Jul 23, 2020
Operator
Dear ladies and gentlemen, welcome to the Idorsia Conference Call. At our customer's request, this conference will be recorded.
[Operator Instructions] May I now hand you over to Andrew Weiss, who will lead you through this conference. Please go ahead.
Andrew Weiss
Thank you, Eily [ph]. Good afternoon, good morning, everyone to wherever you're calling in from.
My name is Andrew Weiss, and I want to welcome to -- welcome you all to that First Half 2020 Financial Results call. Today, we'll be talking about the performance over 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-Paul Clozel; our CFO, André Muller. And I am also pleased to welcome Simon Jose, our Chief Commercial Officer to the call.
It's the positive results of both our pivotal trials for daridorexant. Many people have been asking, how is an outdoorsy intending to commercialize daridorexant.
Simon has joined in this call to get the 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 Idorsia shares.
Next slide. Jean-Paul, floor is yours.
Jean-Paul Clozel
So, slide three. So, the beginning of 2020, the first half of 2020 has been the task beginning of the year, of course, because of this COVID crisis.
But despite the COVID crisis, Idorsia 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 2020 has been marked by a remarkable achievement.
I've mentioned the positive two Phase III results with daridorexant, but we have also achieved a licensing agreement with Neurocrine. We have issued 11 million new shares raising our cash liquidity.
And also this is important for Idorsia Janssen submitted an NDA, both at the FDA and at EMA for ponesimod in multiple sclerosis. We believe that the ponesimod is substantially differentiated from other S1P1 receptor agonists, and we are really very hopeful that it will be a commercial success.
I remember that we get 8% royalty on the sale of ponesimod. What is also important is that despite -- so slide five -- 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 clazosentan, because clazosentan patients are hospitalized in intensive care unit and we wanted in conjunction with the 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 the delay.
And it's very difficult for me to tell you how much is the delay, because all will deepened how fast the hospitals can reopen, how fast the traveling, because we need to be able to go to see the patient 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 Idorsia to achieve the goals that we have given to us when three years ago we were creative. First thing was to get three products on the market and you see with daridorexant, but with lucerastat, with aprocitentan, with clazosentan following rather rapidly after daridorexant, I believe this goal is achievable.
The second goal was to build a commercial organization, and very soon Simon will tell you what is going on about this goal. And the third point was to bring Idorsia to a sustainable profitability.
When we think of the future income of ponesimod, 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 timeline. 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 potential of CHF5 billion 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 daridorexant, 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 daridorexant a success seven.
Slide seven, next slide. Slide seven.
So, we have discussed in lengths and I will not come back on that, the fantastic results we got with daridorexant. We are continuing since the two last webcast to analyze these two studies.
And I would say we are not found any disappointing -- we have not had any disappointments. We discover more and more, I would say, gems in this huge data mind 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 that we 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 results 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 daridorexant.
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 prepare by Simon Jose, who is our Chief Commercial Officer.
Simon has -- now he's 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 in GSK.
And he's going to tell you what is happening on the commercial front. Please, Simon.
Simon Jose
Thanks, Jean-Paul and good morning, good afternoon, everybody. I am very pleased to join today's webcast and provide you with a short update on our commercial strategy.
Obviously, following the positive Phase III results with daridorexant, we're moving full speed now to prepare for a successful launch. And as you've seen, we've established the U.S.
affiliates 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. Daridorexant is the first sleep medicine to demonstrate not only an improvement in sleep onset and sleep maintenance, but also as Jean-Paul said, in daytime functioning, all without compromising safety.
So, with this outstanding profile, we believe daridorexant will be clearly differentiated from existing erection, receptor antagonists, and the older, widely prescribed sedating sleep agents. Now, why we're clearly excited about the Phase III 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 million 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 the person's day, including reduced productivity and greater work absenteeism, and healthy sleepers, relationships with family, friends and coworkers can suffer too. And the impact goes beyond quality of life insomnia costs the global economy approximately $100 billion 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 the 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 you'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 z-drugs, following the FDA, those change and safety warnings in 2013.
With the addition of the black box, the complex link behaviors last year, we expect the shift away from 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 that 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 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, this data also reminder us that we need to account for this large and growing off label use of trazodone in order to get a true picture of market potential.
Next slide. So, I'd like to finish by sharing our commercial approach launches and how that applies to daridorexant.
First, 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 variables and then overweighted focus on the patient in the disease area, we're entering.
Second, we believe daridorexant will have a clearly differentiated profile. I've spoken to this already as has Jean-Paul, but the effect on daytime functioning and the safety profile of daridorexant are two obvious and important areas that standout for that difference to our existing products.
Daridorexant has the potential to bring patients suffering from insomnia what they want to sleep longer at night and feel better during the day. Third, 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 aim 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 daridorexant, 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 daridorexant in order to capture the full potential of the product, we need to effectively reach the primary care market. And we will do so from selected partnerships.
As you know, we have already announced the partnership with Mochida in Japan, and we are currently in discussions with a leading contract sales organization in the U.S. department for our launch there.
This partnership strategy allows Idorsia 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, daridorexant 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 Idorsia 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 André.
Thank you.
André Muller
Thank you, Simon and good afternoon or good morning to everyone on this call. And with no further ado, I will go directly to the next slide, number 13.
Let me start here. We see a P&L and how our results came about.
On the left side, you see the revenues of CHF58 million. These relate to a CHF48 million corresponding to the portion recognized in the P&L of the $57 million paid by Neurocrine for the rights we loved our calcium T channel blocker developed and commercialized, of course, and a two-year research collaboration for backups or follow on.
Out of this $57 million, $5 million were already paid in Q4 2019 and $52 million were paid in Q2 2020 following the IND granted by FDA for this calcium T channel blocker. So rest is 10 million [ph] and it's a deferred revenue with our previous collaboration already announced Janssen aprocitentan CHF5.5 million, Roche with the research collaboration CHF2.5 million and Mochida CHF1.8 million the collaboration Simon Jose alluded to in Japan full marketing for daridorexant.
I will detail CHF193 million non-GAAP OpEx in a minute and go directly to the next bucket, which is, I would say usual D&A CHF10 million, stock based compensation CHF11 million, these are usually the main differences between non-GAAP and U.S. GAAP around CHF40 million on a full year basis.
So you see here that we are well on track. But here and you see this is bucket of other of CHF24 million, I would say it's another difference between non-GAAP and U.S.
GAAP, which is relating to pool in connection with an ongoing arbitration. There we see -- I think it's worth spending some time to really explain you what is this all about.
This CHF24 million accrual is relating to clazosentan. Idorsia currently develop clazosentan.
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 clazosentan in -- across the globe if the drug is approved.
Clazosentan was acquired by -- through an FDA or share purchase agreement with the company called Axovan and the Axovan vendors were entitled or are entitled to CHF115 million potential regulatory and future milestones if and when use. Out of these vendors 65 of these Axovan vendors entered into an arbitration claiming J&J transaction, and here use the accrual to encompass the J&J acquisition of Actelion, but also acquired spin out of Idorsia.
So, the claimants are believe that this transaction triggered the change of control and therefore they are entitled to accelerated payments of all outstanding milestones. This would mean CF75 million relating to clazosentan and then another CF5 million for another compound that was discontinued many years before the merger.
Remaining Axovan vendors included Actelion for 7% -- or CHF8 million so, where this is Idorsia now and will never have to pay the milestones, so this left bucket, right bucket and 28 that decided not to join the arbitration. In H1 2020, Idorsia acquired 26% -- 26% of this 28% non-claimant all their future potential milestones around CHF30 million for cash consideration of CHF9 million.
Obviously, this non-claimants [indiscernible] reputable venture capital risk considered that this deal is a fair deal considering the probability of success and, of course, the cost of capital. So the CHF9 million is in essence, an accelerated milestone and therefore was booked as R&D expense, as you will see in the next site.
But before I would like also to recall that the same offer was also made to remaining 2% non-claimant. Some of them have already taken our own unconditional offer, but we also extended to offer to 65% claimant such agreement being under certain condition notably claimant bearing all arbitration and loyalties should see 67 remaining vendors to non claimant 65 claimants take our offer.
Idorsia would pay a one-time payment of CHF24 million in year of 77 staggered milestones. So this CHF24 million accrual is also booked in R&D expense.
So the total impact in H1 2020 is an expense of CHF32 million. And for further details, please refer to the legal update of the press release or note 12 of our interim consolidated financial statements.
To finish with this slide, you have also below EBIT, an CHF11 million item and this CHF11 million item is mainly relating to the interest paid on the 200 million convertible bond that has a coupon of 75 basis points and our deposits where the negative yield on the Swiss deposit almost compensated by the way the positive yield on U.S. dollar deposits.
We have also a CHF4 million attrition expense on the J&J 445 million convertible loans and 4 billion unrealized loss on the 1.3 million from Santhera shares that we hold and that are valued on a quarterly basis mark-to-market. We can go now to see our next slide number 14.
I just can see here with the non-GAAP operating expenses. We spent much less in H1 2020 than in H1 2019.
If you will exclude CHF9 million milestone, the spend was CHF184 million. So 50% less than in H1 2019.
Going from right to left, we already discussed the CHF9 million milestone. You see a small increase of CHF3 million in G&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 enable Simon and his team to launch product starting with daridorexant across the globe.
Commercial went up from CHF5 million to CHF7 million with now the core team recruited in H2 Simon and also in the U.S. with the GM [indiscernible].
And you see that clinical developments went up from CHF101 million -- CHF151 million, so CHF50 million more, and that mainly due 40 -- more than CHF40 million out of the CHF50 million decrease is due to the pivotal trial for daridorexant, which came to an end at least for the pivotal trial. There's still a lot of work to do, but in H2 2020.
And drug discovery went also slightly down from 56 million to 49 million mainly due to some projects that were postpone, so clearly also in these -- in numbers of -- for the first half of 2020, an impact due to COVID-19. So here understand really relating that COVID-19, which is around 30 million, 40 million.
Let's go to the next slide 15. So, let's see how our cash flow came about.
We started the year with CHF739 million liquidity. We spend CHF193 million non-GAAP OpEx that we just discussed.
We cash in CHF59 million milestone, so it was the CHF50 million from Neurocrine, and also CHF9 million from Mochida. We had limited CapEx CHF4 million and an increase in working capital requirements mainly CHF16 million.
And as Jean-Paul already mentioned, we raised CHF330 million growth with the issuance of 11 million new shares so it's a CHF30 per share, or 323 million 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 strengthen balance sheet with CHF908 million liquidity.
Let's move to our next slide number 16. This slide briefly gives you a breakdown of our liquidity with various durations to offset the negative interest rate environment on Swiss franc deposits.
And as you can see our liquidity is mainly held in Swiss franc to avoid any currency risk, but 146 million are also held in U.S. dollars to cover our forecasted expenses in the U.S.
dollars. Next slide please number 17.
And I will finish with the revise the guidance. But before giving you more color on this guidance of 419 million non-GAAP and 530 million U.S.
GAAP, keep in mind that it excludes additional milestone payments. So in this guidance, you're 9 million are included, of course, and any potential award granted in the ongoing arbitration.
The arbitration is substantially completed, witnesses hearings completed a few weeks ago. So, we can now reasonably expect that decision of the arbitration panel before year-end.
Then the 24 million accrual that we also discussed a few minutes ago will be reversed and see a final award will be booked in R&D expenses. So the final award is almost binary.
It will be zero if the arbitration panel concludes as we believe that there was no change of control triggered by via change their transactions. It could go up to 92 million if the arbitration panel conclude that there was a change of control that would send -- that triggers the acceleration of milestone 75 million for -- and possibly 5 million for the second compound.
And on top, you would have statutory interest for later payment, 12 million as of end of June. So should we lose the arbitration?
Of course, we would pay the same award when remaining non-claimants that'd be low 2% -- 2% now. So it would be less than 2 million 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 would be up to 94 million plus additional statutory interest for late payment between end of June and the final judgment plus potentially arbitration cost.
So, again, we believe that no change of control occur and therefore the arbitration panel should not award any claim to the their claimants, will still be entitled, of course, to 75 million staggered milestone, if and when used. So, now back to the guidance.
CHF490 million all let's say 39 million [ph] so 418 million guidance. This means that with roughly 183 million paid in H1, this would mean that we would -- we will spend $300 million in the second half of 2020.
First half explained, there understand in Q2 due to COVID-19 crisis, and this should be spending nature -- most of it should be spending nature in H2. We also plan for some significant drug substance and drug product to supply around 25 million daridorexant.
In order to have enough finished product for the launch of daridorexant starting with U.S. We also plan for significant increase with some commercial or marketing and selling expenses fixed, but also variable, it's another 25 million in order to really prepare the market for the launch of daridorexant.
And we have another bucket, which is a long 20 million where we are preparing for the Phase III of our main Phase II assets i.e. Cenerimod and Selatogrel.
So, yes it looks like a huge spend, the 300 million looks like a huge spend into the second half of 2020. There's a catch up due to the lower -- due to COVID-19 into your first half, and also some one-offs in order to properly prepare as the launch of daridorexant and to supply with finished products.
With this, I hand over to Jean-Paul for his concluding remarks. So, operator please next slide.
Jean-Paul Clozel
So, slide 18. So, thank you, André.
Thank you, Simon. I hope you have seen that the company is moving forward, getting ready for a 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 we 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 evidence, not only you will see the data of daridorexant, 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 clazosentan 10 in Japan. We are going to have the Phase II -- maybe the Phase II results of daridorexant in Japan, and lot of new information will come.
And so, I'd say stay tuned because it's going to be an exciting second half of 2020. Thank you.
Andrew Weiss
Thank you, Jean-Paul. So with that, we come to the end of our prepared remarks.
Next slide please. So, now we can go into the Q&A session.
Operator, please prepare the lines.
Operator
Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And the first question is from James Gordon, JPMorgan.
Your line is now open. Please go ahead, sir.
James Gordon
Hello. Thanks a lot for taking the questions.
James Gordon, JPMorgan. First question which is about orexin competition in J&J.
So, we recently saw that J&J sold their stake in Idorsia and that decision seems to come quite shortly after they got for votes daridorexant [indiscernible]. So two elements to the question, one is, how do you think daridorexant stacks up against?
So two based on what we've seen so far in insomnia with us competitor we should worry about. And also, I think they're quite bullish about directing for use in depression rather than just in insomnia.
Are you thinking about also doing daridorexant for depression? Could that be an interesting opportunity?
That was the first question. And the second question would just be on partnering.
So I know Idorsia also want to take the retail to market itself or maybe you'll see using some sales organization, but it tends have other assets in the pipeline. Do you still think you'd necessarily want to get everything yourself, but now that daridorexant significantly [indiscernible], could you actually say was something else we consider licensing to someone, or could you monetize other things like the connection with royalty stream?
So is there anything else that you might do more collaborative actions?
Andrew Weiss
Let me just summarize your question. So, on the one hand, competition in daridorexant environment you're looking for comments on what do we think about daridorexant 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 be inclined to partner out other things.
Did I summarize that correctly?
James Gordon
Exactly. On that other thing …
Andrew Weiss
Jean-Paul, do you want to take the direction, please.
Jean-Paul Clozel
I think you have a very good question, James, about depression and sleep because it was a choice we had, let's say, three or four years ago. Should we try to niche our product in to 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 their 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 daridorexant any day. There is no barrier and there is no reason why it 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 covered your indication in addition to all the other indications.
So, we always saw that there is no possibility to go to a niche first, but of course, because of our very good results, it doesn't exclude that though is that we cannot start study, but I don't think this will be registration study, but certainly scientifically valid study 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, first that gets a 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 daridorexant frankly, what we have seen it's on 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.
Andrew Weiss
Do you want to comment on our appetite for partnering other drugs than daridorexant?
Jean-Paul Clozel
Yeah. I think that's 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 then 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 Idorsia, we need either a very large partnership or no partnership.
Andrew Weiss
Thank you, Jean-Paul.
James Gordon
Thank you.
Andrew Weiss
Next question please.
Operator
And the next question is from Jameel Bakhsh, Barclays. Your line is now open.
Please go ahead.
Jameel Bakhsh
Hi, everyone. This is Jameel Bakhsh from Barclays.
I apologies if I missed this in the call. But can you firstly remind us of your timing estimation just for clazosentan REACT study and on aprocitentan Phase III as well.
And then two more questions. Firstly, could you outline the potential implications that's your daridorexant commercial spend will have on the company's capital requirements.
Do you expect to raise more funds? And thirdly, what's your long-term vision for your subsidy, which now holds the full amounts of Vaxxilon and are there any R&D projects of interest that you might want to call out that are going on in that?
Thank you.
Andrew Weiss
Okay. Thank you, Jameel.
I understood your second and your third question. So, what are additional funding requirements and how does Vaxxilon potentially impact going forward?
Those are two finance questions. I would refer those to André.
Could you repeat your first question please?
Jameel Bakhsh
Sure. It was just an update on your timing estimation for the REACT study for clazosentan and on aprocitentan Phase III.
Jean-Paul Clozel
Okay. So REACT is -- we started and 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 we starting 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 three months of follow-up, so that the beginning of 2022, we should, but it all depends on -- of this COVID crisis.
Aprocitentan, it's moving well. We are opening a lot of new centers because we really want to compensate for this COVID-19 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 REACT and aprocitentan during -- of course the patients continue to be treated during this COVID crisis or a safety assessments were continuing doing 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, aprocitentan works on blood pressure, safety is always a very important element to be informed.
Andrew Weiss
Thank you, Jean-Paul. André, do you want to pick up on the funding requirements in Vaxxilon please?
André Muller
Let me start by a smaller one, Vaxxilon. Yeah, if you -- as you've seen we acquired minority 26% equity stake and also subordinated debt of 12 million for -- not from 1.5 million.
And we also terminated this Max Planck around synthetic carbohydrate vaccines. Now, we are -- so we fully integrate Vaxxilon in our drug discovery organization.
And two programs on going one on [indiscernible] and that will require some more funding to the end of the say Phase I around 10 million to 15 million. And if we enter in Phase II then the minority shareholders would be entitled to an amount of 3.6 million, but only if one -- for both would enter into Phase II.
You are right, we are not a vaccine company. We believe that if we have a compelling result after Phase I, we should seek for a partner for research to assets and maybe all sorts of new power developed by Vaxxilon vaccine.
So that your third question. Regarding the second one and the funding gap, yes, we see 330 million.
We have strengthen the balance sheet as Jean-Paul said, this also allows us not to take office from a potential collaboration if we believe there 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, we got some T channel blocker and clearly also ahead of the launch like one of daridorexant that will require or set up commercial organization and the pre-launch marketing and selling expenses.
Yes, we are definitely not funding that’s breakeven. Here we want to remain nimble and to see and if and when we want to raise cash either through equity capital markets or equity linked capital markets.
We also alluded to royalty monetization deals. You have an ideal candidate now with 8% revenue sharing.
We are entitled to regarding ponesimod and of course, out licensing deals with hopefully upfront payments and sharing of the development costs that we also -- we use with funding gap. So, yes, we're not funded until the breakeven, so we will need -- in one way or the other, we need to raise more cash
Andrew Weiss
Thank you, André. Thank you, Jameel.
Operator, next question, please.
Operator
Yes. The next question is from Ram Selvaraju, H.C.
Wainwright. Your line is now open.
Please go ahead.
Raghuram Selvaraju
Thanks very much for taking my questions. Just two very quick ones.
If we look at daridorexant and the commercial considerations for this molecule, if you're thinking that if you were to pursue the commercialization of daridorexant 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 daridorexant's commercial chances by having it be paired additional product?
Andrew Weiss
Thank you, Ram. Simon?
Simon Jose
I’ll take that. I mean, if you look at it purely through a financial lens, often people conclude having a second product clearly allows you to amortize the cost of the salesforce.
Conversely, we also know that when people are very focused on one disease area at one product, they actually way more effective. So, right now, when we launched daridorexant with the salesforce, it will just be carrying daridorexant.
If in the future, that is a call for other primary care support for a future asset then clearly we can bought that into the salesforce, but when we launch it would just be with daridorexant.
Raghuram Selvaraju
Okay. And then just very quickly on -- just a clarification question on the timeline.
Is the revised timeline or the timeline that you talked about today of mid-2022 taking into account sort of a full resolution of the COVID-19 situation that it's impact that you have seen so far on enrollment, or are you assuming sort of continuation of the COVID-19 impact throughout the course of next year? Just wanted some clarity on that, please.
Thank you.
Jean-Paul Clozel
Yeah, 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 center 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 a continuation of the crisis.
The question, of course, is which geographical area is it going to get worse or better? Some studies, for example, Lucerastat maybe more European studies where we can really recruit patients in Europe.
In Japan, we have also done the Lucerastat study it’s possible, but some -- for some disease U.S. is very important.
And the U.S. surprisingly -- in my mind surprisingly is in bad shape for the COVID crisis in the present time.
Andrew Weiss
Thank you, Jean-Paul. Thank you, Ram.
Operator, next question, please.
Operator
The next question is from Graig Suvannavejh, Goldman Sachs. Your line is now open.
Please go ahead.
Graig Suvannavejh
Yeah. Thanks.
Good morning. Good afternoon.
Thanks for taking my questions. I've got two today.
The first, I really want to go back to the Phase III data for daridorexant and the plan to pool the data from the two 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 two separate positive Phase III studies, or is it pre-specified that you could pull the data together in order to have an integrated view of the efficacy of the product? So that's my first question.
And then my second question really speaks to the commercialization efforts around daridorexant. 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 third door to the market and differentiation versus the other two doors.
I'm just trying to get a better sense of how the company is thinking where the riddle can really differentiate not only versus other doors, but just generally in the market. Thank you.
Andrew Weiss
Good questions, Graig. Thank you.
Jean-Paul, do you want to take the one on the …
Jean-Paul Clozel
Yeah. I will take the one and half of the second half -- I will 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 is 25 milligrams doesn't need the pulling.
So pulling is just going to precise for the FDA the extent of the effect, because we have a very clear conformation of how much is the 25 milligram efficacy. There is no doubt that the 25 milligram works, and there is no doubt that the 25 milligrams has an effect on the functioning.
Just for your information, 10 milligram, which aprocitentan, which was approved by the FDA has never been tested in Phase III, never. So, the FDA doesn't really want to have two studies.
They can even approve those, which has never been tested. They want to know -- 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 as they ever had with the sleeping agent, where we know that the 10 milligram really has the minimum effect, this is a very small effect. Why will 50 milligram is fantastic, get everything we want and where 25 milligram is between the two.
And frankly, I think that with that -- and with the incredible safety, which is very interesting because 50 is even -- I would say at least I say for 25. So really, I have absolutely no doubt that the FDA will be very happy to see these data.
Now, of course, the pulling 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 is a third of the thing. They are 20 generics or 30 generics company.
The most important is what is really -- do you add 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 so much.
We made 30,000 products in order to get this one. And frankly, it was so difficult because you need the perfect pharmacokinetic, 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.
Simon Jose
Yeah, thanks, Jean-Paul. And there's no doubt that just because we're another door, they are very different in that TK profile.
You only have to look at the dose response we get on efficacy and the lack of dose response we see with adverse event profile that it's a break different [indiscernible]. In a way, I think that flips into the access point because we're obviously aware that we're entering 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 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, need 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 not be a barrier to us being successful.
Jean-Paul Clozel
Also, as we say, the preparation, the pre-marketing, the market access as was mentioned, there are lots of other activities. A launch is a huge enterprise.
And I would say the most important sentence I tell because you are going to ask me the experience of people who have made successful launch, because you cannot invent what is needed, that’s going to be large. And I think that we are -- we have a good team and really we have -- the most important is a fantastic product.
Andrew Weiss
Thank you, Jean-Paul. That satisfies your questions, Graig.
We've come to the top -- operator, are they more questions?
Operator
We do have another question from Nick Nieland, Citi. Your line is now open.
Please go ahead.
Nick Nieland
Thanks for taking the questions, they're quick one. So, I know that the second door to the market looks to have been launched at a price discount to Belsomra and I wondered whether you could comment on whether you think the profile you've demonstrated for daridorexant would command a price premium.
Secondly, on daridorexant, 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 million cash burn for the second half of 2020.
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 million as a run rate or will that be lower?
Thank you.
Andrew Weiss
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.
André, do you want to comment on 2021 after Simon?
Simon Jose
Sure. Thanks Nick.
Good questions. You'll have obviously ask inside out [ph] why they'd gone 25% than suvorexant.
We certainly -- it’s early days for us to be talking about price, but we certainly plan to price the products. We call it into 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 activities as Jean-Paul referred to.
Jean-Paul Clozel
Just before we go to the finance and André maybe answer the last question, I'd 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 ASI product is a huge problem for patient to have half life 14 or 15 hours and huge variability into the absorption.
So, in order to avoid you 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, what would its ability, no drug interactions, because that allows us 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 to give less, and if you give less, you have less efficacy.
So, there is really a huge importance of the pharmacokinetic for these products. And you have to remember that -- and this is why we have a unique drug.
Now, maybe André can discuss about the -- we are not in the guidance of 2021 I suspect, but maybe André, you can give some answer.
André Muller
No, I always agree with my CEO. We are not -- definitely not giving guidance for 2021.
What is clear and -- was quite transplant. There are some one off in the second half catch up due to delays of COVID-19 and one off -- those are significant drug substance and drug products.
Those would be daridorexant plus some extra cost to prepare for Phase III of clazosentan and cenerimod. So, I would rather not take second quarter -- the second half as a basis for 2021, but you have -- we could spend up to 480 excluding [indiscernible].
So, 480 for sure next year we will go down in R&D because we finished some very expensive Phase III trial with daridorexant. And depending when we will initiate the Phase III for clazosentan, we don't have an impact.
And -- but for sure, so we're globally, I would expect to be a no, but for sure Simon will have to properly assess market by market, starting with U.S., not so much with commercial organization, but also with all the -- prelaunch marketing expenses which will be one-off, how much would be spent in 2021 ahead of the loans that should take place beginning of 2022. We see current timeline.
So not willing to make any commitments. The only thing I can tell you is that there will be a shift between R&D and G&A in a favor off additional cost in commercial, but that’s the price to pay in order to size what we believe is a huge opportunity in insomnia market.
Andrew Weiss
Thank you, André. Operator, do we have questions left?
Operator
We have one final question from Barbora Blaha, Credit Suisse. Your line is now open.
Please go ahead.
Barbora Blaha
Hi, thank you for taking my questions. I have two 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 the partner, et cetera.
And then other question is regarding cenerimod, do you plan to do the Phase III trial in -- with a partner and shared R&D costs, or do you prepare it to do it by yourself? Thank you.
Andrew Weiss
Okay. With regards to European launch, Simon, it would be nice to have a comment from you.
And on cenerimod the future of the Phase III Jean-Paul maybe.
Simon Jose
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 this edge 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 timelines than we see in the state. So, we do see an opportunity in Europe.
And 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 will -- for somebody to work with regard to salesforce support to do that.
But we will continue to remain in control of the core commercial capabilities and the asset across Europe.
Jean-Paul Clozel
For cenerimod, you have seen, I think that lupus becomes more and more exciting. I think that they were many candidates in Phase III.
You have seen some many fetters now recently. And therefore, the value of cenerimod increase, I think it's going to be -- we are closer to the result and it's going to be difficult for people to partner or 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 very large milestones or amount of money, and it's difficult to pay for such a milestone a few months, or before the results.
Andrew Weiss
Thank you, Jean-Paul. Thank you, Barbora.
Barbora Blaha
Thank you.
Andrew Weiss
Operator, I assume we don't have no more questions.
Operator
That's correct. We have no questions left.
Andrew Weiss
Thank you, Eily. So with that, we come to the end of today's first half conference call.
Thank you very much for your ongoing interest in Idorsia. And as Jean-Paul said, it is going to be a very busy second half, so stay tuned.
Operator, please close down the lines.
Operator
Ladies and gentlemen, thank you for your attendance. The call has been concluded.
You may disconnect.