Basilea Pharmaceutica (BSLN.SW) reported a positive financial outlook in their Half Year Results for 2024, with a notable 24% increase in global sales of their antifungal product Cresemba and a 16.6% growth in royalty income year-on-year.
The company also celebrated the FDA approval of ZEVTERA in the US and is actively seeking commercialization partners. With a robust pipeline including the antifungal Fosmanogepix, which is about to enter Phase 3 studies, Basilea is confident in its financial guidance for 2024, forecasting significant increases in revenue and milestone payments.
Key Takeaways
- Cresemba's global sales rose by 24%, leading to a 16.6% increase in royalty income year-on-year.
- Basilea achieved a positive operating result of CHF9.3 million and reduced debt using free cash flow.
- FDA approval was secured for ZEVTERA, and negotiations for commercialization are underway.
- The European Medicines Agencies Committee gave a positive opinion for Cresemba's use in pediatric patients.
- Basilea's pipeline includes Fosmanogepix, BAL2062, and Tonabacase, all targeting various fungal and bacterial infections.
- Financial guidance for 2024 projects a 26% increase in Cresemba and ZEVTERA related revenue and a 24% increase in total revenue.
- The company anticipates a 25% increase in milestone payments compared to the previous year.
Company Outlook
- Basilea increased its financial guidance for 2024, expecting higher revenue from Cresemba and ZEVTERA.
- The company is confident in funding its development programs with the current resources but is open to non-dilutive funding.
Bearish Highlights
- Sales to Pfizer (NYSE:PFE) for Cresemba will cease after December, which could impact revenue, although this is expected to be offset by lower costs of products sold.
Bullish Highlights
- The FDA's fast-track and orphan drug designations for Fosmanogepix for multiple indications bode well for its market potential.
- Basilea is positioning itself as a leading anti-infectives company with a significantly expanded pipeline.
Misses
- There are uncertainties regarding the exact timelines for Phase 3 studies, which could affect investor expectations.
Q&A Highlights
- Basilea did not provide specific guidance on operating cash flow due to milestone payment timing uncertainties.
- The company maintains a realistic timeline for Phase 3 studies based on past experiences.
In conclusion, Basilea Pharmaceutica's earnings call painted a picture of a company on the rise, with strong sales growth for its key product, Cresemba, and promising developments in its pipeline. The company's strategic focus on anti-infectives, along with its efforts to secure non-dilutive funding and commercial partnerships, positions it well for future growth. Despite the end of its sales agreement with Pfizer, Basilea's financial guidance remains positive, reflecting confidence in its ability to manage costs and continue to generate revenue through its expanded product portfolio.
Full transcript - None (BPMUF) Q2 2024:
Operator: Ladies and gentlemen, welcome to the Basilea Pharmaceutica’s Half Year Results 2024 Conference Call and Live Webcast. I'm Sandra, the chorus call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] At this time, it is my pleasure to hand over to David Veitch, Chief Executive Officer. Please go ahead, sir.
David Veitch: Thank you. And hello, everyone. I would like to welcome you to our conference call and webcast reviewing our financial results and key achievements for the first half year 2024, as well as highlighting upcoming milestones. For further detailed information, please see the Ad hoc announcement issued this morning and also our half year report; these documents are both available on our website at basilea.com. I would 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. I would like to start with our key achievements since the beginning of the year. Starting with our most important commercial product, Cresemba. Our antifungal for invasive mold infections. Cresemba continues to perform very well as demonstrated by the 24% increase of global in-market sales according to the latest available data for the 12-month period to March 2024. This continued strong performance translates into a 16.6% year-on-year growth in Cresemba royalty income for Basilea. We also report a strong financial performance for the first six-months of 2024 with 73.3 million revenue from Cresemba and ZEVTERA, our two commercial products. We remain profitable and report a positive operating result of CHF9.3 million for the period, during which we used our free cash flow to further reduce our debt level. Earlier this year, the FDA approves ZEVTERA in the U.S. for a broad range of indications and we have been working towards securing a partnership for the commercialization of ZEVTERA in the U.S. We are currently in negotiations with a number of potential partners. For Cresemba, we received a positive opinion by the European Medicines Agencies Committee for Medicinal Products for Human Uses or CHMP, recommending the approval of Cresemba in Europe for pediatric patients. We expect the European Commission's formal decision still in the third quarter. Through this, Cresemba would gain two additional years of market exclusivity in Europe until October 2027. We also added to our portfolio in the first half of the year. We acquired a pre-clinical stage antibiotic program from a novel class, the LptA inhibitor, which target gram-negative bacteria, also securing CARB-X non-dilutive funding for the initial preclinical activities for this program. In a final step of our refocused strategy to anti-invectives, we have also successfully partnered our last remaining oncology asset, Lisavanbulin with Glioblastoma Foundation. Hence making sure that patients continue to have access to this promising anti-cancer drug candidate. When we now look at our portfolio, we can see that we have significantly expanded our anti-infected pipeline since October 2023 with four separate transactions. With our pipeline, we are positioning ourselves as a leading anti-infectives company, advancing anti-infective drugs from research through clinical development to commercial success. I will now hand over to Adesh.
Adesh Kaul: Thank you, David. I would like to start first with an update on the commercial performance of Cresemba, a key driver of our strong set of financials. I will then highlight some of the key financial figures that we published today. I would like to mention that all figures I refer to are in Swiss francs unless specifically stated otherwise. Cresemba in-market sales is in the 12-month period to end of March 2024 amounted to $489 million, which is a 24% increase year-on-year and we see continued significant growth potential for the brand going forward. Cresemba continues to grow in established markets and we are seeing increasing contributions from China and Japan where Cresemba was launched more recently. These two countries alone represent approximately 25% of the global market opportunity for Cresemba. Earlier this year we obtained the approval of ZEVTERA the U.S. for Staphylococcus aureus bacteremia, acute bacterial skin and skin structure infections and community acquired bacterial pneumonia. The approval was based on successfully completed Phase 3 studies. The SAB and ABSSSI studies were supported by and received significant funding from BARDA. ZEVTERA has 10-years of market accessivity in the U.S. In-line with our business model, we plan to commercialize ZEVTERA in the U.S. through a partner. We have been working towards securing a partnership for the commercialization of ZEVTERA the U.S. and are in negotiations with a number of potential partners. The commercial success of Cresemba is reflected in our strong financial results for the first half year 2024.Cresemba and ZEVTERA related revenue amounted to 73.3 million. The 16.6% year-on-year increase in royalty income to 42.8 million directly reflects the continued healthy growth of Cresemba in market sales. This year, most milestone events are expected in the second half of the year. Therefore, milestone payments amounted to only 2.9 million in the reporting period, which is the key reason why revenues have been lower in the first half of 2024 than in the first half of 2023. As you will see in a moment when we come to our increased financial guidance for 2024, we expect on a full-year 2024 basis to report overall higher milestone payments as compared to 2023. Cost of products sold increased to 18.1 million, reflecting the significant increase in product revenue. Operating expenses amounted to 48.9 million. Overall, this resulted in an operating result of 9.3million. Based on our sustained profitability and positive midterm financial outlook, we recognized deferred tax assets of 13.4 million, which contributed to a net profit of 20.7million. In addition, we further reduced our debt from our positive cash flow, resulting in a net debt reduction to 26.2 million as of June 30, 2024.Considering that 2023 has been a transition year in which we only started to expand our portfolio in the second half of the year, it is helpful to look at the trend in our costs, expenses and profitability over several reporting periods. The general trend of growing cost of products sold reflects our increasing product sales to our partners. SG&A expenses are fairly stable and R&D expenses have some volatility based on transactions and progress in the R&D pipeline, but overall remain stable. Both operating and net result show an upwards trend as a result of our strongly growing revenues. Cash flows from operating activities have further increased and at 17.9 million in the first half year 2024 already exceed the 14.2 million for the full-year 2023. Besides investing into the expansion and progression of our pipeline, we have used the cash flows from our commercial business to strengthen our balance sheet. Since January 2022, we have significantly reduced our debt by a 124 million in a completely non-dilutive way. So that our only remaining debt are our 97 million convertible bonds, which will mature in mid-2027. Based on our performance in the first half of 2024 and the overall strong sales growth trajectory for Cresemba, we increased our guidance for the full-year 2024. Compared to full-year 2023, we now expect a 26% increase in Cresemba and ZEVTERA related revenue to approximately 190 million. Total revenue is expected to increase by 24% year-on-year to approximately 196 million. As a result of increasing product sales, cost of products sold is expected to increase to approximately 40 million and operating expenses are expected to be around 120 million. We expect an 88% increase in the operating result to approximately 36 million and a 300% increase in net profit to approximately 42 million. The disproportional increase in net profit versus operating profit is partially related to the recognition of deferred tax assets. Our healthy financial situation allows us to progress our expanded R&D pipeline to support the long-term growth of Basilea. I would like to provide a little bit more granularity on the Cresemba and ZEVTERA related revenue in order to give you more contexts for our financial guidance. We expect to see continued growth in royalty income and product sales in the second half of 2024. It is important to point out though that we expect a sharp increase in milestone payments in the second half of 2024 as compared to the first half of 2024. On a full-year basis, we expect milestone payments to increase by approximately 25% versus 2023. As a result of the robust growth trajectory driven by Cresemba, we assume that total Cresemba and ZEVTERA related revenue will grow 26% year-on-year. I will now hand over to Marc for the portfolio update.
Marc Engelhardt: Thank you, Adesh. As already mentioned, we have significantly expanded our portfolio by adding four new programs since October 2023. The most advanced clinical asset is Fosmanogepix. Fosmanogepix is a novel, broad spectrum antifungal that is targeting the treatment of invasive yeast and mold infections. With its potent broad spectrum antifungal activity and its excellent tissue penetration, including the eye and central nervous system, Fosmanogepix addresses urgent unmet medical needs and has the potential to become our next lead commercial product and value driver in the midterm. Fosmanogepix is differentiated against existing antifungals and other novel compounds in development. If we can successfully develop it, it could have an important place in the therapy of fungal infections. Fosmanogepix is the product of the active compound Manogepix. Manogepix inhibits the (GPI)-anchored wall transfer protein 1or Gwt1, which is responsible for keeping important fungal surface protein, such as cell wall mono proteins attached to the fungal cell membrane. By interfering with the anchoring of these cell wall proteins, Manogepix causes multiple and unique effects that lead to fungal cell disintegration and death. The spectrum of Fosmanogepix includes multi-drug resistant fungal species, essentially covering all fungi that the WHO has included in their list of critical priority pathogens. The urgent and unmet medical need for developing new treatment options for patients infected with these pathogens is evident when looking at the high mortality rates that had remained at 25% to 40% or higher over the last decade in these yeast and mold infections. The FDA has acknowledged Fosmanogepix potent broad spectrum activity and granted it fast-track and orphan drug designations for seven separate indications, including invasive candidiasis, invasive aspergillosis, scedosporiosis, fusariosis, mucormycosis, cryptococcosis, and [coxidiodomiccosis] (Ph). In addition, it has received two IDP designations. Because Fosmanogepix is available IV and oral with high oral bioavailability, it can be used in both inpatient and outpatient settings. It also has a favor drug in action profile with lower cytochrome P450 inhibition and may be synergistic with amphotericin B and echinocandins, which provides additional options in difficult-to-treat patients. Fosmanogepix is ready for the start of the first Phase 3 study in the coming weeks, a double-blind non-nefarious study in candidemia and invasive candidiasis. This study will include approximately 450 patients randomized to initial intravenous therapy with Fosmanogepix or Casper fungicide. The study includes an oral step-down option to Fosmanogepix in the Fosmanogepix group and to Fluconazole in the Casper fungid group. The primary endpoint for the FDA is 30-days of viable and for the EMA is over-response at the end of study treatment. It is a non-nefarious study with a non-nefarious margin of 15%. We anticipate starting a second Phase 3 study in invasive mold infections around year-end. This study will include a total of approximately 200 patients. Patients will be enrolled in an open-label randomized portion comparing Fosmanogepix with the respective best available therapies for separate cohorts of patients with invasive mold infections caused by difficult-to-treat aspergillosis species, Puzhayum species, Atosporin species, Lomentospora prolificans and Mucorales fungi. In addition, patients requiring salvage therapy will be enrolled in a separate cohort. If successful, this Phase 3 program will provide a comprehensive data set supporting broad use of Fosmanogepix in yeast and mold infections as primary therapy and as a salvage therapy option. Moving to our second clinical asset, BAL2062 is a first in class cyclic hexapeptide antifungal targeting patients with invasive aspergillosis. Our development plan aims at positioning BAL2062 as a first-line intravenous treatment with the potential to deliver superior efficacy to standard of care. It has FDA QIDP orphan drug and fast-track designation for invasive aspergillosis. It has a new mode of action as it is actively transported into fungal cells through the cytoflu iron transporter 1 or CIT 1, which is not present in mammalian cells. BAL2062 does not show any cross resistance with marketed antifungal agents. One of the key attributes of this compound is its potent rapid fungicidal activity against aspergillosis species shown in pre-clinical studies with the potential to provide superior efficacy in invasive aspergillosis. It is active against azole and amphotericin B resistant aspergillosis species and has a low propensity for drug-drug interactions. We are currently conducting preclinical profiling studies to define the optimal positioning and the most efficient clinical development path for this asset. If successfully completed, we expect to start the Phase 2 program in 2025. Turning to our third new program, Tonabacase. Tonabacase is a potent bactericidal endolysin derived from bacteriophages, with potential utility as a junk therapy to standard-of-care antibiotics for the treatment of complicated staphylococcal infections, such as infected endocarditis. Tonabacase is characterized by a rapid bactericidal activity in staphylococcal infections and annualized tests have shown activity to degrade bacterial biofilms and have a low risk of resistance development. We are currently conducting preclinical studies, including PKPD investigations, under an exclusive evaluation license and option agreement. Based on the results, we will decide on the definitive licensing option around year end 2024. Finally, moving to our 4th new asset, the LPTA inhibitor program. LPTA inhibitors are a new approach to the treatment of infections caused by gram negative bacteria and we acquired the rights to this preclinical program in January this year. We believe that this new class of antibacterial has the potential to become a new important treatment option for infections caused by enterobacteriaceae, including - the compounds have a new mode of actions by inhibiting LPTA, which is a part of the lipopolysaccharide transport bridge in gram negative bacteria, hence resulting in a loss of integrity of the outer cell membrane. High potency and rapid bactericidal activity have been shown in vitro and in-vivo and no cross resistance has been observed to other antibiotic classes. We are currently conducting preclinical work with the goal of nominating a candidate for clinical development. If successful, we expect to start first in human studies in 2026. I will now turn over to David.
David Veitch: Thank you, Marc. Let me close with a quick summary and outlook. We reported strong financial results for the first half year 2024 and significantly increased our guidance for the full-year, as we expect continued strong in market sales of December and significant milestone payments from our existing commercial partners in the second half of 2024. An immediate focus for 2024 is to keep working towards executing a commercial partnership for ZEVTERA in the U.S. At the same time, we are progressing our clinical and preclinical assets through research and development. Specifically, our first Phase 3 study with Fosmanogepix for the treatment of candidemia invasive candidiasis is planned to start in the coming weeks. Thank you for your attention and we will now open the line up to your questions.
Operator: [Operator Instructions] The first question comes from Brian White from Calvine. Please go ahead.
Brian White: Yes, good afternoon, and thanks for taking my questions. I got two - you linked so link questions. Just on stuff to buy pro ZEVTERA in the U.S. negotiations appeared to us to be a bit more protected perhaps in the company initially thought. And I guess just in terms of the companies experience so far has it been - have you been pleased with the level of interest and the quality or ambition of potential partners. And I just wondered also just the kind of ongoing limited commercial potential or perception of limited commercial potential for antibiotics has that been - how much of an issue, has that been so far? And then thinking about Fosmanogepix were about to go into some fairly extensive Phase 3 clinical evaluation. Have you had any more thoughts regarding the potential for non-dilutive funding? Is the company quite happy to fund all of that from current resources given the performance of December? And I guess, also just finally looking out there for other assets. Does the - it would funding the Phase 3 program yourself limit your ambitions in that direction? Thank you.
David Veitch: Yes. No, thanks Brian. So I will take the ZEVTERA question and I will maybe hand over to Marc and Adesh on the Fosmanogepix questions. But in terms of ZEVTERA, now I think we said back in March April time that actually we had some new partners came into the process when the label became clearer of ZEVTERA in the U.S. and the label was broad and a good label and basically at that point we thought we could close a deal by the middle of the year. You are correct in terms of it is taken a bit longer but we believe it is just a matter of time and we definitely we have got multiple partners in the process and we are at the negotiation stage and that obviously takes two parties to sort of come to an agreement and sign a document. So that is just taken a bit longer than we had originally planned back in March, April. You are correct. We are confident that, that will be done. It is just we can't say exactly when because it takes both parties to sort of sign the final agreement But that is definitely that is in process and a priority for us as a company. In terms of whether or not the environment for antibiotics has sort of changed or I think it is definitely not changed during the course of the process. We have been going through here with stuff to buy pro, I think we have gone on record and said that we believe sort of antibacterials have a potential probably about half that of antifungals. So I think the Cresemba has got a potential of if you look at other anti-fungal, it can be seven, eight, 900 million sort of dollars peak gear sales where is a good antibacterial is probably half that order of magnitude. So I think that sort of hasn't changed over the course of the last, the process of us going through the sector by proper and so I don't think that is a factor and like I said, we are just hoping to get this over the line as soon as we can. In terms of Fosmanogepix question and about whether or not we would continue in terms of - if we don't get any non-dilutive funding, maybe I will hand that over to Marc and Adesh to answer that one.
Marc Engelhardt: Yes, thank you. Thanks, Brian. So this is Marc. We will continue the Phase 3 studies. I think we have communicated consistently that Fosmanogepix program is not dependent on [indiscernible] a non-diluted funding. At the same time, that Basilea has long-standing and successful collaboration with various groups that support anti-infectives development and especially with BARDA and CARB-X. We also believe that our pipeline, especially for the CapEx, addresses high unmet medical needs in fungal infections, and we have also antibacterial in our pipeline. And we believe this portfolio could meet the criteria to potentially excess non dilutive funding and we are certainly seeking for non diluted funding for all our assets in our pipeline.
David Veitch: Yes, so maybe just adding from really from a financial perspective, I think our full-year 2024 guidance shows that we have the ability to absorb the R&D expenses or investments that we have to take to expand and progress our pipeline and the growth trajectory as indicated for Cresemba is very healthy. So we are very confident that we are able to actually fund anything that we need. But needless to say that any potential non dilutive financial funding would provide significant additional upside. So we would certainly consider it to be quite positive and that is why we are also focusing on trying to achieve that. But it is not getting in the way of us pushing forward with the development programs.
Adesh Kaul: And just to be maybe it is abundantly clear but just to be to stress the point, our updated revised financial guidance does not take into account any additional non dilutive funding. So, if that was to happen, that would be we would revise our guidance accordingly.
Operator: The next question comes from Ram Selvaraju from H.C. Wainwright. Please go ahead.
Yi Chen: Hi, this is Yi Chen for Ram Selvaraju. Thank you for taking my questions. So regarding, for - JEPX, how do you intend to optimize the value while also minimizing risk? And do you will you consider the possibility of identifying a potential partner prior to concluding pivotal development of the drug?
David Veitch: Yes. Maybe thank you for the question. Adesh, do you want to take that?
Adesh Kaul: Yes. So maybe just as a reminder, so we acquired basically first one, JEPX on the basis of quite extensive availability of Phase 2 data. So from a risk perspective, I would say we believe that we have a good understanding of the compounds that it has actually quite convincing clinical data and that we from Cresemba, we perfectly understand the space. We are quite confident in the way we are moving forward. With regard to partnering, I would also like to remind you that when we acquired the program from Pfizer last year, actually the structures in a way that Pfizer retains the right of first negotiations once the Phase 3 program is completed. So from our perspective, it is very clear and that was also planned from the beginning that we would complete the Phase 3 program. We would add, in essence, value by conducting the Phase 3 program broadly. And then in line with our business model, we would be planning on commercializing with a partner. In this case, the first party to talk to would be Pfizer, an existing partner for Cresemba. So we are quite comfortable with the path forward for - JEPX.
Yi Chen: Got it. So, with respect to BAL2062 and Tonabacase, do you are you committed to conducting clinical trials of these assets independently all the way to approval? Or would you seek to potentially out license them earlier?
David Veitch: No. I think in any event, we believe that we are really uniquely positioned to take assets in our focus areas all the way through clinical development to the market. And we also believe that that is actually the phases of development where you are truly adding value. So we would consider that to be our core competence that we take these assets, look through a commercial lens as well when we are designing the clinical development programs to really come up with differentiated profiles in order to then really partner for the conversation. So the current plan is to basically take the programs forward ourselves if they are successful in meeting our bar for taking programs forward and the only partnership that we would consider at this point in time. Prior to completion of Phase 3 would be, of course, to get potentially some non-dilutive financing, which we would also consider to be partnering. But that would be more from, not from an operational perspective, but purely from a financing perspective.
Marc Engelhardt: And in terms of timings, I think Marc alluded to it in his words. But our 2062 Tonabacase, we have sort of decision points towards the end of this year where we complete the preclinical profiling before pressing the button or not, depending on what the preclinical profiling results look like in terms of starting a Phase 2 study next year. And Tonabacase has a slightest sort of derivation of that, because at the moment we have got an evaluation license, and if things are all positive, then we would press the button and move ahead with a definitive licensing agreement, and then before the Phase 2.But that is in terms of timings.
Yi Chen: Got it. And my last question is, what are the principal drivers for the increase in operating profit guidance? And also what are your views on the optimal use of debt in the company's cap structure? Thank you.
David Veitch: So the driver, in essence, is the increase in revenues. So we are increasing revenues and that flows through in our model quite nicely to the profit line. And that is reflected then in the year-on-year guidance. It probably also shows really the leverage in our models as sales increase given that we are commercializing through partners, actually, we are not incurring a corresponding increase in operating expenses. And your second question was debt in the capital -
Yi Chen: Optimal use of debt, yes.
David Veitch: So from our perspective where we stand today, we believe that we would actually, for the time being, we continue to seek to reduce our debt level. We have been doing that for the last two years. So we have reduced our debt level by 124 million. We have now just one convertible bond outstanding. And the intention would be actually to also repay that or to have it converted.
Yi Chen: Alright. Thank you very much.
Operator: The next question comes from Soo Romanoff from Edison Group. Please go ahead.
Soo Romanoff: Hi, thank you for taking my questions. Congratulations on the quarter. It was nice to see the guidance raised. For my first question, I just wanted to for ZEVTERA, does that increased guidance includes any of upfront payments that you expect from the ZEVTERA partner or not?
David Veitch: Thanks, Soo. So for two things. First response is our guidance for 2024 does not include any material, I would say contributions from a partnership in the U.S. We would actually be looking at having more meaningful contributions in 2025. The reason with regards to the upfront payment is that again it depends on the details of how the agreement is structured. But given the precedence that we have, we would probably defer the recognition of the upfront payment anyway over the lifetime of the agreement. And hence, the short term impact or the annual impact of an upfront payment would not be that significant, especially as we have highlighted also in the past that we are looking at not necessarily at front loading of transaction with a highest possible upfront. But to ensure that we have a maximum participation in the overall value creation of the whole 10-year period of ceftobiprole being on the market. So we are looking at having a structure that allows us to participate on the one hand in the risk, but then also in the upside of the drug in the market.
Soo Romanoff: That is super helpful. For it was really nice to hear Marc's update for both, BAL2062 and Tonabacase and I think we add some questions already but base on the preclinical profiling, is there anything you can kind of give us like how is it progressing and is there any initial data or insight you could share with us?
Marc Engelhardt: So we are making good progress with the preclinical profiling. We are confident this will enable us to make a decision as to whether and how to move forward with BAL2062 and to another case. And as we said before, we will make that decision around year end 2024. Compared to Fosmanogepix, the two compounds, BAL2062 and especially term markets are somewhat higher risk projects, but they also offer potentially really high return. So once we have all the data from the preclinical profiling studies, we will review these projects based on their capacities to address unmetallurgical needs and then consider the risk and the returns, the potential returns, and then we are going to make a decision and communicate it.
David Veitch: Yes. And just one thing to add from my side, obviously we can't be specific with the sort of data that we are generating as we go at the moment. But what I would say is that a bit like was said earlier, I believe, is that we will seek we think these products. As Marc said, fulfill the sort of requirements of non dilutive funding bodies such as BARDA. So actually, we will apply for non dilutive fund, not just for Fosmanogepix, but for other compounds like these in our portfolio and CARBX for the earlier compounds. We, you know, we believe that these types of compounds that we have in our portfolio and we look for to attract into our portfolio are the types of products that should fulfill the need of non dilutive funding bodies.
Soo Romanoff: So my last question, thank you for that. Last one is, you've invested heavily in building this portfolio in 2023 and you had multiple asset purchases. Is the strategic focus developing existing pipelines now or are we still looking at further acquisitions? I know you are in a niche market, but any color and any particular category or stage of assets you are targeting would be super helpful. Thank you.
David Veitch: Yes. I mean, at the high level and then Adesh, you want to jump in as well, but from my side, we have stated since we had our strategy refocus in 2022, we have stated that we are we look at the bacteria and infect the treatment of bacterial infections, severe bacterial infections, and severe fungal infections. We think that is, for us, for this time in our life, that is a sort of broad enough area. We have built quite a nice portfolio over the last ten months on top of ZEVTERA. And actually, we are continuing to look at assets in that area. We haven't finished because, as we said, there will be attrition in our portfolio like there is in every biotech's portfolio. So we are still looking for assets in this area. So at the moment that we think the area is, is big enough for us to find assets that we like and we can bring into our company. But maybe, Adesh, you want to.
Adesh Kaul: Yes. One thing I would add to that is that first the fact that maybe for a few months or a few quarters, we don't do a transaction doesn't mean that we don't keep on looking for opportunities. We have a list of a shortlist, in essence, of assets that we are interested in. Not every project or every asset is available at any given time, but you still monitor it and it may become available. So we will certainly look at any assets that we believe we can add value to in our focus areas and will transact whenever they become available.
Soo Romanoff: Thank you for that. Great quarter. Thank you.
David Veitch: Thank you.
Operator: The next question comes from Chien-Hsun Lee from Pareto Securities. Please go ahead.
Chien-Hsun Lee: Hi, good afternoon. So, a few questions from me. So, first, just want to elaborate a bit on the Fosmanogepix non-dilutive funding, because if I understand correctly, you think that for Fosmanogepix takes all the box for potential bars are reimbursement that if the barrier will be able to grant decision. Do we have any estimated timelines?
David Veitch: I think I will make a comment. And then, Marc, maybe you want to comment as well. You are correct that we do believe that Fosmanogepix ticks the boxes in terms of the type of product that BARDA could fund. Obviously, we are seeking to try and get funding for Fosmanogepix along with, like I said, our other compounds in terms of specifically where we are in a process. I wouldn't comment on that exactly now, but just to say. What I would say is that we are seeking to get funding for a number of our compounds in development including Fosmanogepix and I can't really say much more than that at this exact point in time. But we are not just thinking about it, we are actively trying to get funding for our three compounds actually in clinical development.
Chien-Hsun Lee: Okay. Thank you. And just a follow-up question on Soo's previous question. So do you think there is a more pressing need to acquire or enlist more later stage assets? Since ZEVTERA alone may not be able to basically bridge the GAAP for Cresemba, revenue loss beyond 27 and Fosmanogepix can take another three, four years to start generating material sales. Is it still your focus to basically replenish your pipeline by adding more research assets?
David Veitch: Yes. So just to remind you of one point, in terms of the Adesh touched on earlier about our model. So our model is that we in license compounds from late preclinical to the end of Phase 2, but actually, to get to in-license something after Phase 3, if you think about it, sort of from us, makes no sense. Because the person that is trying to license that compound out should really then go straight to the company that is going to commercialize rather than, you know, we can Basilea in that model with our model of commercializing through partners as well. You know, we Fosmanogepix really is probably the latest compound in terms of development stage that we would that fits with our model because we can bring it in at the end of Phase 2, add value fit through Phase 3, then we could look for a commercial partner with all the benefits we think about doing that. And that, you know, maybe one day in the future, you know, our model changes because we have critical mass and we can commercialize ourselves in selected markets. But as for now, this model doesn't fit really that - it doesn't fit having a later than Phase 2 portfolio.
Marc Engelhardt: And I would just add two things to that. So first of all, also just as a reminder, we don't necessarily believe that Cresemba revenues will right away drop across the board because countries that or regions that we expect will contribute to growth beyond 2027, so the end of exclusivity in the expected end of exclusivity in the EU and U.S. So that is one thing. Secondly, maybe also a little bit underappreciated is that if you look from a cash flow perspective and operating profit perspective, the benefit of our business model is in essence that we are actually able to generate positive cash flows even if revenues will be declining to a certain degree because we are not incurring the cost of commercialization. So as long as Cresemba remains on the market in essence, it is from our perspective cash flow positive. And that is also reflected in our SG&A cost. If you just look over the last couple of years, our SG&A costs have remained fairly stable irrespective of how many countries or how broadly Cresemba and ZEVTERA were launched. And I think that is one of the benefits also of our business model that we probably don't have the same level of exposure when it comes to profit and also bottom line and cash flows to loss of exclusivity as maybe companies that are directly marketing themselves and have fixed costs that they have to cover.
Operator: [Operator Instructions] The next question comes from [Lauren Flum] (Ph) from ZKB. Please go ahead.
Unidentified Analyst: So the first question relates to Fosmanogepix. The first 2D Phase 3 already referenced under clinicaltrials.gov indicates primary readout in January 28. Is there any chance that we get a faster enrollment than what is suggested by this time line? The second question relates to the operating cash flow for the full year. We had a significant swing in working capital requirements in first half with a positive eight million contributing to the 18 million around free cash flow. What would you which should we expect for the second half of this year considering notably the milestone to be perceived in relation with Cresemba in the second half of this year?
David Veitch: Thanks, Lauren. Marc, why don't you take that.
Marc Engelhardt: Yes I take this one. I mean, for predicting exact timelines for large Phase 3 studies, prior to having some data on the progress, there is always, a level of uncertainty with these timelines. They can in principle go in both directions. We have estimated the timeline that is given on clinicalTrials.gov based on previous studies that we have performed and other sponsors have performed and we consider this as a realistic timeline. I think this will be better informed when we have visibility, after the study has started accruing patients, then the trajectories get kind of substance and we can then come up with precise estimate. But from our perspective what we have put into ClinicalTrials.gov is a realistic timeline based on our past experience and the experience of other sponsors.
Adesh Kaul: And with regard to your operating cash flow guidance, so we are not guiding on operating cash flow for also the reason that a lot depends on when exactly milestones are being triggered, and basically, when you are invoicing. But in general terms probably the best proxy to use is look at our operating result guidance for 2024 and take that as a baseline and then deduct from that the interest payments that we are doing related to our convertible bond and that would get you probably somewhere close to CHF33 million in essence in cash flow for operating cash flow for 2024.
Unidentified Analyst: Maybe, another question if I may. The supply service agreement with Pfizer for Cresemba stipulate that you deliver semi-finished products until December this year and you had booked already a bit more than 10 million product sales in relation to Cresemba with Pfizer in the first half. Can we infer that from next year there won't be any more sales to be booked for Cresemba with Pfizer?
David Veitch: That is correct. According to our agreement with Pfizer we would no longer be selling product to Pfizer but then also as a reminder as a result of that our cost of products sold would go down significantly because basically the economics of our agreement with our license partners is usually that we sell product more or less with a minor markup to the production costs and the real economics are coming from the royalties and the milestone payments. So from that perspective yes on top line there will be an impact from product revenues for Pfizer but there will be offset by lower costs of products sold.
Unidentified Analyst: Super. Thanks. Thanks very much.
David Veitch: Thank you.
Operator: [Operator Instructions] Gentlemen, so far there are no further questions back over to you for any closing remarks.
David Veitch: Okay. Thank you for your interest in your questions everyone and enjoy the rest of your day. Thanks so much.
Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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