allocate this cash as you are also facing a negative interest rate should you keep it on your savings account? The second question is more concerning the marketing of Cresemba in China. We saw that Pfizer got the approval of their filing in China for the use of Cresemba in mucormycosis. I'm missing invasive aspergillosis. Could you please comment on the dynamics on the fungal market in China, and how the drug would be positioned over there? Thank you.
Yeah. Olav, thanks for the questions. Actually, let me take the second one, then Adesh, I'll pass over to you about the what are we doing with our CHF 50 million from the convert that's left over. In terms of the second one, just to be clear, we haven't got an approval of mucormycosis in China. What we've announced is that, and what we've stated in our half year report actually, is the fact that in China, so Pfizer, our partner for China, they have applied for and the application, the marketing authorization application, has been accepted for mucormycosis in China. That doesn't mean it's approved yet, it just means it's sort of the next stage of the sort of regulatory process after you submit.
The reason why it's mucormycosis, and well spotted it's not mucormycosis invasive aspergillosis, is the invasive aspergillosis will be the subject of a separate regulatory process. Actually, it's not that we haven't been accepted for invasive aspergillosis, it's just on a separate timeline than the mucormycosis one. Yeah. At some point, hopefully, you'll hear more about that one. Just to be clear on the China one. Maybe Adesh, what are we doing with our CHF 50 million that we have left over?
I wouldn't call it left over. Basically, the cash inflow from the convertible bonds. Overall, we have since years now, or since several years, a treasury strategy, which is a combination of keeping, of course, cash deposits in order to manage our liquidity needs. Also, we have increasingly moved to short-term time deposits and long-term time deposits in order to really manage the impact of negative interest rates. There's no magic solution. It's not that I can present to you now, oh, we have found a way to get positive interest rates on cash. We're just trying to manage basically the impact by putting out, I think especially since the CHF 50 million are earmarked largely, or the proceeds are largely earmarked to manage the 2022 convertible bonds. We have more flexibility with regards to the long-term, let's say, investment of that money.
The longer you invest, the less you have in your incurred impact of negative interest rates.
Okay. Thank you.
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Thank you for your continued interest in Basilea. If you have any further follow-up questions that you want to ask us, please reach out to any of us, including our investor relations team, Per and Hazel as well. We'll be happy to answer any other follow-up questions. As I said, thank you for your continued interest and enjoy the rest of your day. Thank you very much.
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