Basilea Pharmaceutica AG (BSLN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Basilea Pharmaceuticals Full Year Results 2021 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to David Veitch, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Hello, I'm David Veitch, CEO of Basilea, and I would like to welcome you to our conference call and webcast, reviewing our financial results and key achievements for the full year 2021 and in which we will be outlining our strategy for Basilea to become a leading global anti-infectives company. For further detailed information, please see the ad hoc announcement issued this morning and also our financial report 2021. These documents are both available on our website at basilea.com. I would also like to mention that this call contains forward-looking statements. Joining me on our call today are Adesh Kaul, our Chief Financial Officer; and Dr. Marc Engelhardt, our Chief Medical Officer. Before outlining our new strategy, I would like to start with a brief summary of our key achievements in 2021 and the year-to-date 2022. This morning, we reported very strong financial results for the full year 2021. The Cresemba and Zevtera non-deferred revenues increased by 65% year-on-year to almost CHF 129 million. Our strong financial performance is further highlighted by an operating profit of CHF 1.2 million for 2021. These results are driven by the continued commercial success of Cresemba and Zevtera. The key revenue driver currently is Cresemba with a 29% growth in royalty income, directly reflecting the sales performance in the key markets from our partners. In addition to the positive developments for our commercialized products, we also made significant progress in our clinical studies. For our FGFR inhibitor, derazantinib, we reported positive results from a Phase II study in bile duct cancer. The first proof-of-concept indication. In anti-infectives, the last patient was enrolled in the ceftobiprole Phase III ERADICATE study in bloodstream infections. We also expanded our clinical oncology pipeline by adding BAL0891, a first-in-class mitotic checkpoint inhibitor following an IND approval at the end of 2021. Our expertise in anti-infectives was once more recognized as we received the CARB-X grant of up to USD 2.7 million for the preclinical development of a novel drug for the treatment of infections with resistant gram-negative bacteria. Also in 2021, we conducted several transactions which further strengthened our financial position. We divested our Chinese R&D subsidiary, allowing us, going forward, to be more flexible with sourcing R&D services. Then we carried out a strategic capital increase in the form of a private placement with institutional investors, which generated gross proceeds of around CHF 46 million. Furthermore, we have continued to reduce our outstanding 2022 convertible bond by about CHF 23 million, thus further improving our debt level. From this current position of strength and after a thorough strategic review, we have announced today our decision to separate our anti-infective and oncology businesses. What this means is that in the future, Basilea will focus on the research, development and commercialization of innovative treatments to treat severe bacterial and fungal infections. We believe we have made great progress in both our anti-infectives and oncology areas over recent years. But from an external perspective, our hybrid 2 therapy area model undervalues us, and the value would be better appreciated and reflected if the 2 therapy areas were separated. We believe our exciting oncology programs would benefit in the environment of an oncology-focused partner. Moving forward, the 2 areas would then be able to have the necessary focus and support they require to be successful. As a leading global anti-infectives company, Basilea is uniquely positioned to create sustainable value in an area of increasing unmet medical need and with our proven ability to advance anti-infective compounds from research through development to commercialization. For our oncology assets, we aim to maximize the value through strategic transactions. These could be either for a portfolio of assets or on an individual asset basis. Why do we believe that we will be seen as a global leader in anti-infectives? We have significantly growing cash revenues from Cresemba and Zevtera. For Cresemba, with its 29% royalty growth and global sales already exceeded over USD 300 million, we are expecting marketing approvals in China in the coming months for the IV formulation and an approval in Japan later in the year, with launches following soon thereafter. China is the #2 market globally in commercial potential after the U.S. and Japan is in the top 5. Zevtera, as stated, following the recently completed enrollment of the Phase III SAB study, we're expecting the top line results around mid-2022. If these are positive, we will file an NDA around year-end to access the U.S. market by the end of 2023. The U.S. is by far the most important market for ceftobiprole, accounting for what we believe around 90% -- 80% to 90% of the global potential. And with the QIDP designation, we would have 10 years of market exclusivity after the approval of ceftobiprole in the U.S. We also have a number of preclinical anti-infective assets, but would also look to supplement our current portfolio with additional, externally sourced, clinical and preclinical anti-infective assets. We would have a sustainably profitable company from 2023, and this would allow us to be active from a future financial transactions perspective. In short, we would have credibility as a leading global anti-infective company, and we'll be well positioned to take advantage of the improving business environment. From the oncology perspective, we have generated valuable data for oncology assets to date with, in addition, multiple data readouts for both derazantinib and lisavanbulin during the course of 2022, which are important to potentially add further value to the programs. For BAL0891 or our novel TTK/PLK1 kinase inhibitor, we are in preparations to enable the start of the Phase I study in mid-2022. We are also continuing to progress our preclinical assets. We will be exploring strategic transactions for our oncology assets, either as a portfolio of assets or as individual transactions, in order to maximize the future value of these assets. Given our financial strength, we do not have to look for front load in the value from these transactions. We can, therefore, look to maximize the lifetime value of these transactions. Adesh will now provide an update on our commercial progress and present more detailed financial highlights for 2021 as well as provide guidance for 2022 and 2023. Then Marc will provide you with a more detailed information on the progress of our development programs. I'll now hand over to Adesh.

Thank you, David. I will highlight some of the key financial figures that were published today. All figures I will refer to are in Swiss francs. As announced last year, we have largely completed a significant change in our revenue mix in 2021. The noncash relevant recognition of deferred revenue, that means upfront development and regulatory milestone payments received in prior years, has reduced by 92.6% year-on-year and will not be material going forward. We've reported CHF 128.8 million in total Cresemba and Zevtera non-deferred revenue, a 64.7% growth year-on-year. The other revenue components amounted to CHF 16.8 million, which mainly comprises BARDA reimbursements, which are offsetting a substantial portion of the ceftobiprole Phase III development expenses. Considering all these factors, total revenue increased by 16.1% to CHF 148.1 million. Cost of products sold stayed flat at CHF 24.1 million. SG&A expenses remained at a comparable level of CHF 29.7 million in 2021 versus CHF 29.4 million in 2020. And R&D expenses decreased slightly from CHF 97.4 million to CHF 93.2 million. We reported an operating profit of CHF 1.2 million compared to an operating loss of CHF 8.2 million last year. For 2020, we recorded a positive one-off effect of CHF 15 million from the sale of our headquarters property, which makes the improvement in operating results even more remarkable. Net loss was reduced by 53.7% to CHF 6.8 million from CHF 14.7 million in the previous year. Net cash used by operating activities was reduced significantly by 40.9% to CHF 32 million, which provides an indication of the significant improvement in the underlying operational performance last year. As of December 31, 2021, our combined cash, restricted cash and investments amounted to CHF 150 million, which includes a cash outflow of approximately CHF 23 million related to the reduction of our 2022 convertible bond. We have consistently improved our net cash used for operating activities over the past years, driven by the significant increase in cash inflow based on the continued growth of Cresemba and Zevtera non-deferred revenue contributions and our continued focus on managing operating expenses and improving our cost base. We expect the positive trends to continue and to report positive cash flow from operating activities as of 2023. In 2021, our partners continued to make significant progress in the commercialization of Cresemba and Zevtera. We see a strong increase in demand across the world. The latest in-market sales numbers available for Cresemba show that in the 12-month period ending September 30, 2021, sales grew by 26.5% year-on-year to USD 304.5 million. Additionally, in the U.S., where our partner, Astellas, is marketing Cresemba since 2015. January to December 2021 sales grew by 14% compared to full year 2020. Increasingly, markets outside of the U.S. are contributing to the global success of our brand as well. Partnerships continue to play an important role in the execution of our global commercialization strategy and provide a strong basis for future revenue growth. Cresemba is currently marketed in 56 countries, and we expect further countries to be added, leading to around 70 launched countries by the end of 2022. As already mentioned by David, our partner for Cresemba in Japan, Asahi Kasei has filed an NDA in September 2021. A regulatory decision on the application is expected in the second half of 2022. And in China, the Chinese health authorities granted our partner, Pfizer, a regulatory approval for oral Cresemba for the treatment of adult patients with invasive aspergillosis and mucormycosis. Zevtera is now on the market in 19 countries. In July 2021, we announced our latest distribution agreement for Zevtera with JSC Lancet for Russia and the other countries of the Eurasian Economic Union. I'd like to highlight that we have had an excellent financial performance in 2021 and delivered financial results above our guidance on all key financial KPIs. For 2022, we expect continued strong in-market sales growth for our key brand, Cresemba, more than compensating the expected decrease in COVID-19-related sales in 2021. Cresemba and Zevtera related revenue is expected to amount to CHF 98 million to CHF 104 million. The decrease versus 2021 is solely due to fewer milestone events expected in 2022, thus bringing the milestone payments closer to the levels seen in previous years. R&D and SG&A expenses are expected to decrease to approximately CHF 110 million, mainly due to lower anticipated costs related to the ceftobiprole Phase III program, which is nearing completion. This results in an expected operating loss of CHF 20 million to CHF 25 million in 2022. Net cash used in operating activities is expected to improve further to CHF 10 million to CHF 15 million on the back of a strong top line performance and the anticipated decrease in operating expenses. For 2023, we expect continued growth of Cresemba and Zevtera related revenue and a reduction of around 30% in operating expenses versus 2022. This would result in us reaching sustainable profitability and generating positive cash flow from operating activities from 2023. I will now hand over to Marc for the development update.

Thank you, Adesh. As mentioned by David, our future strategic focus is on research, development and commercialization of innovative treatments for severe bacterial and fungal infections. So let me start with our anti-infectives pipeline, which includes isoconazole and ceftobiprole as our key anti-infective assets. Our pipeline also includes several research programs. One of these programs is focused on small-molecule inhibitors of DXR, which is an enzyme essential for the survival of gram-negative bacteria, and this program is supported by CARB-X. Now turning to ceftobiprole. One of our key priorities for ceftobiprole is to gain access to the U.S. market. In January 2022, we have completed enrollment into the Phase III ERADICATE study which is investigating ceftobiprole in the treatment of patients with Staphylococcus aureus bacteremia or SAB. Top line results are expected to become available around mid-2022. If the study is positive, we intend to submit a new drug application to the U.S. FDA. The funding of our Phase III program of up to approximately 70% by BARDA has allowed us to advance the development of ceftobiprole for the U.S. market in a cost-effective way. The ERADICATE study, which just completed the enrollment of 390 patients, is a Phase III randomized double-blind multicenter study to establish the efficacy and safety of ceftobiprole compared with daptomycin in the treatment of adult patients with complicated SAB, including infective endocarditis. The primary endpoint is the overall success rate at 70 days after randomization. ERADICATE is the largest randomized study ever conducted for registrational purposes of a new antibiotic treatment in SAB. SAB is an area of high medical need with about 120,000 SAB infections per year in the U.S. alone with high mobility and a 30-day mortality of approximately 20%. The ERADICATE study targets complicated SAB, which is characterized by concomitant or metastatic infections such as bone joint or heart valve infections, persistent bacteremia or bacteremia in patients on dialysis. There are limited antibiotic treatment options with only 2 approved treatments in U.S., which are vancomycin and daptomycin, that cover both methicillin-susceptible and methicillin-resistant Staphylococcus aureus, or MSSA and MRSA. So ceftobiprole, if approved, will address an important medical need in this area. Ceftobiprole provides several key attributes supporting its use in SAB. It is a beta-lactam antibiotic with rapid bactericidal activity against composite pathogens, including MSSA and MRSA, but also provides coverage against many gram-negative bacteria. Ceftobiprole has demonstrated efficacy in Phase III clinical trials in acute bacterial skin and skin structure infections, or ABSSSI, and in pneumonia where daptomycin is not effective. It has also shown superior activity profile in clinically relevant models of endocarditis or heart valve infections compared to vancomycin and daptomycin, and has a low propensity for resistance development. Furthermore, ceftobiprole has an established clinical safety profile that is consistent with the cephalosporin class. The other pivotal Phase III study in our planned NDA submission is TARGET, in acute bacterial skin and skin structure infections. This study was completed in mid-2019. TARGET was a randomized double-blind Phase III non-inferiority study and enrolled 679 patients. Patients received either ceftobiprole or the comparator regimen of vancomycin plus aztreonam. Ceftobiprole met the prespecified primary endpoint of early clinical response at 48 to 72 hours after the start of IV drug administration in the intent-to-treat population, which is the key endpoint according to the FDA guidance for the U.S. Response rates were 91% with ceftobiprole versus 88% for the comparator. And the lower bounds of the 95% confidence intervals were all well within the prespecified non-inferiority margin of 10%. Now moving on to our oncology pipeline, which includes derazantinib, lisavanbulin, BAL0891 and several earlier programs from our research. In 2022, we will continue our preclinical and clinical activities in oncology to ensure project continuity while we aim to optimize the value through either transactions of individual assets or a portfolio of assets. For derazantinib, our targeted orally available small molecule FGFR inhibitor, we are now focusing on 2 indications and these are intrahepatic cholangiocarcinoma, or iCCA, a form of bile duct cancer in study FIDES-01, and advanced gastric cancer in study FIDES-03. We have deprioritized study FIDES-02 in urothelial cancer because of challenges in patient enrollment and the competitive environment in this space. In 2021, we reported top line results from the first cohort of the FIDES-01 study, which provides the clinical proof of concept for derazantinib as monotherapy in this indication. This first cohort includes 103 patients with FGFR2 fusion-positive advanced iCCA in a second line and post second line treatment setting. The effective response rate in these patients was 21% and the disease control rate was 76%. The median progression-free survival was 8 months. We are also making good progress in cohort 2 of this study, which is enrolling iCCA patients with FGFR2 mutation and amplifications and is another area of high unmet mental need. We've just published updated positive interim results at the ASCO GI Cancer Symposium in January 2022. This reported similar disease control rate and progression-free survival with derazantinib in this patient group to that reported for iCCA patients with FGFR2 fusions. We are aiming to report top line results in the first half of 2022. FIDES-03 explores derazantinib as monotherapy and in combination with other cancer therapies in patients with advanced gastric cancer and FGFR genetic aberrations. Initial results with derazantinib monotherapy and the recommended Phase II dose of derazantinib in combination with ramucirumab and paclitaxel are expected in the first half of 2022. For lisavanbulin, our microtubule-directed checkpoint controller, we are approaching target enrollment for Stage I in the Phase II study in patients with recurrent glioblastoma whose tissue is positive for end-binding protein 1, or EB1, and we expect top line results in the first half of 2022. Two EB1 positive patients on the Phase I part of the ongoing clinical study are showing a long-lasting clinical benefit and have been successfully treated for more than 3 years. Moving on to BAL0891, our latest addition to our clinical pipeline. BAL0891 is a unique dual inhibitor of TTK and PLK1, targeting key pathways in cancer cell divisions. The dual action of BAL0891 leads to a rapid disruption of the spindle assembly checkpoint, and cells are pushed through mitosis without adequate time for correct chromosome alignment and segregation. This ultimately leads to tumor cell death. BAL0891 has shown potent single-agent anti-cancer activity in preclinical models of human cancer. In December 2021, the U.S. FDA approved the Investigational New Drug or IND application and we are continuing the preparations of the planned Phase I study in patients with advanced solid tumors to enable a start around mid-2022. I will now turn over to David.

Thank you, Marc. Let me summarize then the key milestones for 2022 in order to implement our strategy. In anti-infectives, we have a number of upcoming milestones which will drive the value of our anti-infective portfolio. This includes the top line results in the Staph aureus bacteremia Phase III study with ceftobiprole. And as stated, if positive, this would pave the way for future launch in the commercially critical U.S. market in 2023. In addition, we will continue to increase Cresemba and Zevtera related revenues from both the continued growth from existing markets but also new country launches throughout the year. China and Japan, as stated, are 2 of the most important global markets for antifungals. So we are looking forward to the potential marketing approvals and subsequent launches of Cresemba in China and Japan. We are also going to advance our preclinical anti-infective programs such as the CARB-X funded DXR inhibitors. And we then, finally, will also look for in-licensing opportunities to further strengthen our clinical and preclinical anti-infective pipeline. In oncology, there will also be a number of important milestones. As stated by Marc, we expect multiple data readouts from our current clinical assets. Top line results from cohort 2 of the derazantinib Phase I study with FGFR2 non-fusion iCCA patients. Then the interim results for derazantinib monotherapy in combination with ramucirumab and paclitaxel in the FIDES-03 gastric cancer study. And finally, results from the lisavanbulin Phase II study with EB1 positive glioblastoma patients. In addition, for our new clinical candidate, BAL0891, we are preparing to enable the start of a Phase I study in the middle of the year. Furthermore, we will be advancing our preclinical oncology programs. Then in parallel to the ongoing activities, we will also be ensuring the continuity of the oncology programs and seeking to identify, as stated, and execute strategic transactions in order to maximize the future value of our oncology portfolio. Thank you for your attention, and we'll now open the line to your questions.

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

Congratulations on all the progress this year. So I wanted to ask you what your go-to-market strategy is for Zevtera in the U.S. How we should think about the peak sales potential of this opportunity? And then lastly, just where are you with your portfolio optimization efforts? Are you just at the beginning or has some progress already been made?

Okay. Thank you, Louise, for your questions. I'll kick off. In terms of go-to-market strategy for the U.S., I think we've been quite consistent and actually nothing has changed with the result of today's announcement. Our plan is still to seek a partner -- a distribution partner for ceftobiprole, for Zevtera, in the U.S. In that way, we would be cash flow positive from the moment they start generating sales. And we are, therefore, in active discussions with potential partners, and that will continue to accelerate and maybe it will need the results of the SAB study to clearly then secure a deal, but that's definitely the go-to-market plan. In terms of peak year sales of the U.S. opportunity, as I indicated, our belief, looking at analogs, is that 80% to 90% of the global potential of Zevtera is in the U.S. I mean all I would refer to is probably analyst reports that have the opportunity for Zevtera anything between [ USD 350 million to USD 550 million ] globally, of which the majority is in the U.S. So we think this is clearly a multiple hundred million potential opportunity in the U.S. In terms of our -- your question 3 around the optimization, maybe I'll hand that over to Adesh.

Yes. Thank you. Louise, so with regard to the partnering, I think it is fair to say that we will in -- we will kick off the structure process as of today, in essence. However, especially with regards to the more visible compounds of projects like lisavanbulin or derazantinib, over the years, of course, we have had already interaction. So I think it is fair to say that for some assets, we are more advanced because we have had -- there has been more visibility in the past. For others, there has, simply, not been a lot of visibility. And hence, there has not been a lot of -- there have not been a lot of discussions ongoing. But the process will be kicked off, and it's a priority now for the company to get this executed.

The next question comes from Brian White from Calvine.

I think I got 3 as well. Just thinking again about the strategic realignment, I wasn't quite sure, I doubt you were saying that you had already actively canvassed interest from your suitable partners. I guess you're looking at companies that may not have, for example, an FGFR inhibitor program. And to that extent, I would have thought it was unlikely that there would be a single new partner for all of the programs, given that hopefully these programs would fill in your gaps in other oncology portfolios. And with that in mind, I just wondered when -- from a timing perspective, when you think this might be best achieved? And then just finally, I don't know if you can answer this, Adesh. It's just really a question regarding the guidance for 2023. I know it's a long way off. But if we're talking about a 30% reduction in overall operating expenses, that still, I think, looks like quite a sizable chunk of money going into research and development. And I just wondered if your expectation is that there'll be a 0% contribution to -- for the oncology portfolio in that 2023 expenses guidance.

Thanks, Brian. Actually, Adesh, why don't you?

Okay. So maybe to your first question, I think it is fair to say that probably with different assets, we may have to consider different kind of strategic transactions. So it's not that we will sort of have to bundle everything together, and that's sort of going to create most of the value. But we are open to a lot of different structures given the fact that we are in a strong financial position, that we have a good financial prospect as you have seen in our guidance. Hence, we don't need to front-load transactions. So we can be creative and we will be exploring both single-asset transactions, in-licensing or bundling of any kind of projects that we have in our portfolio. And the aim, of course, is and that's sort of also answering the question in your second question, is that we are aiming at having the strategic transactions completed in 2022. And hence, in 2023, sort of we will be looking at being focused exclusively on our new strategic priority in anti-infectives. On the cost base, I think the only thing I can say there is that we, of course, have certain ongoing activities also on the anti-infectives side. There is still some ceftobiprole Phase III activities ongoing. There are the pediatric programs. There's research studies ongoing on the anti-infectives side. And then especially, there is quite a lot of activity, of course, to support a commercial business. As you know, we have sort of -- we are responsible for pharmacovigilance, regulatory activities and so on, also in the context of managing our partners.

The next question comes from Jacob Thrane from Edison.

Some of them have been answered already and also, from me, congratulations on the excellent results. I just wanted to hear a little more about if you could add some color to Cresemba and the Chinese market. You mentioned it's the second largest after the U.S. So just to get a sense of the loss trajectory, that we're just going ahead as being approved or should we have both formulations ready? And could you say a little more about the situation with the NRDL. And so -- and another thing is just a little bit about the guidance that you've given, basically for 2023, where everything should be sort of in positive territory, if I could call it down. Is that as a growing concern? Or does that have any sort of prerequisites about the strategic activities you're mentioning? Or anything, let's say, the positive readout -- potentially positive readout from the ERADICATE study would just be a cherry on the cake? And then could you perhaps explain to us a little more about how you are going to handle the -- your convertible bond that is maturing by the end of the year? And how you would -- what you intend to do there? That's -- I know it's a little more sort of finance triggering, but if you could add a little color to that as well, I'll be very happy.

Okay. Thank you, Jacob. I'll take the first one on the Chinese opportunity. So basically, the -- looking at analogs again of other compounds like voriconazole, for example, we believe the Chinese market, as I said, is the second biggest global market after the U.S. The U.S. is about 25% of the global potential. China is around sort of 18%, 20% of the global potential. So it's a significant market. We -- just to be clear, and I think you understand this, but we -- so we've got the regulatory approvals that the applications were actually separate approvals for the IV and the oral. So actually, we got the oral approved in December in a very quick succession for mucormycosis and aspergillosis. And then the -- in the coming months, we expect the IV to be approved, okay? So -- but your question about the reimbursement list and the inclusion on that is a very pertinent question because actually our partner, who's a very competent partner in China, Pfizer, they are working on various scenarios. And so all I would say is the one thing that's clear is that it's a big opportunity, but the sort of initial take-up, there's a range of scenarios from good to very good, depending on how quickly we get on this list -- this famous reimbursement list in China. So actually, there's -- all I would say is there's a range of some possibilities of how quickly the product takes off, depending how quickly we get on this reimbursement list in China. In terms of the second question around guidance...

Yes. So I'll take that because that's also then a little bit of a segue into the third question that you had. So maybe what does our strategic -- what does our financial guidance 2023 take into consideration? So what we're assuming there is, in essence, no inflow or no positive impact from the strategic transactions around the oncology bit. I think the only thing is, and that's building on the answer that I gave to Brian before. But it is assuming that we will not be incurring any expenses in 2023 related to our oncology portfolio or our oncology business. So that's sort of the only implication or the only consideration with regards to the strategic transactions and the oncology portfolio. With regards to ERADICATE, of course, having positive readouts from ERADICATE will have a significant impact, certainly on the mid- to long term on our cash flows, but potentially even in 2023 through partnering and so on. But in essence, irrespective of the outcome of ERADICATE, we'll be looking at actually being cash flow positive in 2023. And that's sort of the segue into your third question about the convertible bonds because that's certainly also a consideration for us when looking at how to deal with the maturity of our upcoming -- of our convertible bond. So we have -- we had a cash position of cash, restricted cash and investments of CHF 150 million at the end of 2021. We're guiding for about CHF 10 million to CHF 15 million in operating -- operating cash flow -- negative operating cash flow for 2022. That gives you an idea about where we stand at the end of the year. And what we have to say is that going forward, our aim is to reduce our debt level and to manage the debt level in a way or the refinancing, if a refining is required, in a way that minimizes dilution. But the extent to which we have to refinance the convertible bond will depend, to some degree, on the proceeds from a strategic transaction, on the outcome of the ERADICATE study and the projections that we will, therefore, have related to those. So hence, we will only be able to make an informed decision later in this year about how exactly we should deal with the convertible bond.

The next question comes from Arsene Guekam from Kepler Cheuvreux.

I have 3. First of all, on ERADICATE trial, what is a clinically meaningful threshold for this trial compared to daptomycin? The second question, could you give us more color on BARDA reimbursement? What is the remaining part to fund? And do you include any reimbursement in your sales guidance? And the last one, regarding your guidance in terms of operating expenses. You expect 30% reduction in operating expenses. Could you give us more detail in terms of the evaluation of the sales and marketing expenses and R&D expenses?

Thank you, Arsene. Marc, maybe you take the one on the ERADICATE clinically meaningful outcome versus daptomycin, what we should be looking at.

Yes, sure. So I think point number 1 is that the primary study objective is met, which is to demonstrate non-inferiority in the overall success rate between ceftobiprole and daptomycin. We have a non-inferiority margin of 15%. So the 95% interval -- the lower bound of the 95% interval of the difference needs to be above this 15% point. I think this is the prerequisite then to move on to a regulatory procedure and NDA submission. And then certainly, I think for positioning of the drug, it will also be important to look at consistency of results over subgroups. There are a number of subgroups, one of which, for example, is methicillin resistance versus susceptibility. But also in this study, there are patient subgroups predefined such as right-sided infective endocarditis, patients on dialysis, persistent Staphylococcus aureus bacteremia. And in the statistical analysis plan, we have defined a couple of more groups in categories of patients who have infectious foci. This could be, for example, septic arthritis or osteomyelitis. We will need to see then, in discussions with FDA based on the results, what could be relevant for the U.S. prescribing information. That's kind of what we will be looking at with this study.

And then in terms of the BARDA reimbursement and the...

Yes. Sure. So we need to start with the BARDA reimbursement. So at baseline, for 2021, we had other revenues amounted to CHF 16.6 million. And out of that, CHF 14 million was related to BARDA reimbursement. So about, let's say, 80% to 85% of our other revenue. For 2022, our guidance implies CHF 8 million in other revenue. And again, the majority of that is going to be related to BARDA reimbursement. That gives you a little bit direction of travel of the BARDA reimbursement, in essence. As the study is also still ongoing, as you know, the patient enrollment has completed but the study is running, and there will be also close out activities then over the remainder of the year. And then maybe to -- if we look into 2023, on more color, the only thing -- so at this point in time, I wouldn't really break down the individual line items about where the cost is coming from. But what we can say is that the majority is actually related to direct product costs. So about 70% of the cost that I was mentioning before, the 30% reduction, 70% of that is related directly to the R&D expenses on the oncology side. So that gives you an idea about how the distribution is.

The next question comes from Ram Selvaraju from H.C. Wainwright.

I also have 3. The first was with respect to how you are thinking about strategically positioning the initiative to partner Zevtera in the United States. And if you think about the optimal point at which to have a partner on board being after the results from ERADICATE but before the actual regulatory approval or if this would be post regulatory approval. And if you can give us a sense of what commercial preparations are likely to be required in order to position the drug optimally in the United States prior to getting regulatory approval. And then secondly, with respect to the R&D expense, I was just wondering if you could clarify. If we look at the 2021 R&D number, how much of that was related to the oncology programs? And lastly, if you can clarify for us whether you expect to, in an ideal context, complete the current and the near-term envisaged oncology development programs with your pipeline assets, and after that point, no longer allocate further R&D development expenses to them, or if you are prepared to make additional R&D development expense allocation to these projects, assuming that you do not find an ideal partner or partners for them.

Okay. Thanks, Ram. In terms of your question about strategically the timing of the partnership with Zevtera in the U.S., I think we alluded to it in our words earlier that I think there's certainly value now. There's obviously significantly more value once the SAB study is positive in the middle of the year. So -- and then your question about, yes, but could you get more value if you've got the regulatory approval. I think -- and then that also dovetails with your second question about commercial preparation. I think it's a sort of -- it's a balancing act. Obviously, it depends on -- it takes two to tango, so to speak. So we need the partners coming up with the right sort of offers. But my feeling is that it's that balancing those different sort of aspects, I think post the SAB results, because the SAB results are, we believe, pivotal, as Marc has alluded to earlier. The skin indication is important for the regulatory package, but in terms of the differentiating indication and a sort of real proof of concept for key opinion leaders in the U.S., we believe the SAB indication is pivotal. So actually, we think there will be markedly increased interest and increased valuation in the asset following the positive SAB study. And we think that -- so probably balancing that with wanting to do a deal and prepare -- the partner being prepared for the launch towards the end of 2023 might -- if I was a betting man, I would say you'd get -- we'd start to get involved in very serious discussions after the SAB results. Whether or not it happens at the end of 2022 or beginning of 2023, it's difficult to exactly say. But I think that's definitely when we believe that probably the ideal time will be for doing a deal. In terms of your question about the R&D expense, how much of it was oncology in 2021. Adesh, do you want to take that?

You can again -- it's almost like tying back into the 30% that I was indicating before. So if you think about the 30% reduction in the CHF 110 million in operating expenses in 2022 that we're guiding for, that is sort of relating to the oncology business. So we didn't just come up with the 30% number by chance, that was based on a calculation or estimate about how much of the costs relate actually to the oncology activities. And that maybe then is also the segue into your next question about would we be prepared to take the assets further. I would say in essence, we would be prepared to take the assets forward in the context of an agreement that we have because you can discuss about kind of structures that sort of require that we continue for a certain period of time. But as a matter of fact, we would not move forward or that's not the intent to move forward in the absence of having a partnership or strategic transactions executed.

[Operator Instructions] The next question comes from Bob Pooler from ValuationLAB.

Congratulations with the excellent results. Just on your strategic alignment, has something also changed also in the anti-infectives area? In the past, you mentioned that there were not so much deals in the anti-infective area and a lot more, yes, agreements and potential agreements in oncology. Is this also something that you're looking into as well?

Yes. Bob, I think the observation over the last years and, definitely, I think we feel that the anti-infective space is becoming more active. I mean in the areas that we're playing, which is the antibacterial and antifungal space, I think it's becoming more active. We've clearly got a list of potential candidates -- assets that we're interested in terms of in-licensing in. I think -- it's definitely becoming -- that's 1 factor in our thinking, the attractiveness of the area versus maybe a few years ago. And I think also, as you're probably very aware of is the whole antimicrobial resistance topic is gaining more and more traction, I think, globally by governments, organizations, lobby groups to try and push this agenda forward. And I think, again, the coronavirus pandemic has also helped, I think, bringing to focus the concept of resistant pathogens and the importance of globally addressing these issues. So I think the whole number of reasons why we think this area is not going to become less active but become more active.

Yes. So the only thing I would add is that actually over the -- I think, since about 5 years and so on -- about 5 years, there have been increasing investments on the early side, actually, in discovery on the early side of small companies in the space because I think the whole question about is there a medical need? It's out of question, let's put it that way. And I think those investments are finally resulting now in more and more projects reaching a certain level of maturity that is becoming interesting for also companies like us to pick them up and actually leverage our experience and our infrastructure to take them forward. So the opportunity -- the scope of opportunities, the number of opportunities have certainly evolved over the last 4 to 5 years based on the investments that have been made in early research and discovery.

Yes. So you'd be probably now looking -- well, if you look at your pipeline with Zevtera, if ERADICATE is positive, then you actually only have early stage project. So you're probably either looking at projects that have proof of concept or going to Phase II or Phase III. Is that a correct observation then?

Yes, Bob. Completely correct observation. I mean I would just remind you that the ceftobiprole, if it's positive, the SAB study, with this QIDP designation, we would get 10 years of exclusivity following the approval. So Zevtera, U.S. would be a big opportunity for us for a number of years. That you're 100% right that our compounds behind that are in the preclinical stage. And that's why I think I said that we're looking to actively in-license both clinical and preclinical assets in anti-infectives.

Okay. Then second question on Cresemba and Zevtera. Where is the growth coming from? Is it volume? Of course, you have in the country -- the rollout in countries, but do you also see pricing power as well?

Actually, it's all coming from volume, Bob, because -- yes, it's all volume growth in the U.S., our most established market. It's volume growth in the other markets we've launched in and its volume growth from new markets we're going to launch in. It's not a question of a mix of price and volume. It's -- I would say, it's almost exclusively volume -- more patients treated.

Okay. And then a final question just on FIDES-O2 or bladder cancer. Do you still have some cohorts for a second line treatment in bladder cancer?

Yes, Bob, we've reached -- for the second line and post-second line monotherapy, we've reached the Stage I required number of patients, and we will see, over the next months, the efficacy results evolving. That's why where we will be reporting interim results of this cohort. As said, the 2 sub studies that we did not continue was the ones in first-line cisplatin-ineligible patients, which is extremely difficult to enroll because of the competition, and the FGFR inhibitor refractory, which also is very advanced and hard to find patient population. So this was the reasons. But we are looking into the monotherapy data in second and post-second line setting, and they are maturing. And I think we've indicated that we expect having results for these -- interim results in the first half of 2022.

Okay. And just 1 quick one. When do you expect to move to your new headquarters?

What we've said is, and it's still the case, middle of the year, Bob.

Gentlemen, so far, there are no more questions.

Okay. So from Basilea, thank you very much for your questions, and thank you for your interest. Enjoy the rest of your day. Thank you.

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