Earnings Call: H1 2020

Jul 23, 2020

Dear, ladies and gentlemen, welcome to the Adelphia Conference Call. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen only mode And after the presentation, there will be an opportunity to ask questions. May I now hand you over to Andrew Weiss, who will lead you through this conference. Please go ahead. Thank you, Olivia. Good afternoon, good morning, everyone, to wherever you're calling in from. My name is Andrew Weiss, I want to welcome you all to our first half twenty twenty financial results call. Today, we will be talking about the performance over the first half as well as progress that has been made and how we look at the rest of the year. With me on the call, as usual, are our CEO, Jean Claude Laudel our CFO, Andre Muller and I'm also pleased to welcome Simon Jones, our Chief Commercial Officer to the call. Since the positive results of both our pivotal trials for dairy directxant, many people have been asking how is EYdorsia intending to commercialize dairy directant. Simon has joined in this call to give his first impressions on how we see the insomnia market and how he and then he will be able to take questions later on. Next slide, please. Before handing the microphone, I need to remind everyone that we will be making forward looking statements. You therefore have been appropriately warned about the risks and opportunities of investing in Eydorska shares. Next slide. Jean Paul, the floor is yours. So Slide 3. So the beginning of 2020, the first half of 2020 has been a tough beginning of the year, of course, because of this COVID crisis. But despite the COVID crisis, Hydrosia has moved forward in a tremendous fashion. And I think that I would like to tell you that the whole company is now working very hard to prepare the filing of our NDA for the end of the year, hopefully, before the end of the year. Next slide. So the first half of twenty twenty has been marked by a remarkable achievement. I've mentioned the positive 2 Phase III results with daridorexant, but we have also achieved licensing agreements with Neurocrine. We have issued 11,000,000 new shares, raising our cash liquidity. And also, this is important for EYdorsia. Janssen submitted an NDA, both at the FDA and at the EMEA for polemizimod in multiple sclerosis. We believe that the ponezimod is substantially differentiated from other S1P1 receptor agonist, and we are really very hopeful that it will be a commercial success. I remember that we get 8% royalty on the sales of ponazimod. What is also important is that despite so Slide 5, sorry, despite the COVID crisis, we are moving rapidly our pipeline forward. Basically, during this crisis, only one project was more or less on hold. This is the clazosantan, because clazosantan patients are hospitalized in intensive care units, and we wanted in conjunction with investigators to really keep these intensive care rooms for patients with COVID. But now the project has restarted and all other Phase III programs are moving forward. We got a delay, and it's very difficult for me to tell you how much is the delay because all will depend how fast the hospitals can reopen, how fast the traveling because we need to be able to go to see the patients in the centers and the investigators, all depend how well the countries are going to be able to deal with this crisis. But what is very reassuring for me is to see recruitment picking up now with some of our Phase III projects. And for example, I'm confident that we will get the results of Lucerastat next year. So next slide. So I think we are on track within EYJORSEA to achieve the goals that we have given to us when 3 years ago we were created. First thing was to get 3 products on the market. And you see with Daridorexant, but with Lucerastat, with afrocentan, with clazotantan following rather rapidly after daridorexant, I believe this goal is achievable. The second goal was to beat a commercial organization, and very soon, Simon will tell you what is going on about this goal. And the third point was to bring Hydrosia to a sustainable profitability. When we think of the future income of ponezimod, of daridorexant and all the other Phase III program, which are coming, I think that this profitability should be able to be achieved in a reasonable time line. But what is very important was not only to reach profitability, but to be able to grow for the next 10 or 15 years and to have brought to the market sales with a potential of 5,000,000,000 sales, and I think we are on good track. And finally, what is important, and this is going to be extremely important for the launch of delidorexant, We want to use all state of the art technologies, not only for research, not only for development, but also for marketing. And I think people speak about digital launch. I believe that you cannot only launch 100% digitally, but this digital means are going to be very helpful to make from daridorexant a success. Slide 7, next slide, Slide 7. So we have discussed in length, and I will not come back on that, the fantastic results we got with daridorexant. We are continuing since the 2 last webcasts to analyze these 2 studies. And I would say, we have not found any disappointing We have not had any disappointments. We discover more and more, I would say, gems in this huge data mine that we have. This product, daridorexant, is really an outstanding product. I think it's going to be really changing the life of many patients with insomnia, not only they will be able to sleep quicker, to sleep longer, to sleep, I would say, better, but I'm convinced that we have evidence to show that with this drug, people can function better during the day. So we are soon going to show the results at the scientific conference. The first result will be shown in August. But of course, there are, I would say, tens of papers to be written based on the huge database that we have. So now we must not do the mistake. Now next slide. We must not do the mistake to believe that even we saw fantastic results, a drug can sell by itself. We need to explain the differentiation of dasil dorexant. We need to explain what are going to be the benefits of this drug. And this is going to be the goal of the launch, which is now orchestrated and prepared by Simon Joss, who is our Chief Commercial Officer. Simon has now been with us for more than a year. He has a fantastic experience for not only but for large for these type of products. He got his experience with GSK, and he's going to tell you what is happening on the commercial front. Please, Simon. Thanks, Jean Paul, and good morning, good afternoon, everybody. I'm very pleased to join today's webcast and provide you with a short update on our commercial strategy. Obviously, following the positive Phase 3 results with the redirectsant, we're moving full speed now to prepare for a successful launch. And as you've seen, we've established the U. S. Affiliate and already appointed a talented leadership team with deep experience of the U. S. Market. And to give you an idea, they collectively have 178 years of experience and have worked on 40 launches between them. The Redirection is the 1st sleep medicine to demonstrate not only an improvement in sleep onset and sleep maintenance, but also, as Jean Paul has said, in daytime functioning, all without compromising safety. So with this outstanding profile, we believe the readorexant will be clearly differentiated from existing orexin receptor antagonists and the older widely prescribed sedating sleep agents. Now while we're clearly excited about the Phase 3 results, I'd like to take just a few minutes to share with you why we're also excited about the opportunity we have in front of us in the insomnia market. Next slide, please. The insomnia market is huge, with an estimated 20,000,000 adults in the U. S. Alone suffering from chronic insomnia, and with more than twice that number experiencing poor sleep. Insomnia at night affects every aspect of a person's day, including reduced productivity and greater work absenteeism than healthy sleepers. Relationships with family, friends and co workers can suffer too. And the impact goes beyond quality of life. Insomnia costs the global economy approximately $100,000,000,000 a year. And furthermore, there's growing evidence that chronic insomnia is associated with increased risk of other diseases such as cardiovascular and cerebrovascular disease. But despite this substantial burden, the insomnia market is underserved. Existing products all have limitations, whether that be insufficient efficacy through the night, next morning residual effects or other well known adverse events. So all in all, there is a high unmet need in a very large patient population. Next slide, please. Now one of the things that gives us confidence in the magnitude of the unmet need is the prescribing patterns in the U. S. That we've seen over the last 15 years or so. As you can see from the chart, there's been a significant decline in the use of the Z drugs following the FDA dose change and safety warnings in 2013. With the addition of the black box for complex sleep behaviors last year, we expect the shift away from the Z drugs to continue. Now since 2013, we've also seen a corresponding increase in the use of trazodone. We're doing more analysis on this, but we estimate that 70% to 80% of trazodone scripts are written at doses primarily used to treat sleep complaints. And this, despite trazodone not being licensed for insomnia and the American Academy of Sleep Medicine guidelines explicitly recommending against its use. This clearly suggests there is a large unmet need and a big opportunity for a product that is specifically developed to treat insomnia that can deliver the desired efficacy without compromising safety. And as an aside, these data also remind us that we need to account for this large and growing off label use of trazodone in order to get the true picture of market potential. Next slide. So I'd like to finish by sharing our commercial approach of launches and how that applies to the Redirectsant. 1st, although there's a real opportunity to transform and modernize the insomnia market, we cannot approach it in a standard way. We need to bring innovative approaches to our launch, including predictive analytics, and as Jean Paul has said, the use of digital channels and wearables and an overweighted focus on the patient given the disease area we're entering. 2nd, we believe the redirects will have a clearly differentiated profile. I've spoken to this already, as has Jean Paul, that the effect on daytime functioning and the safety profile of the Redirect Scent are 2 obvious and important areas that stand out for their difference to existing sleep products. The Redirect XANT has the potential to bring patients suffering from insomnia what they want, to sleep longer at night and feel better during the day. 3rd, we need to be flexible and nimble in how we build commercial organization. We'll build global brands with consistent positioning and claims and use best in class platforms and ways of working. Since we're building our organization from scratch, we have an opportunity to design this in from the beginning, allowing us to move fast, make quick decisions and grow in a cost effective way. And finally, when we look across our pipeline, all our late stage assets are in the specialty area, except for doluterexone, whereas you all know, a large volume of insomnia prescriptions are in primary care. We're confident we can build the capabilities we need to successfully launch our specialty assets, and they do not require large infrastructure. But for the Redirects that, in order to capture the full potential of the product, we need to effectively reach the primary care market, and we will do so through selective partnerships. As you know, we have already announced a partnership with Machida in Japan, and we are currently in discussions with a leading contract sales organization in the U. S. To partner for our launch there. This partnership strategy allows Eidorsia to retain control of the product and build our own core capabilities, while leveraging our partners' experience and track record of launching products in the primary care market. So in closing, the redirects ramp is the first asset we will commercialize globally from our robust pipeline. We're very excited about the Phase III results and believe we have a product that will enable Idorseea to lead the much needed modernization of the insomnia market. Our launch preparations are well underway, and we're ramping up the recruitment of our team. Our partnering strategy to reach primary care is clear, and I very much look forward to providing you with updates on our progress over the next year. And with that, I'll hand over to Andre. Thank you. Thank you, Simon, and good afternoon or good morning to everyone on this call. With no further ado, I will go directly to the next slide, number 13. Let me start here with the P and L and how our results came about. On the left side, you see the revenues of CHF 58,000,000. These relate to CHF 48,000,000 corresponding to the portion recognized in the P and L of the $57,000,000 paid by neuro clients for the rights to develop our calcium T channel blocker, develop and commercialize, of course, and a 2 year research collaboration for backups or follow ons. Out of this 57, 5 were already paid in Q4 2019 and 52 were paid in Q2 2020, following the R and D granted by the FDA for this calcium T channel blocker. The rest is €10,000,000 and it's deferred revenue with the previous collaboration already announced, Yanten with Apositen Tan, €5,500,000 Roche with a research collaboration, €2,500,000 and Mosheeda, 1,800,000. The collaboration Simon Kloss alluded to in Japan as a core marketing for Dalidore XM. I will detail the 190 3,000,000 non GAAP OpEx in a minute and go directly to the next bucket, which is, I would say, usual D and A, dollars 10,000,000 stock based compensation, dollars 11,000,000 These are usually the main differences between non GAAP and U. S. GAAP, around €40,000,000 on a full year basis. So you see here that we are well on track. But sales here and you see it in this bucket other of €24,000,000 There is another difference between non GAAP and U. S. GAAP, which is relating to an accrual in connection with an ongoing arbitration. Bear with me because I think it's worth spending some time to really explain you what is this all about. This €24,000,000 accrual is relating to clazosventab. Idolsia currently develops clazoventan. As you know, we have almost completed the Japanese registration trial, and the ongoing REACT trial will also be hopefully completed by end of next year. So we should commercialize clazolventam in across the globe if the drug is approved. Klazoo was acquired by Aktadio through an SPA, a share purchase agreement with a company called Axovant. And the Axovant vendors were entitled or are entitled to $115,000,000 potential regulatory and sales milestone if and when new. Out of these vendors, 65 of these actual vendors entered into an arbitration, claiming that the J and J transactions. And here, I use the plural to encompass the J and J acquisition of Octavion, but also the prior spin out of Eydorsia. So the claimants believe that it this transaction triggered a change of control and therefore that we are entitled to the accelerated payment of all outstanding milestones. This would mean €75,000,000 relating to clazolventine and they even claim another €5,000,000 for another compound that was discontinued many years before the merger. Remaining Axovant venues included Acadian for 7%, so or €8,000,000 So this is Adorsion now and we'll never have to pay as this milestone. Because it's left pocket, right pocket and 28 that decided not to join the arbitration. In H1 2020, Eudorsee acquired from the 26% 26% of this 28% non claimants all their future potential milestones around €30,000,000 for cash consideration of €9,000,000 Obviously, the non claimants, 2 seasoned and reputable venture capitalists considers that this deal is a fair deal considering the probability of success and of course, the cost of capital. So the €9,000,000 is in essence an accelerated milestone and therefore was booked as an R and D expense, as you will see in the next slide. But before, I would like also to recall that the same offer was also made to the remaining 2% nonpayment. Some of them have already taken our unconditional offer, but we also extended this offer to see 65% claimants. Such settlements being under certain condition, and notably the claimant bearing all arbitration and loyalties. Should these 67 remaining vendors, 2 non claiming 65 claimants, take our offer, Hydrosia would pay a onetime payment of €24,000,000 in year of €77,000,000 staggered milestone. So this €24,000,000 accrual is also booked in R and D expense. So the total impact in H1 2020 is an expense of €32,000,000 And for further details, please refer to the legal update of the press release or the year Note 12 of our interim consolidated financial statements. To finish with this slide, you have also below EBIT an €11,000,000 item. And this €11,000,000 item is mainly relating to the interest paid on the EUR 200,000,000 convertible bond that has a coupon of 75 basis points. And our deposits, we have a negative yield on the Swiss deposits, almost compensated, by the way, by the positive yield yields on the U. S. Dollar deposit. We have also a $4,000,000 accretion expense on the J and J 445,000,000 convertible loan and €4,000,000,000 unrealized loss on the €1,300,000 from Terra shares that we hold and that are valued on a quarterly basis mark to market. We can go now to the next slide, number 14. I just can see here, we see a non GAAP operating expenses. We spent much less in H1 2020 than in H1 2019. If you exclude the €9,000,000 milestone, the spend was €184,000,000 so 50% less than in H1 2019. Going from right to left, so we already discussed the €9,000,000 milestone. You see a small increase of €3,000,000 in G and A, which was mainly driven by IT systems because we need to prepare the supply chain and commercial systems and processes to enable us and to enable Simon and his team to launch the product starting with daridorexant across the globe. Commercial went up from €5,000,000 to €7,000,000 with now the core team recruited in H2 with Simon and also in the U. S. With the GM, Patitore. And you see that the clinical developments went up from €101,000,000 to €151,000,000 so $50,000,000 more. And that's mainly due more than $40,000,000 out of this $50,000,000 decrease is due to the pivotal trial for daridorexant, which came to an end at least for the pivotal trials. There's still a lot of work to do, but in H2 2020. And drug discovery went also slightly down from €56,000,000 to €49,000,000 mainly due to some projects that were postponed. So clearly, also in this in the numbers of the first half of twenty twenty, an impact due to COVID-nineteen. So a clear underspend really relating to COVID-nineteen, which is around €30,000,000 €40,000,000 Let's go to the next Slide 15. So let's see how our cash flow came about. We started the year with €739,000,000 liquidity. We spent €193,000,000 non GAAP OpEx, as we just €59,000,000 milestone. So it was the €50,000,000 from Neurocrine, but also the CHF 9,000,000 from Mosheeda. We had limited CapEx, CHF 4,000,000 and an increase in working capital requirements, mainly €16,000,000 And as Jean Paul already mentioned, we raised €330,000,000 growth with the issuance of 11,000,000 new shares. So at CHF 30 per share or CHF 323,000,000 net after the 1% stamp duty on any capital increase in Switzerland and also after lawyers and bankers fees. So we enter the second half with a strengthened balance sheet with €908,000,000 liquidity. Let's move to the next Slide, number 16. This slide briefly gives you the breakdown of our liquidity with various durations to offset the negative interest rate environment on Swiss francs deposit. And as you can see, our liquidity is mainly held in Swiss francs to avoid any currency risk, but €146,000,000 are also held in U. S. Dollars to cover our forecasted expenses in U. S. Dollars. Next slide, please, number 17. And I will finish with the revised guidance. But before giving you more color on this guidance of €490,000,000 non GAAP and €530,000,000 U. S. GAAP. Keep in mind that it excludes additional milestone payments. So in this guidance, the €9,000,000,000 are included, of course, and any potential award granted in the ongoing arbitration. The arbitration is substantially completed. Witnesses' hearings took place a few weeks ago. So we can now reasonably expect the decision of the arbitration panel before year end. Then the €24,000,000 accrual that we also discussed a few minutes ago will be reversed and the final award will be booked in the R and D expenses. So the final award is almost binary. It will be 0 if the arbitration panel concludes as we believe that there was no change of control triggered by the J and J transactions. It could go up to €92,000,000 if the arbitration panel concludes that there was a change of control with a good plan that triggers the acceleration of the milestone, €75,000,000 for Clazzo and possibly €5,000,000 for the second compound. And on top, you would have statutory interest for later payment, £12,000,000 as of end of June. So should we lose the arbitration, of course, we would pay the same award to any remaining non payments. They are below 2% now, so it would be less than €2,000,000 by now. And as I told you, we have some non claimants already that has already taken the offer we made. So in the worst case scenario, the total impact could be up to €94,000,000 plus additional statutory interest for late payments between end of June and the final judgment, plus potentially arbitration cost. Again, we believe that no change of control occur and therefore the arbitration panel should not award any claim to the claimants. We'll still be entitled, of course, to 75,000,000 staggered milestone if and when due. So now back to the guidance. The €490,000,000 or let's exclude the €9,000,000 so the €480,000,000 guidance. This means that with roughly €183,000,000 paid in H1, this would mean that we will spend €300,000,000 in the second half of twenty twenty. First half explained, there is an understanding in Q2 due to COVID-nineteen crisis, and this should be spent in H most of it should be spent in H2. We also plan for some significant drug substance and drug product supply, around €25,000,000 for dalidorexant in order to add enough finished product for the launch of DALYDRA XANT starting with U. S. We also plan for a significant increase with some commercial or marketing and selling expenses, fixed but also variable. It's another €25,000,000 in order to really prepare the market for the launch of pterygoid sand. And we have another bucket, which is around €20,000,000 where we are preparing for the Phase 3 of our main Phase 2 assets, I. E, Fenarimod and Selatogel. So yes, it looks like a huge spend, the EUR 300,000,000 looks like a huge spend in the second half of twenty twenty. There is a catch up due to the lower spend due to COVID-nineteen in the first half and also some one offs in order to properly prepare the launch of Dalidor Xfant and to supply with finished products. With this, I hand over to Jean Paul for his concluding remarks. So operator, please, next slide. So Slide 18. So thank you, Andre. Thank you, Simon. I hope you have seen that the company is moving forward, getting ready for successful launch of daridorexant. It's always difficult because I have seen the data. You have not seen the data, but of daridorexant. But in August, you will start to have a first look. And I think that you will not be disappointed. What you have also to remember that until the end of the year, a lot of events, not only you will see the data of direct sand, but there will be a lot of results that we will get. We are in the second half of this year, we are going to have the results of clazosantan in Japan. We are going to have the Phase II, maybe the Phase II results of the direct line in Japan. A lot of new information will come. And so I say stay tuned because it's going to be an exciting second half of twenty twenty. Thank you. Thank you, Jean Paul. So with that, we've come to the end of our prepared remarks. Next slide, please. So now we can go into the Q and A session. Operator, please prepare the line. Ladies and gentlemen, we will now begin our question and answer session. And the first question is from James Gordon, JPMorgan. Your line is now open. Please go ahead, sir. Hello. Thanks a lot for taking the questions. James Gordon and JPMorgan. First question was about Oraxia competition and J and J. So we recently saw that J and J sold their stake in Idorzia, and that decision seemed to come quite shortly after they got full rights to their orexin to seltorexant return to them. So 2 elements to the question. One is, how do you think the riddorexants tax up against XELTO based on what we've seen so far in insomnia? Is that a significant competitor we should worry about? And also, I think they're quite bullish about their orexin for use in depression rather than just in insomnia. Are you thinking about also doing Doritos for depression? Could that be an interesting opportunity? That was the first question. And second question would just be on partnering. So I know I do also want to take Doritos market itself or maybe you're using some sales organization. But in terms of other assets in the pipeline, do you still think that you necessarily want to cut everything yourself? Or now that the redirects is looking pretty nailed on, could you actually say, well, something else we consider licensing to someone? Or could you monetize other things like the Pinessema royalty stream? So is there anything else that you might do more collaborative actions on? Okay. Let me just summarize your question. So on the one hand, competition in the orexin environment, you're looking for comments on what do we think about seltorexant and whether we are interested in developing daridorexant in the direction of depression? And the second question is with regards to partnering. On the one hand, we acknowledge daridorexant, we look for marketing muscle. But your question goes to whether we'd be inclined to partner out other things. Do I summarize that correctly? Exactly. Partner out other things or even could you divest Joel, do you want to take the question, please? I think you have a very good question, James, about depression and sleep because it was a choice we had, let's say, 3 or 4 years ago. Should we try to niche our product into a small indication? Or should we go to the very large indication, which we did? And at this time, we had also some discussion with the FDA. And so we know a little bit what is in mind. And I think, frankly, it was very clear to me of why to go for a small niche indication if you have the whole big indication because frankly, somebody who cannot sleep with depression can take direct sense any day. There is no barrier and there is no reason why you should not take it. And how you can really make money if you go to a niche indication when somebody with supposedly a lower price will have cover your indication in addition to all the other indications. So we always thought that there is no possibility to go to a niche first. But of course, because of our very good results, it doesn't exclude at all that we cannot start studies. But I don't think this will be registration study, but certainly scientifically valid studies in many different type of patients. And this might include, of course, depression, but this might include also patients with sleep apnea, where every type of indication you can think of, and that's our strategy. 1st, let's get the bigger label and then show the benefit in a much more concrete way in subgroup of patients. And this is, of course, a program which we are designing now. So and I think that for seltorexant, frankly, what we have seen, it's a selective orexin. We do believe we need to block both receptor to get the whole benefits. And the first results were not really convincing. So I'm not sure what is going to do Janssen with this drug. Do you want to comment on our appetite for partnering other drugs than daridorexant? Yes. I think that because we now know that daridorexant is going to be put on the market. We are a little bit more relaxed to be able to find a partner. However, now we have also revenues, And so we know that we are closer to, I would say, closer to profitability than before. So frankly, we will partner and we are in discussion with some partners, but we need to have really good conditions because it's not a few millions milestone, which is going to change anything for IGORCEA. We need either a very large partnership or no partnership. Thank you, Jean Paul. Thank you. Can you take a question, please? And the next question is from Daimo Baksh, Barclays. Your line is now open. Please go ahead. Hi, everyone. This is Jamil Baksh from Barclays. Apologies I missed this in the call, but can you firstly remind us of your timing estimation just for casetentan's REACT study and on apacitin10 Phase 3 as well? And then two more questions. Firstly, could you outline the potential implications that your Davidex and commercial plans will have on the company's capital requirements? Do you expect to raise more funds? And certainly, what's your long term vision for your subsidy, which now holds the full amount of Vaxillin? And are there any R and D projects of interest that you might want to call out that are going on in there? Thank you. Okay. Thank you, Jamil. I understood your second and your third question. So what are additional funding requirements? And how does Maxolon potentially impact going forward? Those are 2 finance questions. I would defer those to Andre. Could you repeat your first question, please? Sure. It was just an update on your timing estimation for the REACT study for casusentan and on apocitintan Phase III. Apocitintan, I'm putting it for more. So as for REACT is restarted. As we said, it was really stopped the recruitment. It started. The Japanese studies are finished recruitment. So we get the results this year. The REACT study is restarting, and frankly, it depends of what is going to happen in United States and in some countries because of the COVID. So we know more about the timing exactly, I would say, at the end of the year. I know some patients have been recruited already. But frankly, is there a second wave in September or not? That's going to be the key. But our intention is to finish recruitment the whole next year. And by the end of the year, next year, so we should have finished recruitment of React at the end of next year. And then you have to count 3 months of follow-up so that beginning of 2022, we should, but it all depends on this COVID crisis. At Positantan, it's moving well. We are opening a lot of new centers because we really want to compensate for these COVID delays. So and again, we are a lot of these patients come from United States and who knows what is happening in United States, frankly. It's so again, we are difficult to give you some timelines. We have more than half way through. What is very important for you to know is that both for ReaS and apocitantan during of course, the patients continue to be treated during this COVID crisis or safety assessments were continuing during this COVID crisis. We had for both of the program mentioned DSMB looking at the data and to my knowledge, no negative information came to us. So the studies are continuing, which I think is very, very good because I have no doubt that, for example, that prostitendan works on blood pressure, its safety is always a very important element to be informed. Thank you, Jean Paul. Andre, do you want to pick up on the funding requirements in Axilon, please? Let me start by the smaller one, Vaxilone. Yes, as you see, we acquired the minority 26 percent equity stake and also subordinated debt of €12,000,000 for an upfront of €1,500,000 euros And we also terminated with Max Planck, the license around the synthetic carbohydrate vaccines. Now we are so we fully integrate Vaxelon in our drug discovery organization. Funding to go to the end of Phase 1, around €10,000,000 to €15,000,000 And if we enter in Phase 2, then the minority shareholders would be entitled to an amount of €3,600,000 but only if both would enter into Phase II. And you're right, we are not a vaccine company. We believe that if we have compelling results after Phase I, we should seek for a partner for these 2 assets and maybe also the know how developed by the Vaxillone team. So that's your third question. Regarding the second one and the funding gap, yes, we see EUR 330,000,000 We have a strengthened balance sheet. As Jean Paul said, this also allows us not to take offers from potential collaboration if we believe they are not do not reflect the real value or potential value of some of the assets. But we have some discussion on some of our assets as we had one concluded with Neurocrine for Tecalcum T channel blocker. And clearly, also ahead of the launch like one of the reloactants that will require a setup via commercial organization and pre launch marketing and selling expenses. Yes, we are definitely not spending to breakeven. Here, we want to remain nimble and to see if and when we want to raise cash, either through Equity Capital Markets or Equity Linked Capital Markets. You also alluded to royalty monetization deals. You have an ideal candidate now with the 8% revenue sharing we are entitled to regarding PONASIMO and, of course, out licensing deals with hopefully upfront payments and sharing of the development costs that would also reduce this funding gap. So yes, not funded until the breakeven. So we will need in one way or the other, we need to raise more cash. Thank you, Andre. Thank you, Jameez. Operator, next question, please. Yes. The next question is from Ram Selvaraju, H. C. Wainwright. Your line is now open. Please go ahead. Thanks very much for taking my questions. Just two very quick ones. If we look at daridorexant and the commercial considerations for this molecule, Is your thinking that if you were to pursue the commercialization of Deradorexant exclusively independently, that having one product in the bag of the sales rep would be sufficient? Or do you believe that it's potentially best to optimize direct sense commercial chances by having it be paired additional product? Thank you, Ram. Simon? Yes. I'll take that. I mean, if you look at it purely through a financial lens, often people will conclude that having a second product clearly allows you to amortize the cost of the sales force. Conversely, we also know that when people are very focused on one disease area, one product, they actually are way more effective. So right now, when we launch the redirectsant with the sales force, it will just be carrying the redirectsant. If in the future, there is a call for other primary care support for a future asset, then clearly, we can bolt that into the sales force. But when we launch, it will just be with the duridorexant and insomnia. Okay. And then just very quickly on just a clarification question on the time line. Is the revised timeline or the timeline that you've talked about today of mid-twenty 22 taking into account sort of a full resolution of the COVID-nineteen situation and its impact that you have seen so far on enrollment? Or are you assuming sort of continuation of the COVID-nineteen impact throughout the course of next year? Just wanted some clarity on that, please. Yes. I think we are not so optimistic to believe this is going to resolve. I don't think that until we get the vaccine, I think, unfortunately, we have to live with that. But many countries reopen, many countries seem to be able to cope with it and can now recruit patients, include patients. So what we told is that we have anticipated we are anticipating the problems of COVID and, for example, increasing the number of centers because we think that the output of the sensors is going to decrease from what we had planned. So the timing that mentioned, but it's difficult really, really difficult to precise to be precise. But the timing is including continuation of the crisis. The question, of course, is which geographical areas is it going to get worse or better? Some studies, for example, Lucerastat, maybe more European studies, where we can really recruit patient in Europe. In Japan, we have also done the Lucerastat study, if possible. But some for some disease, U. S. Is very important. And U. S. Surprisingly, in my mind, surprisingly, is in bad shape for the COVID crisis in the present time. Thank you, Ram. Operator, next question please. The next question is from Gregg Svanovich, Goldman Sachs. Your line is now open. Please go ahead. Yes, thanks. Good morning, good afternoon. Thanks for taking my questions. I've got 2 today. The first, I really want to go back to the Phase III data for deridarixant and the plan to pool the data from the 2 studies. I just want to clarify, is your understanding that pooling of the data is something that the agency will accept? In other words, did you need to show 2 separate positive Phase 3 studies? Or is it pre specified that you could pool the data together in order to have an integrated view of the efficacy of the products? That's my first question. And then my second question really speaks to the commercialization efforts around duridorexant. And I'm just wondering, at this stage in the game, if I could ask, what does the company think the key critical success factors are for a successful launch in this space in light of the fact that there is heavy use of non branded products like trazodone as you pointed out, but you will be the 3rd door to the market and differentiation versus the other 2 doors? I'm just trying to get a better sense of how the company is thinking, where Dorito can really differentiate not only versus other doors, but just generally in the market? Great questions, Greg. Thank you. Jean Paul, you want to take the one out of the free store? Yes, I will take the one and half of the second one. I leave half to Simon. But first one is, first of all, we don't need to pull. The two studies are positive. And when you see the data, there is no doubt. And the FDA wants to know what is the dose, and we know that the 50 milligram, everything was positive. And frankly, and 25 milligram, a lot of elements are positive in both studies. So I think there is no doubt that this 25 milligram doesn't need the pooling. The pudding is just going to precise for the FDA the extent of the effect because we have a very clear confirmation of how much is the 23 milligram efficacy. There is no doubt that the 25 milligram works, and there is no doubt that the 25 milligram has an effect on the functioning. Just for your information, 10 milligram, which was suvorexant, which was approved by the FDA, has never been tested in Phase III, never. So the FDA doesn't really want to have 2 studies. They can even approve a dose which has never been tested. They want to know if the drug works and what is the dose. And we have given to the FDA, we're going to give them the best data they ever had with the shipping agent, where we know that the 10 milligram really has a minimum effect, it's a very small effect, while with 50 milligram is fantastic, gets everything we want and where 25 milligram is between the 2. And frankly, I think that with that and with incredible safety, which is very interesting because 50 is even, I would say, at least as safe as 25. So really, I have absolutely no doubt that the FDA will be very happy to see this data. Now of course, the pudding is very nice, but it's a cherry on the cake because frankly, I don't think it's even needed. But we do it. It has been preplanned, then the FDA knows that we are going to do it. And of course, this is going to be interesting information. Now just before Simon answer, it's interesting because you say it's a third of the product, it's a third of the thing, there are 20 generics or 30 generics company. The most important is what is really do you have the right product? You can have 40, 50, 100 products. If they are not the right product, it doesn't matter. You need to have the right product, the best product, the product which does the job. And frankly, we have it. This is the first time in the sleep market you will see a drug which can make you sleep faster, better, longer and doesn't have safety consequences and even more can improve your functioning in the day. No drug can do it because it took us 22 years to get it there. It didn't come by chance. We fight it so much. We made 30,000 products in order to get this one. And frankly, it was so difficult because you needed the perfect pharmacokinetics, the perfect affinity over the receptors. So it's going to be really disruptive. Now starting from the big product, there is a lot of things to be done and Simon is going to tell what is going to be important. Yes. Thanks, Jean Paul. And there's no doubt that just because we're another dora, they are very different in their PK profile. You only have to look at the dose response we get on efficacy and the lack of dose response response we see with our adverse event profile, that is a very different product than nocuvorexant or emborexant. In a way, I think that flips into the access point because we're obviously aware that we're entering a largely generic market. So the first thing is we've got to have a differentiated product, which we absolutely have. Secondly, I think unlike many generic markets where people, by the way, can still succeed, we know that there's a systemic concern about the use of the generic agents at the moment. And I think the reason we're seeing people moving to trazodone is because they don't have other options. So when you start using the off target effect of an unlicensed medication in preference to the licensed medication, to me that just tells us that we've got a big opportunity in front of us. So, obviously, we're working through all the activities around market access and payers and everything else. But I think we're confident with the profile of the product and the growing concern about the agents that are in the market right now that will not be a barrier to us being successful. But also, as we say, the preparation, the pre marketing, the market access, this was mentioned, there are a lot of other activities. Launch is a huge enterprise. And I would say the most important success matter, because you are going to ask me, is the experience of people who have made successful launch because you cannot invent what is needed to successfully launch. And I think that we are we have a good team. And really, we have the most important, it's a fantastic product. Thank you, Paul. I hope that satisfies your questions, Greg. We've come to the top of the hour. Operator, are there more questions? We do have another question from MacNeilan, Citi. Your line is now open. Please go ahead. Thanks for taking the questions. They're quick ones. So I note that the second door to the market looks to have been launched at a price discount to Belsomber. And I wondered whether you could comment on whether you think the profile you've demonstrated for darodorexant would command a price premium. Secondly, on darodorexant, I wonder how much of the marketing is going to be direct to consumer and how much that might be part of your costs in 2021? And then thirdly, just on the €300,000,000 cash burn for the second half of twenty twenty, is that a realistic run rate for 2021? I wonder if you could just talk about the moving parts of your costs in 2021 and whether we can use that €300,000,000 as a run rate? Or will that be lower? Thank you, Nick. So the first two, I think, for Simon. And then the third one on the cash burn run rate coming out of the second half of the year. Andre, do you want to comment on 2021 after Simon? Sure. Thanks, Nick. Good questions. You have obviously asked Eisai about why they've gone 25% lower than suvorexant. We certainly it's early days for us to be talking about price, but we certainly plan to price the product according to the value that we're bringing to the marketplace. And on the second thing with regard to DTC, we absolutely see the patient and the consumer being critical in this launch in this product. I think DTC now, we should not be just thinking of big television spend. I think there's an awful lot now of different channels where we can get to patients through digital technology, omnichannel marketing, much more targeted, much more personalized messaging. And that certainly would be part of our plan. In 2021, obviously, there'll be no branded activity because we won't be approved, but we would expect to be starting our pre launch activity, as Jean Paul referred to. Just before we go to the finance and Andre maybe answered the last question. I'd ask really to make a quick scientific explanation why it's so important to have a short half life and a reproducible absorption. I think that what you see with Eisai product is a huge problem related to a half life of 14 or 15 hours and a huge variability into the absorption. So in order to avoid you are between the rock and either if you want to get good efficacy, you are going to get long term side effects because people won't be able to wake up. Or if you don't want side effects, you have to have a low efficacy. And the worst of it is you don't know how to choose the dose because from one patient to the other, there is a huge overlap between the two plasma concentration. So you are stuck. And this is why we took so much time for us to find the right kinetics, short applied, good absorption, reproducibility, no drug interactions because that allows to perfectly titrate each patient to the right plasma concentration and also to avoid the remaining efficacy of the drug in the morning. What can you do if you are still sleeping in the morning? You cannot avoid that. The only way is to give less. And if you give less, you have less efficacy. So there is really a huge importance of the pharmacokinetics for this product, and you have to remember that. And this is why we have a unique drug. Now maybe Andre can discuss about the we are not in the guidance of 2021, I suspect, but maybe Andre, you can give some answer. No. I always agree with my CEO. So we are not definitely not giving you guidance for 2021. What is clear and I was quite transparent, there are some one offs in the second half catch up due to delays of COVID-nineteen and one offs because of significant drug substance and drug product notably for die dikes and plus some extra cost to prepare for CFA III of selatozel and senerimod. So I would rather not take the second quarter the second half as a basis for 2021. But you have we could spend up to EUR 4.80 million excluding the milestone. So $480,000,000 for sure next year, we will go down in R and D because we finished some very expensive Phase III trial with tiboxant. Depending when we will initiate the Phase III polycercept and sevatodele, this will have an impact. And but for sure, so globally, I would expect to be low. But for sure, Simon will have to properly assess market by market, starting with the U. S, not so much with the commercial organization, but also with all the pre launch marketing expenses, which will be a one offs, how much will be spent in 2021 ahead of the launch that should take place beginning of 2022 with the current time lines. So we're not willing to make any commitments. The only thing I can tell you is that there will be a shift between R and D and G and A in favor of additional costs in commercial. But that's the price to pay in order to size what we believe is a huge opportunity in the insomnia market. Thank you, Andre. Operator, do we have questions left? We have one final question from Baburav Laham, Credit Suisse. Your line is now open. Please go ahead. Hi, thank you for taking my questions. I have 2 very quick questions. First, for daridorexant, can you remind us of the filing and commercialization plans in Europe? Do you intend to file here and also launch with a partner, etcetera? And then other question is regarding cinerimod. Do you plan to do the Phase III trial in with Okay. With regards to European launch, Simon, it will be nice to have a comment from you. And on cinerimod, the future of the Phase III, Jean Paul maybe. Yes. I mean, we see a big opportunity in Europe actually. All of the issues we've talked about today, although focused on the U. S, are all there in Europe in terms of the prevalence of the use of the Zs and the benzos. In fact, I think there's increased concern from the regulators in Europe about the use of these agents and restricting use to much shorter time lines than we see in the States. So we do see an opportunity in Europe. Obviously, it's a heterogeneous market, so the countries look different in terms of which products are predominant and also the concentration of the prescription. So in terms of your question on partnership, that's something that we're looking at. And as we've said with both Japan and the U. S, where we believe we require to get into primary care, then we'll for somebody to work with regard to sales force support to do that. But we would continue to remain in control of the core commercial capabilities and the asset across Europe. For scenario mode, you have seen, I think that lupus becomes more and more exciting. I think that there were many candidates in Phase III. You have seen some many failures now recently. And therefore, the value of CinereMode increased. I think it's going to be we are closer to the results, and it's going to be difficult for people to partner a drug a few weeks or months before getting the results. So I think that we first should see the results and then we see the strategy because I think that it's very difficult because it's a very big product. It would be a very large milestones or amount of money, and it's difficult to pay for such a milestone a few months before the results. Thank you, Jean Paul. Thank you, Barbara. Thank you. So operator, I assume we don't have no more questions. That's correct. We have no questions left. Thank you, Oeli. So with that, we come to the end of today's first half conference call. Thank you very much for your ongoing interest in EYDORFIA. And as Jean Paul said, it is going to be a very busy second half, so stay tuned. Operator, please close down the lines. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.