Ladies and gentlemen, welcome to Basilea from Azusica's Full Year Results 2019 Conference Call and Live Webcast. I'm Ellis, 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 Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to David Beach, Chief Executive Officer. Please go ahead, sir.
Thank you. Hello. This is David Beach, CEO of Basilea. I would like to welcome you all to our conference call and webcast reviewing our financial results and key achievements for 2019 and discussing our upcoming milestones and financial guidance for 2020. I would like also to mention that this call contains forward looking statements.
Joining me on our call today are Anesh Kaul, our Chief Financial Officer and Doctor. Mark Engelhardt, our Chief Medical Officer. This morning, we issued a press release and our financial report on the results for the financial year 2019. These documents are available on our website atbasilea.com. 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.
We have a proven track record of progressing brands from research through clinical development to the market. We have successfully brought 2 anti infective brands to the market, our antifungal Cresemba and Zevtera, our broad spectrum MRSA active antibiotic. We have oncology assets in clinical development, and we have a number of oncology and anti infective assets in preclinical development. I would first like to provide a brief summary of our key achievements in 2019. We had a strong year in 2019.
We achieved important financial goals and we continue to make great progress launching our 2 marketed brands Cresemba and Zevtera around the world. During 2019, our commercial partners doubled the number of Cresemba launched countries. Cresemba is now marketed in more than 40 countries worldwide. Our total revenue increased to CHF 134,400,000. This includes a significant revenue increase from Cresemba and Zevtera by 39% year on year to CHF 114,300,000.
This largely reflects the in market sales growth we're seeing around the world. Due to the increase in revenues and management of our operating expenses, we improved our operating results for 2019 by 29% compared to 2018. As a result of increasing cash flow from our revenues and the management of our cost base, we continue to reduce our net cash consumption year on year, resulting in a solid year end cash position of CHF161 1,000,000. This provides us with the necessary flexibility to continue moving forward to our next potential value inflection milestones in 2020 and beyond. We also made significant progress in our clinical stage assets.
For our FGFR kinase inhibitor derazantinib, we initiated a Phase III study in patients with urothelial cancer, both as a monotherapy and in combination with immunotherapy. This study is called FITIZ-two. Early in 2019, we reported positive interim results from the FITIZ-one study, a potentially registrational Phase 2 study with derazantinib in patients with iCCA or intrahepatic cholangiocarcinoma and its tumors harbor FGFR2 gene fusions. We subsequently expanded FIDIS1 into iCCA patients with other FGFR2 compound. For our tumor checkpoint controller, lease of Ambulin, based on data readouts from 2 early stage studies with the IV and oral formulation patients with glioblastoma, we decided to move into a targeted biomarker driven Phase 2 study with the oral formulation of Licevambulin in patients with recurrent glioblastoma.
Finally, we reported positive top line results from our antibiotic ceftobiprole from a Phase 3 study in patients with complicated bacterial skin infections or ABSSI. This is the first of 2 Phase 3 studies required for potentially gaining regulatory approval in the U. S, which is commercially the most important market for ceftobiprole. Adesh is now going to give an update on our commercial progress and present more detailed financial highlights the financial year 2019, as well as provide our financial guidance for 2020. And then Mark 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 2019, together with our partners, we continued to make significant progress in the commercialization of our 2 hostile anti infective brands Cresemba and Zevtera. The most current in market sales numbers available for Cresemba show that in the 12 month period ending September 2019, the global in market sales of Cresemba grew by 32% year on year to approximately US190 $1,000,000 In the U. S, our partner Stellas reported Cresemba sales for January to December 2019 of US146 million dollars which is at 28% growth year on year. The sales performance is not only driven by a continued strong sales uptake in the U.
S, but also by strong sales in markets outside of the U. S. The Cresemba sales in Europe were particularly positive, which was reflected by 2 sales milestones in the total amount of $12,000,000 being triggered in 2019. The strong growth of Cresemba sales is expected to continue over the coming years as we expect our partners to launch Cresemba in more and more countries. At year end 2021, we anticipate that Cresemba will have been launched in about 60 countries.
Partnerships continue to play an important role in the execution of our global commercialization strategy and provide a strong basis for future revenue growth. Our partners for Cresemba include Pfizer for most of Europe, China and Asia Pacific and Astellas for the U. S. In addition, we have strong regional partners for Zevtera and Cresemba in other territories. All in all, our partnerships for Cresemba and Zevtera cover more than 100 countries worldwide.
In 2019, new important Cresemba launch countries included Canada for instance and Singapore as the first country in the Asia Pacific region. Basilea participates in the commercial success of Cresemba and Zevtera through royalties or a transfer price structure. In addition, we already received around US250 $1,000,000 in upfront and milestone payments and could realize up to an additional US1.1 billion dollars in potential future regulatory and sales milestone payments from MyoPark Virtrux. 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 full year report.
I'd like to mention that all the figures that I will refer to are in Swiss francs. We are very pleased with our financial performance in 2019. We did beat our guidance both on revenues and operating results. Deferred and non deferred revenue contributions from our 2 marketed brands Cresemba and Zevtera together increased by 39% to $114,300,000 in 2019. Most importantly, non deferred revenue from Cresemba and Zevtera increased by 36% to 68 $800,000 reflecting the strong in market sales performance reported by our partners.
Other revenue mainly consisting of R and D reimbursements from BARDA decreased 6,700,000 dollars in line with the lower expenses for the ceftofibro development program as the first of 2 Phase 3 studies was successfully completed in 2019. We completed the TURTINO related deferred revenue recognition in 2018, which is why there is no corresponding revenue contribution reported in 2019. In spite of the approximately $30,000,000 reduction from lower Toxyna related revenue and partner reimbursements, total revenue increased from $132,600,000
to $134,400,000
in 2019. For 2020, we anticipate that the non deferred revenue contributions from Cresemba and Zevtera will continue to grow at a healthy double digit rate to $77,000,000 to $87,000,000 in line with the anticipated strong commercialization progress of our partners, especially related to Cresemba. Deferred revenue contributions from Cresemba and Zevtera are expected to decrease to $33,000,000 as we complete in the course of 2020 the deferred revenue recognition of the Pfizer upfront payment and the Astellas upfront development and regulatory milestone payments received in previous years. In other words, our Cresemba and Zevtera related revenue mix is moving increasingly to its non deferred revenues, which more directly correlate with the in market sales and provide near term cash flows. Non deferred revenues are expected to reach between 70% to 72% of total Cresemba and Zevtera related revenues in 20 20.
For the breakdown of the deferred revenue in 2020, about $21,000,000 are expected to be booked in product revenue and about $12,000,000 in contract revenue. We continue to carefully manage our expenses. This is reflected in our flat operating expenses that means R and D and SG and A expenses 2019 versus 2018. We expect to keep our R and D and SG and A expenses at a stable level also in 2020. Cost of products sold are influenced by a number of factors.
Generally, they correlate with the volume of product that we deliver to our partners. However, as we are still in the launch phase and at the same time transitioning stepwise responsibility for supply to Pfizer for their territory, there are some one off effects that impact our cost of products sold. Once the transfer is completed in 2020 or 2021, our Cresemba revenue mix is expected to move more towards royalties and milestones. This and increasing economies of scale will result in increasing gross profit margins
forward looking.
Summarizing our guidance for 2020, we anticipate a continued strong double digit growth of the non deferred revenue contributions of Cresemba and Zevtera to $77,000,000 to $87,000,000 as a result of the expected strong end market sales growth. The total deferred and non deferred Cresemba and Zevtera related revenues are expected at $110,000,000 to $120,000,000 As we continue to carefully manage our expenses, we expect to further reduce our net cash consumption and to report a strong cash position of $100,000,000 to $110,000,000 at the end of 2020. I will now hand over to Mark for the clinical development update.
Thank you, Adesh. Let me continue further with our antibiotic ceftopiprole. In Europe and several markets outside of Europe, ceftopiprole is approved for the treatment of community and hospital acquired pneumonia. It is marketed in most countries under the brand name Zevtera. 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% for anti MRSA treatments such as optimize and or ceftarolin. Based on special protocol assessment agreements with the U. S. FDA, 2 successful cross supported Phase 3 studies are necessary for registration in the U.
S. Our Phase 3 program for ceftobiprole includes one study in acute bacterial skin and construction infection and one study in staphylococcus aureus of uveremia or bloodstream infections. The program is funded up to approximately 70% by BARDA. This allows us to advance the development of deptopyprole for the U. S.
Market in a cost effective way. In 2019, we reported positive top line results from the first of the two studies, the so called target study, a Phase 3 study in patients with skin infection. The 2nd Phase 3 study in staphylococcus aureus buxterumia is called ERADICATE. It is well on track and is expected to report top line results as planned in the second half of twenty twenty one. IFTOBARTERIMA study is also positive, but Valeya 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, TAVTOBYPRO will be eligible to receive 10 years of market exclusivity in the U. S. From the date of approval.
TARGET was a randomized double blind Phase 3 non inferiority study and enrolled 6 79 patients. Patients received either ceftobiprole given intravenously 3 times daily or the comparator regimen of twice daily intravenous vancomycin plus atstrianom. In summary, ceftobipro was non inferior to vancomycin plus adstrinam in this study, and the key endpoints for the FDA and Europe were both met. Ceftobaltromet 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, which is a key endpoint according to the FDA guidance for the U. S.
Ceftobipar 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 EMA in Europe. Now moving on to oncology, our lead oncology drug candidate is sarazantinib, which we in license from ArQule, which is now a wholly owned subsidiary of Merck. Serazantinib is a targeted, orally available small molecule inhibitor of the fibroblast growth factor receptor or FGFR family of kinases. FGFR genetic operations, for example, gene fusions, mutations or amplifications have been identified as potentially important therapeutic targets for various cancers, including intra particle oncocarcinoma or iCCA and urothelial, gastric, breast and lung cancers.
Derazantinib also inhibits the cognitive stimulating factor 1 receptor or CSF1R and the vascular endothelial growth factor receptor 2 or VEGFR2 kinases. CSF1R is an important target in the modulation of the tumor immune microenvironment. The inhibition of CSF1R by derazantinib seems to be a unique feature for derazantinib compared to other FGFR inhibitors. VEGFR2 is known as a therapeutic target in the anti angiogenic treatment in multiple cancers including gastric cancer. Our development strategy focuses on achieving differentiation over other FGFR kinase inhibitors by leveraging the unique properties of darazantinib.
Key differentiation factors for darazantinib include its unique kinase inhibition profile and its clinical safety profile. Baselav's clinical development program for derazantinib currently comprises 3 studies, 2 of them, PDAS-one and PDAS-two are ongoing in iCCA and in urothelial cancer. And we are planning to start the 3rd study PDES-three in gastric cancer in the Q3 of 2020. Cristal's structures indicate that the improved CSF1R inhibition activity of darazantinib versus other FGFR kinase inhibitors can be explained by a better fit of darazantinib into the active site of CSF1R. Other FGFR kinase inhibitors such as the approved FGFR kinase inhibitor erafitinib have different chemical structures and may not fit as well into the active site.
The CSF1R inhibition may be important in the treatment of urothelial cancer, but may also have a broader utility support combination studies with immunotherapy and other cancer types. Preclinical data has shown that tumor macrophage modulations through CSF1R blockade may render tumors more responsive to T cell checkpoint immunotherapy, including approaches targeting PD L1 and PD-one. T cell F1 kinase inhibition may thereby improve the susceptibility of tumors to immunotherapy. Experiments with mouse bone marrow derived macrophages support that derazantinib modulates CSF1 R kinase activity at clinically achievable concentrations in vivo. Adler has entered into a clinical supply agreement with Roche for atezolizumab or Tecentriq, a PD L1 checkpoint inhibitor to explore this immunotherapy combination in patients with urothelial cancer and gastric cancer.
In urothelial cancer, patients' FGFR genomic abnormalities frequently show low glycanone expression, which has been associated with reduced response immunotherapy. Therefore, derazantinib as a single agent and combined with PD-one inhibitors may address several oncogenic mechanisms and provide a new treatment paradigm. Another pillar in our differentiation strategy of terazanib to other FGFR kinase inhibitors is the safety profile where derazantinib shows some of the FGFR kinase inhibitor class effects, but also clear differences with the lower current of retinal events, nail toxicity and foot syndrome and somatitis. Such differences are relevant for patients as these side effects may compromise the patient's quality of life and have been shown to result in treatment discontinuations. In January 2019, we reported encouraging interim results from the registrational Phase 2 study called FEDAS 1 in the second line treatment of FGFR2 fusion positive iCCA.
Top line results for this cohort are expected in the second half of twenty twenty. In addition, we have expanded the PD-one study in June 2019 with a new cohort of iCCA patients with FGFR2 gene mutations or amplifications in that tumor. Through this new cohort, we intend to Interim data from the 2nd cohort are also expected in the second half of the Interim data from the 2nd cohort are also expected in the second half of twenty twenty. In the Q3 of twenty 19, we have started FEDUS-two, a Phase 2 study with darazumab as monotherapy and in combination with Roche's PD-one checkpoint inhibitor, atezolizumab. This is a biomarker driven multi cohort clinical study in patients with advanced urothelial cancer expressing FGFR genetic aberrations and first interim results are anticipated for the second half of twenty twenty.
In the Q3 of 2020, we are planning to start FEED 3. This study will explore derazantinib in patients with gastric cancer and FGFR genetic aberrations and will also include a cohort in which derazantinib is combined with atezolizumab. We've decided to investigate derazantinib in gastric cancer based on derazantinib's unique kinase inhibition profile convincing preclinical in vivo data and the high medical need in this indication. Moving to our tumor checkpoint control in lizavangolin of IL-fifteen fifty three. We are focusing our clinical development activities with lizavangolin on glioblastoma, the most common and aggressive form of primary malignant brain tumors in an area of high unmet medical need with very few treatment options available.
Lisovangolin is a novel microtubule targeting small molecule. It can be administered oral and IV, crosses the blood brain barrier and has shown potent activity in brain tumor models in monotherapy and 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 response predictive biomarker for glioblastoma. In our Phase 1 glioblastoma clinical study with daily oral dosing of lizavambulin, we have observed a profound and exceptional objective response in a glioblastoma patient whose tumor tissue was EB1 positive.
This patient continues on frequency with lizavambulin for more than 20 months now and shows a more than 80% error reduction of the brain tumor. As non responding patients did not show this pattern of strong EB-one expression and based on additional biomarker work, we are therefore assessing the potential utility of EV1 in a biomarker driven clinical study in glioblastoma and are planning to start this Phase 2 study mid-twenty 20. We also continue with our Phase 1 study in newly diagnosed glioblastoma patients of lizavambulin in combination with standard radiotherapy in the U. S, which is conducted by the Adult Brain Tumor Consortium. I will now turn over to David.
Thank you, Mark. So in summary, we are on track with the execution of our strategy in terms of both significantly increasing cash flows from our marketed brands Cresemba and Zevtera and advancing our R and D portfolio towards the next milestones. In particular, the clinical milestones in 2020 beyond are as follows. We will progress the Phase 3 ceftobiprole study in staphylococcus boyus bacteremia with the aim of having top line results in the second half of twenty twenty one in order to file in the important U. S.
Market at the end of 2021. In the first half of twenty twenty, we anticipate complete enrollment into the Phase 2 registrational study in derazantinib in iCCA patients, it is 1, and expect then top line results for the cohort with FGFR2 fusions to be available in the second half of this year. In the second half of this year, we also expect interim data from the ICCA FIDD1 cohort with other FGFR2 genetic aberrations. And finally on derazantinib, we also expect the 1st interim data from the FIDDIS2 study in urothelial cancer in the second half of twenty twenty. We have already amended the clinical supply agreement with Roche for their PD L1 checkpoint inhibitor to Tecentriq and our plan to explore the combination with derazantinib as well as derazantinib as monotherapy in gastric cancer.
And this gastric cancer Phase III study is anticipated to start in Q3 this year. For lease of Ambulance, we are planning to start the biomarker driven Phase 2 study in glioblastoma mid-twenty 20. And finally, we expect completion of patient enrollment into the ongoing Phase 1 study release of Ambulin in patients with newly diagnosed glioblastoma by mid-twenty 20. We'll now open the line to any of your questions.
First question comes from the line of Louise Chen from Cantor. Please go ahead.
Hi, thanks for taking my questions here. So my three questions are as follows. First question is just curious if you could provide more color on your competitive advantage for darazantinib in urothelial cancer and gastric cancer? And then second question is what supports the use of darazantinib in gastric cancer? I know you talked a little bit about it on the call, but just maybe if you could elaborate more that will be helpful.
And then the last question I have for you is on lisa vinbulin. Can you provide more color on your biomarker and the type of patients that can be best treated with your drug? Thank you.
Okay. Thank you, Luis. David here. Actually, they're probably best all those questions are best answered by probably Mark. So Mark, why don't you kick off and then Deshay can jump in.
But in terms of the competitive advantage of derazantinib in urothelial and gastric and then the data supporting gastric cancer and Y gastric cancer and then the EB1 and e spambulin.
Yes, Luis, thanks a lot. So for the urothelial cancer, the key differentiation is, as we've outlined also in our presentation today, the activity of derazantep against colony stimulating Factor 1 receptor, which is a kinase on macrophages and is involved in the modulation of the tumor immune microenvironment. And we have done comparative kinase screen versus all competitors in clinical development, and that's a unique feature of darazantinib. And we believe that this might contribute to potential improved efficacy when combined with an immune checkpoint inhibitor. So I think that this is clearly the differentiation we have and we have done some more work into this.
We have looked at the crystal structures, which explain why Zanib and for example, not rafitinib fits into the binding pocket of CSF1R and we've also done in vivo experiments now in actual macrophages to confirm that CSF1R inhibition really happens. So that's, I think, the key differentiation for urothelial. In addition, I think, for any combination, it looks like that daritanib is differentiated by the safety profile. I mentioned during the call that this is related to retinal toxicity in Mayo and foot syndrome and thrombosis, so it may be easier to combine it. For gastric, I guess where we were coming from was a large screen in patient derived xenograft models where we looked across a large number of tumors and different tumor types to just see where we have the most consistent best efficacy and that was gastric.
From a kind of biology perspective, we also have seen that in addition to the CSF1R inhibition, derazantin inhibits vascular endothelial growth factor receptor 2. There are compounds approved for this is a compound approved for this target in gastric cancer. So this may contribute or may really be an underlying biologic rationale, but the primary kind of both gastric cancer came from convincing the data in a series of non clinical models.
Then the lease of ambulin and the EB1, the type of patients?
So for
lizavambulin, I think we would initially, the Phase II study that we're planning to start mid of this year would be in a recurrent setting. This is where we've seen this exceptional responder in the study in the U. K. With Bali oral lisavambulin. We have done quite substantial non clinical work and also looked into tissue banks and have a relatively good idea on the how to do the biomarker selection.
These data will be published later this year, but I think it's premature to detail on them, but we basically have prevalence estimates and also have, I think, identified how to do the patient selection in that trial.
In order to start the study in Q3 this year, which is what I think we said during the presentation. Does that answer your questions, Louise?
Yes. Thank you very much.
Okay. Thanks.
Next question comes from the line of Raghuram Selvaraju, H. C. Wainwright. Please go ahead.
Hello. This is Edward Marks on for Ram. I appreciate you guys taking the questions. I have 2 financial questions and one clinical question. Just a little clarification, I was wondering how you plan to get to the projected year end 2020 cash flows or cash position of $100,000,000 to $110,000,000 if you had $161,000,000 at the end of 2019 and the operating loss only projected to be $20,000,000 to $30,000,000 I was wondering if there are some non operating items contributing to this cash decrease?
Wes, do you want to take that?
Yes, sure. Thanks for the question. So as you have seen probably in our guidance, we are looking at €30,000,000 non deferred basically deferred revenue contribution to the top line. So these are non cash items. This is non cash revenue.
And hence that's sort of the difference. There are also non cash items with regard to expenses, but in essence really the big difference comes from deferred revenues, which are all non cash relevant. Does this answer your question?
Yes, absolutely. And then when my profitability or maybe at least cash flow breakeven be attainable by the end of next year?
Yes, that's a good question. The way we would answer that is that obviously, clearly, our model in the past has been to we take compounds to the end of Phase 2 and then we partner the Phase 3 like we did we're doing currently with ceftobiprole with BARDA and we did with Astellas with isopeconazole. The caveat I would say is that assuming that we would partner 1 or both of the compounds in development in Phase 2, which release of Ambulin and derazantinib. So if we partner either of those compounds during the course of 2021, then and we keep on maintaining our stable cost base that Adesh talked about and our cash generating revenues keep going in the direction they're going in, and we can foresee the possibility of us breaking even in 2021.
Excellent. That's good to know. And then finally on the clinical side, just when you outlined a lot of your timelines there, which really appreciate. But looking at top line data, I was just wondering when we might see the top line data for the Phase 2 study of lease of Ambulance in glioblastoma? And would the Phase 1 study in the newly diagnosed patients yield data before the end of this year?
Yes. So we expect for the Phase 2 study in recurrent glioblastoma that will be biomarker driven to have data available that are meaningful in the first half of twenty twenty one. And for the I think you asked for the Phase 1 study in the U. S. With the ABTC.
This is basically from a readout perspective requires survival data because it's a newly diagnosed GBM study. So these patients, by definition, they do not respond. They are kind of followed for progression between overall survival. So these data, we would expect somewhat later more towards 2022 readout.
Okay, thank you. I appreciate all the details.
Thank you.
Your next question comes from the line of Victor Floch, Bryan Garnier. Please go ahead.
Hi. Thanks for taking my question. I have a couple of questions regarding derazantinib. So first one, I just wanted to understand why did you prefer to start a study in gastric cancer rather than in the breast? So I understand that you have great confidence about your about there isn't any in gastric concern.
But in the meantime, the frequency of FDA collaboration seems to be quite high in breast. So just wanted to understand what drove you towards gastric? And my second question is about the competition from the antibody monoclonal antibody targeting FGFR such as both ofatumab and bemarituzumab. Just wanted to hear your views about those 2 assets in terms of competition?
Mark, you're probably best placed to comment on why gastric rather than breast?
Well, I said we've done a quite comprehensive screen through various models. And gastric just was the gastric cancer models were quite consistently responding to diazepamhip. So that was our main rationale. I also mentioned before that biologically, we've seen the VEGFR2 activity of derazantinib and that for gastric cancer population maybe really indicate utility. I think from a differentiation perspective, this to us just seems the best move.
And also it is the industrial cancer is not really explored by other FGFR small molecule FGFR inhibitors. And the high medical need would probably also allow a quite rapid access to market if the interim results turn out to be positive.
And then the comment about the antibodies in development, how do we see those visavis erosantinib, the antibodies targeting FGFR?
I think this is to be seen. As in other areas, EGFR inhibitors, I think there's utility for antibodies, but there's also utility for small molecules. And I think the difference the differentiation we have for Telazamlib really is that we have profiled this molecule in terms of its kinase inhibition profile and it affects more than just the FGFR1, 23 kinase. It also inhibits CSF1R, which is provides a differentiation for combining DASANET with immunotherapy with HFR2 may be another differentiator for our approach in gastric cancer, whilst the antibodies, they will just work against one very specific target.
Your next question comes from the line of Brian White with Cantor. Please go ahead.
Yes. Hi. Good afternoon. Thanks for taking my questions. I'm going to ask actually another variant on a question that's just been asked actually on derazantinib.
Just thinking about the comprehensive preclinical model experiments, I just wondered, did actually derazantinib show activity in other cancer settings in addition to gastric or was it only gastric? And then secondly, thinking about the combination with TECENTRI can I get the differentiation and the mechanism behind why it might work well with checkpoint inhibition? And I wondered if you thought about other classes, for example, the PARP inhibitors or DNA damaged repair pathways in particular? And then just thinking about more generally on oncology assets and bringing some of these programs into Basilea. I guess that these could be quite expensive if they were on later stage oncology assets and there would be a reasonable degree of competition for these programs also.
And I wondered if there were if you could talk about co development structures that could perhaps facilitate Basilea's involvement while still preserving cash for these programs?
Yes. Okay. We'll come back to thanks for the questions, Brian. We'll come back to the in licensing. But the in terms of the those answering questions, Mark, again,
it was
a comment on actually
to the previous question, why did we choose gastric? What have we seen?
That wasn't the question, sorry. The question was, did I get why you chose gas tickets. Was there any activity in any other cancers? Or is that it?
Yes. I think kind of considered this implied. That yes, we have as said, we have looked across a large range of different tumor types and we have seen signals beyond iCCA urothelial and gastric cancer. It's I think as said, we explained why we selected gastric. I think the data we've seen and the signals we've seen in the other types, they will need some further consolidation.
It's too early at this point in time to make disclose them and make a firm statement about our plans for additional clinical studies in cancer types beyond should say, urothelial cancer, gastric cancer. But there's clearly potential there. And I guess, somehow we consider Aurizanab as a pipeline and drug in this context, where we have the ability to expand into various indications. And the first three we have disclosed, we may move on to additional indications once we have consolidated the preclinical signals. The other question I think was about the combination and currently I think we're focusing on combination with immunotherapy, But we are also looking into combination approaches with other compounds, including chemotherapy, anti androgenic treatments, a number of other combination partners which could also include PARP inhibitors.
But I think from a realizing this clinically, we I mean, we are there with a atezolizumab combination of PKR1nebula combination. And we'll be disclosing in the first half of twenty twenty or later in 2020 our detailed combination approach in the gastric cancer study, which is atezolizumab, but also will include other combination approaches.
Okay. Thank you.
And then the in licensing strategy in terms
different structures around collaboration. So with regard to development, we have the clinical supply agreement, for instance, with Roche for Tecentriq for the gastric study and for the urothelial cancer study that has, of course, implications with regard to the cost, as you were mentioning costs or reducing costs for running combination trials. Historically, we have had co development agreements as we did with Astellas, for instance, on a global basis or more on a regional basis or local basis as we have with Gozan. So there are all kind of different structures. And the question really is what are we trying to get out of it?
Is it that we need to have or that we like to get access to an
asset as such
or do we want to have financial, let's say, participation. And we are exploring all kind of different partnerships.
And just to build on that one additional point for myself would be the fact that clearly our sweet spot in terms of in licensing compounds per se, obviously, is the sort of and this is what we've shown is from the sort of preclinical pre IND to sort of early clinical Phase III, but obviously not any later than that with our structure, with our financial means that is the sort of sweet spot for us and then the concept being that we add value to our development and our science that we can apply to it. And then we can partner or in the future, maybe keep some ourselves. But that's the sort of concept that in terms of in licensing that we apply. And we also are very clear, we have clear in our head, we haven't disclosed this fully about the sort of the types of target assets we're looking at in oncology and where we're clear where we want to play and where we don't want to play.
Right. Okay. Thank you.
Your next question comes from the line of Christopher Redhead, Gutspatnitz. Please go ahead.
Hi, gentlemen. Yes, just a quick question on lizalbimin. Is given the indication and given the high unmet medical need, the nature of the patients there, Do you see there's a strong possibility for getting some kind of accelerated approval, going straight from a Phase 1 into a Phase 2 pivotal? Is that a possibility, do you think, or not?
Certainly, this depends on the observed results. If it turns out, I mean, we would be really looking for patient clinical benefit, which includes response, but also durability of response. If these data are convincing, then certainly GBM is one of the indication that where there is an avenue on accelerated approval.
Yes. So there's a possibility that it could move faster than the other products in the end, right? You could be seeing within a relatively short period of time, those that product, if you get the results, that product moving faster than the other products. Is that fair to say if you get the right results?
That's fair to say and it's data driven. But also for the DARZANIP data, the way the studies are designed and the size of individual cohorts also allow if we see really promising activity in these studies to probably move them onto a track that may not require necessary in all cases a full on Phase 3 development. So it's true for Liza-one billion, but it may also be true for terazantinib.
Next question comes from the line of Paul Verbraeken, Research Partners. Please go ahead.
Yes, good afternoon. I also have 3 questions. The first one is my recurring question about the progress of Cresemba in Japan and China. Is there any update there on the clinical and regulatory path? The second one is on larazantinib with ArQule being acquired by Merck.
Do you notice any impact? Or do you think that might change your collaboration on this compound? And my last one is financial. I noticed that in your 2020 guidance, you expect an increase in cost of goods, which I find very surprising as Pfizer will take over the manufacturing in Europe of Cresemba. So I was actually expecting a decline.
So can you maybe give some color on that development? Thanks.
Okay. Thank you, Paul. So I'll answer the first one, Japan and China, and then Adesh will pick up on your next two questions. In terms of the Japan and China, there's not much of an update probably from what we would have said previously in terms apart from saying that the as you're aware with Japan and by the way, clearly, you're asking the question because these are 2 very important markets. For Cresemba and Japan, there is the ongoing Phase III study, which is still on track, ongoing.
We anticipate that the projection is that top line results of the study would be in the second half of twenty twenty one and then an approval subsequent to that. So that's obviously pending the data being positive. So that our partner Assai Kasai is on track with the Phase 3. That is an example where we did need to do a Phase 3 and it's ongoing. With China, we don't yet know if we have to do a study.
Our partner there is Pfizer. And all I would say there is that we're anticipating definitely this year to hear the news about whether or not we need to do studies or not, whether we've got a waiver or not. And we don't know the answer to that question just yet. But obviously, as soon as we do, then I'm sure you would see that because we would almost definitely issue a press release to the news about the China submission and timings and strategy. So that's the status with China and Japan.
Adesh, do you want to comment on the Merck deal with ArQule and the
cost of goods? Okay. So for the acquisition of ArQule by Merck, for the time being, there is not an immediate impact. The transaction only closed 4 weeks ago. And this is not a co development.
As such, we are developing the drug. So from our perspective, nothing has immediately changed. I suppose Merck also has to really step into the program and have to understand the full program and the concept behind derazantinib. I think generally speaking, we could say it's probably not a disadvantage to have a partner like Merck on the oncology side. So we'll see how this will evolve.
But for the time being, no immediate impact. With regards to our product tool, you're right about the handover to Pfizer, which is actually still happening step by step. It is not completed. So in 2020, we are still supplying certain material to Pfizer. This may actually even extend into 2021.
But just generally speaking, I would say that if you look at our guidance, our product sales are actually going up. So in spite of Pfizer eventually taking over the supply for their own territories, we also have our distribution partners that are selling more. So the actual amount of products being sold increases. The way that you could look at COGS is however or at cost of product sold is we're currently probably around 30% give or take. If you look at 20, if you look at the 20 19 numbers and at the 2020 numbers and put them into relation to the non deferred revenues, they add up to about 30%.
I think it is fair to say that in 2020, let's say 2021 and going forward, we would expect that margin to improve because more of our revenues will be coming from royalties and milestones, which flow straight to the bottom line. And then the other thing is that we expect to realize economies of scale. So currently I think cost of products sold about give or take 30% of non deferred revenues depending on whether you're at the lower or the higher end of our guidance for non deferred revenues, forward looking that will improve.
Okay.
Thanks a lot. Thanks a lot.
Next question comes from Bob Pooler, Valuation Lab. Please go ahead.
Good afternoon, gentlemen. Two questions, if
I may. First, if you look at now, the spread of infectious disease has been quite prominent in the news lately, currently one of the coronavirus, but also in November, there was also a CDC report highlighting the antibiotic threats in the U. S. So very, very important threats there. Do you expect with all the momentum behind infectious disease that we'll finally see some triggers, increase in action into research in infectious diseases and what is needed to make antibiotics attractive again?
Yes. Hi, Bob. Yes, it's a good question. I mean, obviously, I'll try and keep the answer very brief. But in essence, I guess, unfortunately, news such as the coronavirus and but also with bacterial outbreaks and things that are resistant, This actually our belief is that this only helps sort of spike interest and raise awareness of the issues, including AMR.
And actually, we've seen during the course of the last 12 months, particularly in the U. S, changes to, for example, reimbursement of antibiotics in the U. S. Market, which are helping to provide these so called sort of pull incentives, which is the bit that's really lacking at the moment. I think there are a lot of incentives and obviously we take we benefit from that through the BARDA funding, through the QIDP designation.
So we have a series of benefits in the sort of push incentive area that we benefit from very significantly. But yes, our view is that on the so called pull incentive area, where there hasn't been too many meaningful commercial incentives in place, We've seen signs that things are getting better. I think the external environment, it's only increasing in the news. And so I believe it's just a matter of time before real full incentives are in place. I mean, there's a couple of initiatives, again, in the U.
S, disarm and revamp, which we talked about, but haven't become law yet. But our belief strongly is that at some point, there will be more meaningful full incentives and then that would change the whole NPV of an antibiotic in the future versus what it is today. And so we don't know when, but we firmly believe that it has to get better.
Okay. Thank you. And then just a
small question on Zevtera. You have the positive target results in skin infections. Is there any potential that you'll file for this indication in Europe?
Actually, what we are currently doing with regard to the yes, just to build on your question slightly is that the obviously for the U. S, we need both. So we can't file the skin infection in the U. S. Then subsequently file the patremia.
We have to actually wait for both to file the 2 together because they're cost supportive of each other. In terms of the usefulness, the utility of the skin infection study around the globe, I mean, clearly, from a medical affairs point of view, and obviously, we're planning on publishing in a scientific meeting the detailed results of the skin infection study this year. We can do that, and we're planning to do that. And that would be then disseminated through our commercial partners so they could utilize from a medical affairs perspective in the in their respective organizations. In terms of the utility and the label in other parts of the world, my understanding is that once we've shared the data, we then have to find out if we can use it, if we can get any label enhancements in terms of indications.
We currently go through that process with our partners around the world to see whether or not we can actually file for the indication. But immediately, that doesn't stop us from a medical affairs point of view using the data in that arena.
Okay. So basically, once the data is published, then there could be some potential off label use next to lung infection?
Exactly. But as I said, you're probably aware of this that actually antibiotics, Mark, you could comment, but antibiotics are used pretty much routinely off label anyway. Obviously, companies don't promote off label, but they're used off label. So I'm sure a lot of Zevtera usage probably already now is used in things other than HAP and CAP. But Mark, do you Yes, of
course, we would not do any proactive activities there. But it is just I mean, there is data out from years ago on the activity in skin infections. This will confirm that this is an active compound in skin infection. And we know that sevto bifrost used outside of pneumonia. So I agree with David's statement, but it doesn't give us any unless we really file it to get into the SMBC, we're not going to be able to actually be promoted.
Okay. Thanks. Just maybe one clarification on the partnering plans for your oncology assets. It's true that at the end of Phase 2, that's when you would be the ideal time to partner?
Yes. I mean, obviously, it's a little bit of a it's a sort of moving feast depending on the discussions you have, the ongoing discussions you have with partners and the sort of the offers you get at different points in time. So I'm just saying generally, or we were saying that generally, that and if you look at our history, it's sort of that's the time at which we usually look to partner that, that usually makes sense. But it doesn't mean every single time, so it's always exactly at the end of Phase II. It depends on the ongoing discussions we're having with a partner at a particular point in time.
Okay, very clear. Thank you.
The next question comes from the line of Oleg Cylian with Mirabeau. Please go ahead.
Thank you for taking my question. I keep it very brief. First question about Cresemba sales in United States. So Astellas reported for the past quarter that the sales accelerated once more, reaching almost 40% year on year, while in previous quarters, it was in the range of some 20%. What is the particular reason for that, like a change in the use pattern, prescription pattern in the U.
S? And second question would be about EB1. So it's obviously a strong predictive biomarker for patients responding to Lisavant Bulin. So what is the frequency we should expect for this biomarker expressed in other solid tumors? Is it in the range of low percentage range?
So requiring like a tissue agnostic path to approval, tissue agnostic studies? Or would you need to conduct studies in a very dedicated way like tissue, like breast cancer, where EB1 is also relevant? Thank you.
Okay. Thanks, Balav. Okay. Adesh, why don't you
So I can take the Cresemba question. We are of course very pleased with the performance. So it's not that we're complaining, but probably it is fair to say that for Cresemba, you have to look at more or less a rolling 12 months performance to really get a feel for where our trends going. Because what you shouldn't forget is that what is being reported is at the end of the net sales and that there is there are all the accounting impacts and so on. But generally speaking, I think what we can say is there's healthy double digit growth that Delta guided for 20% growth year on year within their fiscal year.
They're well on track on achieving that. And that's basically what we can say at this point in time. We look forward to further growth. So our guidance implies that there is continued double digit growth of in market sales across the world.
Thank you. Mark, the EB-one question.
Probably cannot say everything we know about it, but I try to put it at least give some indication on where this is going. So we have looked into the prevalence of EB1 in fibroblastoma. We view several independent tissue microarrays. These arearrays where there are a couple of 100 tissues from hundreds of patients mounted onto several arrays. They can be stained and then looked at in a very short time.
And what we can say, I think that EB1 positive GBM is infrequent, but the prevalence is still high enough to allow for tissue screening on a reasonable scale to conduct clinical trials. That's what I think I can say now. And we will be publishing the prevalence data later this year. To other content types, I know that there are some publications from a couple of years ago from Chinese scientists where for example EV1 and breast was
I think 30%.
We believe that it really is quite assay dependent and from what we have seen so far we believe that this is probably we don't expect for example, if we did a breast cancer prevalence that we would find 30 percent. We believe that the published numbers maybe due to different assays used. And the question whether then beyond GBM whether this goes to a cancer type by cancer type or an agnostic approach, it's a little too early. I think it really depends on the biology and also the frequency from a strategy perspective if we found that in a relatively large indication we have 3% to 5% even one
just let's see
as an example that for itself would justify going into that indication I think from a clinical trial efficiency to go agnostic if we actually had a significant albeit relatively low proportion large to my pipe is probably not the best approach. So this is really to be seen.
Okay.
Maybe a follow-up question, if I may. So on derazantinib, can we then assume that should you have compelling data at the Phase II stage of your program, be it in bladder cancer or then late in gastric cancer, you would be in the position to submit the data for an accelerated conditional approval?
That's what we would be trying. It's really purely data driven. These are both high medical need indications. And I mean if you look at the fitinib FGFR inhibitor from Alvarza from Janssen, they received an accelerated approval based on 87 patients. So from a patient number perspective, non controlled study.
From a patient number perspective, if the medical need is really high and unmet, I don't think that necessarily large studies are required, but it will be really data driven. And the design of the study is put in a way that we have the option to expand certain cohorts if we want to then we would have to expect to discuss with regulators what they expect to see.
And maybe just to finish, so the trigger that would allow you to disclose interim data, is that completion of the Phase I stage or number of patients treated or the number of events you have observed? Could you give some flavor on this please?
So I mean for the UCI Casa study for example we've just presented the design on the poster on the ASCO to you and you have several things. It's about the optimal dose for the combination of derazantinib and patezolizumab. And then most of our cohorts are conducted in the so called Simon 2 stage design. So you start, let's say with the cohort, let's say you have 70 patients in the cohort just for example purpose, then you start 25% cohort with 25 patients with looking at the endpoint if it's just response rate there is a minimum that has to be achieved and then the study moves on to enroll another 45 and then at the end there has to be a number of responses to say this is this is promising. So this stage approach and the open label nature of study allows us and to communicate interim data that we are painting anyways to define the this kind of moving from one station to the next.
Gentlemen, there are no more questions at this time.
Okay. Thank you, everyone, for your questions and your interest in Baselaya.
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. Goodbye.