Galapagos NV

Welcome all to the audio webcast of Galapagos' H1 2022 results. I'm Sofie van Geestel, Investor Relations, representing the reporting team at Galapagos. This recorded webcast is accessible via the Galapagos website homepage and will be available for download and replay later on today. I would like to remind everyone that we will be making forward-looking statements during today's webcast. These forward-looking statements include remarks concerning future developments of the pipeline and our company, and possible changes in the industry and competitive environment. Because these forward-looking statements involve risks and uncertainties, Galapagos' actual results may differ materially from the results expressed or implied in these statements. Today's speakers will be Paul Stoffels, CEO, and Bart Filius, CEO and President. Paul will discuss the highlights of H1, and Bart will go over the operational and financial results. You will see a presentation on screen. We estimate that the prepared remarks will take about 20 minutes. Then we'll open it up to Q&A with Paul and Bart, joined by Walid Abissat, Chief Medical Officer, and Michele Mantou, Chief Commercial Officer. And with that, I'll now turn it over to Paul.

Thank you, Sophie, and welcome to this first half review of the year. Let me say, I think we have made very good progress and we'll hope to give you a good insight on where we are with the company. We'll focus on the full half year, but first on Q1, you probably have seen that and remember that the Icelica was approved in the UK and Japan for UC and that you started on all JAK inhibitors and we'll come back to that later on. That review is ongoing and we'll expect information by the end of the year. In Q2, a lot of changes happening in the company. First, I joined on April 1st as CEO of the company, joining a team which I know for a long time and with a lot of enthusiasm working together with the team on how we can create a very value-creating pipeline at the company. First, I must say we are very proud on the Icelica. We got the reimbursement in 15 countries for RA now, six countries for UC, and you will see that in the review of part where the results of that are following on a European sales. And I think we are all very happy about that and very proud that we can progress the iSeleca in this way. In the pipeline, we kicked off a whole program of reviewing the pipeline and a capital allocation accordingly. And so we made the move on acquiring two companies, CellPoint and Abound, in order to move into oncology. We moved in a very exciting part of oncology with CAR-T, both with new CAR-T products, but also with a very transformational platform where we can bring CAR-T to the point of care, and we'll highlight that in the presentation, which we are now in clinical trials testing it out. But on the other hand, we also made the decisions to... to discontinue early-stage programs in order to focus our resources on the most value-creating programs we have in the organization. If you look at the pipeline, and you will see here what we are working on, first we have the JAK inhibitor, filgotinib, with very good results in our ANUC in Europe. but we expect data from Crohn's disease out of us phase three in the first half of next year. And that will then hopefully be given additional accelerated boost to the sales in Europe as this type of compounds are very highly needed in the market. We are starting with a tick two, three, six, six, seven, a study in dermatomyositis. We'll come back on that. It had good results in the phase one. And building on that, we have chosen a selected indication to bring it into the clinic. We are still further evaluating our SICK compounds. The SICK3, 4-3-9-9 is in healthy volunteers. And we are looking for the data before deciding what indication and where we are going with that. And then the several SICK compounds in two entry and previously combinations, we have now decided to look at what can one bring, SICK2 bring, and see how we can move that forward. And that is still under evaluation by our teams. As indicated, the CD19 CAR-T is now in phase two clinical trials, come back to that, and then we have committed to make three next-gen CAR-Ts to a bound bio in the next three years in transformational CAR-T products. Still one product which is in preclinical in fibrosis, 623, 4605, and then the kidney program. We also expect results first half of next year and decide then whether we go forward with that or not. We discontinue four compounds, 555, 3121, and then 4716, 4586. As you see on the slide, the first two are in inflammation. The second two are in fibrosis. And both were through a deep review and on a scientific review, but also a prioritization exercise. And the 4716 and 4586 are compounds which we have returned to rights back to the original owners of the company. The 4716, we continue still to evaluate that. Sorry, I missed here. 4586, we are continuing to evaluate in other indications, but not anymore in fibrosis. In dermatomyositis with TIK2, we chose a selected indication of a high medical need to explore the activity of TIK2. The compound 3667-TIK2. The compound shows clinical activity in psoriasis in Phase 1b, and was well tolerated. Dermatomyositis is a chronic autoimmune disease of skin and muscle with an estimated incidence of 2 to 10 cases per 100,000, and the key drivers for it are the type 1-3 interferons as well as the IL-23 pathways. It's a severe disease with muscle weakness, rash, and papules, and we hope to start a study before the end of the year. That is the aim and the teams are working on doing that. So that's a new indication with the TIC2 we are starting by the end of the year. A few words on the acquisitions of SellPoint and Abound. As I already said, we would bring with SellPoint and Abound a disruptive CAR-T manufacturing where we can go to point of care with a seven-day vein-to-vein process with a clinical stage pipeline. The acquisition of Abound is a complementary to that which can, for us, and we are working with Abound on the next generation CAR-Ts, but it also brings us broader biological capabilities in antibodies. That all supported by the fully integrated pharma biopharma capabilities with our end-to-end development capabilities at Galapagos, as well as our commercial presence in Europe today, and hopefully future with this product globally. There is still a very significant unmet need in heme CAR-Ts as of today. And there are three very important points with CAR-Ts. One is access, second is durability, and three is the toxicity. And with that approach, we hope we can address each of them. First, the manufacturing constraints and logistics. People need to wait. There is limited access on the global scale with the centralized production. And often, valuable time gets lost for patients with high dropout rates leading to mortality. And that provides an opportunity to accelerate onsite with a seven-day vein-to-vein, access to CAR-Ts on a very large scale with a very high added value to patients and physicians and hospitals to be able to manage their own CAR-T process in the hospitals and priorities for patients. Durability, high relapse rates today, And the second one, the use of humanized antibodies and CAR-T constructs as we are working on, would probably go to re-dosing. The current or most marine constructs and therefore re-dosing is not working. The high relapse rate, most likely we need multiple binders, multi-specific. and that could prevent the relapse rate and therefore provide durability. Toxicity, as we use fresh cells going into the system but also going out, meaning there is no freezing in the whole process, the cells are much more viable. We have still proved that it really is a differentiator, but it's highly likely a differentiator on how the cells can can be produced as well as can be given to patients. And hopefully with that we can prevent toxicity and with that reduce intensive care hospitalization at hospitals. So there's the opportunity there is for us to show the differentiation both on the CAR-T construct but also on the seven days vein to vein point of care model in the hospitals. At the cell point, Here in all the demonstration, if you compare seven-day vein-to-vein versus the 15 to 17, even up to 30-day process in the centralized where transportation takes time, freezing in two directions, and then, of course, the central GMP facility, which is a huge investment, we can all go around that by using a scalable point-of-care system. incubator combined with the cassette. And on the right side, you see how we do that with an automated, rapid, efficient, and scalable tool, production incubator, including integrated quality control and release. And that will allow us at the moment, and we do it consistently in the hospital in clinical trials now, seven days, fresh cells, vein to vein. Next slide. The collaboration, which is also a very big enabler for us, is with Lonza, a very experienced CMO who has developed this tool, and it's existing out of two elements. One is the Cocoon incubator, and second is the cassette, which is a fully closed cassette where the production of the CAR-T is happening. What CellPoint has done is built an accelerated platform around it, which is a quality incubator quality system and data system which monitors the whole process as well as collects all the data. And with that, we succeed now in providing quality released products within hours after the end of the process. On the extreme right side, you see that this will also be provided in multiple units for hospitals with many CAR T production needs And there, very limited space is needed in a GMP environment to be able to produce this type of the CAR-T and use this type of systems. It's regulatory compliant with FDA. It has the CE mark, highly automated, and it is very well proven as a manufacturing tool today. Abound brings us a highly experienced team, and that was very much needed as we were not in oncology, with a proven track record of multiple industry partnerships, both in CAR-T, in antibodies, but also in ADC. And in antibodies, they did both in infectious disease and oncology, multiple partnerships. And so with that, we acquired a research team, which allows us to state that our goal is we will bring three differentiated CAR-Ts and three different indications in the next three years. We are aiming for one per year. With that, we use their fully human, multi-specific, and multi-functional CAR-T capability. We have access to bispecific antibodies and antibody drug conjugates, and that will help us Also innovating with our chemistry here at Kalapagos, where we can combine the biology with the chemistry. And so with that, working on improved efficacy and hopefully preventing cancer relapse. With the two acquisitions, we brought very quickly end-to-end oncology capabilities in-house, and we are building on that and strengthening it with new talent, which we are bringing in. The phase one study, The one-two-A study with the CAR-T in Cocoon is going well. We are enrolling patients at the moment in the Netherlands, Belgium, and Spain in the part one of the study. We have now five enrolled in NHL, four in CLL, a very robust program. We continue to be able to do it in seven days, vein-to-vein, in the clinical trials, in the hospitals locally produced. Part one is a dose escalation where with 15 patients at three doses going from low to high, yeah, from a very low dose to an extensive dose. And then followed with that is the dose expansion where we include 30 patients and that will lead them to the conclusion at the dose we get out of a dose finding as a pivotal phase two dose. And the low-dose cohort is now completed for both trials, and we'll be able to present data in the upcoming meetings before the year end. With that, Bart, I would like to give it to you and go over the financial results. Thank you. Thank you, Paul.

And good morning, everyone in the U.S., and good afternoon in Europe. Happy to be with you this afternoon on Friday. and give you a bit of background on our performance in the numbers, as well as our commercial operation. So if we can go to the next slide on Gia Celica. As a reminder, it's our first marketed product. We are also the marketing authorization holder since we've taken that back from Gilead. We are reimbursed in 15 countries in rheumatoid arthritis and now six countries in ulcerative colitis. And we anticipate that the vast majority of Western Europe is going to be reimbursed in UC by the end of this year, so that process is going well. And I'll say a few words about how the drug is received and that indication in a few seconds. And lastly, noteworthy for everyone, we'll have phase three top-line data in the first half of next year in Crohn's disease, and that should hopefully enable us to make an extra indication part of the life cycle of Jaiselica. Maybe first in the performance in the markets, and on the next slide you see the quarterly sales as of basically the very first quarter when we were in the markets at the time, maybe in Germany in Q1 2021, up until now in the second quarter of 2022, where we've reached a level of €21 million of revenues in the quarter, with a good quarter-on-quarter growth compared to the first quarter of the year. but actually a good straight line extrapolation of where we've seen the growth in the fourth quarter of last year. And with that, it's becoming clear that we can be a bit more optimistic on our anticipated full year sales. Actually, we take an additional 10 million on the guidance. We go from 65 to 75 to now a range between 75 and 85 million euros, of which the first 35 has been realized in the first half year. There's also a milestone that we got from SOBI in the second quarter, second milestone this year, for starting countries in Eastern Europe, so also that part of the business is starting to gain traction. So very pleased with that. On the next slide, a bit of detail, as I promised, on the UC. Here we see essentially what our market share is on the left in the German market in UC in two, three different lenses. First of all, we look at the dynamic market share, obviously. So these are patients eligible for a new treatment option. Our overall market share is 12%, but noteworthy is that actually in the switch category of patients, we are the leader in terms of initiations with 25%. And this is not just among JAKs, obviously, but this is across classes, including biologics, including small molecules. So this gives you flavor as to what the unmet need really is in this indication. Reflected again on the right, still the remission rates with patients are truly suboptimal in UC. Many therapies still require patients to remain on corticosteroids. The treatments are complex and safety concerns persist. So we think that with GYSELICA, we have a very good proposition to address those four elements of unmet need in ulcerative colitis. And that's also, even if it's early days in Germany, but that's also reflected in the pickup that we get in Germany. Then, if I move on, and obviously, Michele Manto, our Chief Commercial Officer, is available for any further questions on the commercial side. But if I move on for the financials, our cash burn for the quarter, for the half year, I should say, has been 217 billion euros. That is our operating cash burden. As usual, we exclude a couple of elements therein. First of all, a little bit on word exercise to the far left. We had a positive 70 million currency translation effect. As you know, we keep a portion of our cash balance in dollars. The dollar has appreciated against the euro. As we report in euros, we get a translation effect which is favorable by 70 million for the first half of the year. And then we also highlight the acquisitions, sell point and about bio. We actually were able to sign and close them at the moment of announcements. So the cash that we spent on that in the second quarter at the end of June was 133 million euros. And that remains then with the cash burn and operating cash burn of 217. Our full year cash burden and our guidance toward that full year cash burden We have increased by 30 million euros. I think I pre-announced that at the end of June when we said that through the acquisitions of CellPoints and the balance, we would also incorporate some additional operating costs. At the time, I mentioned 25 to 50. We've landed now at a 30 million increase of our range, which brings our range between 480 and 520 billion euros. And that's all against a very healthy cash balance at the end of June of 4.4 billion euros. On the next slide, maybe the highlights on the P&L. I won't dwell on that too long, but revenues and other income, 290 million euros. A good portion of that is still driven by revenue recognition from both the field government and the larger Gilead transactions, both of them 450 in the quarter. And then they're, sorry, for the half year. And then the sales, 35 million royalties of 6 million which are related to the japan business from jai seneca and the milestones for uh for sobi there as well the operating costs are a bit higher on the on the sales and marketing side the big effect there is that in the year 2021 we were still sharing our expenses on commercial with gilead for 50 that's no longer the case in 2022 So as a result, NetNet, that sales and marketing line, is going up. And the second element noteworthy for the first half of the year is the impairment that we've taken for the transaction with Oncor Irony, which relates to the molecule 4716 that Paul was describing before, which we've handed back to that company. And we've taken an impairment of 27 million, which is included in the R&D line of our P&L. Our net loss is 32 million negative, a good, obviously, effort by the financial income here of 68 million to protect our bottom line, which is to a large extent driven by currency effects. Then I conclude with the last slide. Our strategic priorities, we start when we go into the second half of the year to give a bit of reflection on, let's say, the later years. But FIRST 2022 was still upcoming. We're still in the midst of our scientific and strategic review. So a number of discontinuations that we've announced are a result of that. But there's more work, I think, that we are doing in terms of how to organize for our future. And we are also, with this presentation, inviting you all to join an R&D update, the Capital Markets Day, on the 5th of October. that we're going to be holding in the US, where we're going to give more details about this, about the outcome of this scientific and strategic review. We also have very much on the agenda the desire to execute additional business developments. We believe the sell point and abound transactions were very powerful, but there's more we think we want to do and need to do to restore our pipeline in a general sense. And we're obviously also focusing on making sure Jaiselica remains a success and continues to grow. Our guidance numbers are already talked about, so those are there for reflection. And then for the later years, really the key objectives for us as a company, make sure we get Jaiselica to where we had promised it to be, which is a half a billion peak sales number in the EU. we want to make sure we develop a catalyst-rich pipeline across therapeutic areas. So again, there's more to be done there, both through internal innovation, but especially also through external innovation as well. And then thirdly, a focus on building our point-of-care cell therapy network with multiple differentiated CAR-Ts is a core priority for us in the outreach as well. But again, more to come on the R&D updates on October 15th. With that, I give it back to Sophie, who can guide us through the Q&A. Thanks, everyone.

Thanks very much. That concludes the presentation portion of today's audio conference call. I would now like to ask the operator to open up the line for Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Once again, star 1 and 1 if you would like to ask a question. We will now take our first question. Please stand by. And your first question today comes from Brian Abrahams from RBC. Please go ahead, your line is open.

Hi, good morning, and thanks so much, or good afternoon as well. Thanks so much for taking my question. I guess bigger picture, you've announced some deprioritizations within the pipeline. I was wondering if you could maybe talk a little bit more about the overall rationale, what you're looking for in the assets that you're going to be moving forward, and I guess sort of bigger picture, how much this reflects your overall strategy in terms of what indications you'll be focusing on, or is this more of an asset-specific decision process? What should we be looking for going forward as you continue to prioritize the pipeline? Thanks.

Yeah, let me give a high-level answer to this. First, we will focus on real added value, which is very logic, but addressing medical needs with highly differentiated compounds. And then look at the competitive market on where are we on a global base and see then how we can, in that market, make competitive products which create significant value. For that, you need to have a focus, and definitely a focus will continue to be on inflammation. As you have seen with oncology, we entered into oncology with specific technologies, specific indications, and we are going to further expand that in the future probably to Cartesian solid. We also have a good, we are building a good capability in biologics and small molecules in oncology, so oncology will be a significant focus, but again, evaluating very careful how we, as Galapagos, can make a difference with molecules which are differentiated and bring value to patients and then also to our shareholders. We continue to evaluate fibrosis as a part of our portfolio, but carefully looking at whether, from a capital allocation perspective, that can continue to be part of our portfolio as it is a long-term, highly challenging and highly... highly challenging environment with limited validated targets and limited validated endpoints. So we'll carefully look at therapeutic area focus, good assets within that, and then look at the timeline and how we can deliver a pipeline in the 25-28 timeframe, because that's the goal here. If not earlier, we hope to be earlier.

Got it. Thanks so much.

Thank you. We will now take our next question. Please stand by. And your next question comes from the line of Jason Gerbery from Bank of America. Please go ahead. Your line is open.

Oh, hey, guys. Thank you for taking my questions. First one's just on 667. Just curious how you see your molecule potentially differentiating from Pfizer's dual TIK2, JAK1, which is moving into phase three for dermatomyositis. I know it's early days, but I'm not sure if there's anything, you know, even there in terms of, you know, your approach versus their dual inhibition approach or any pharmacological differences that you think are important. And then, On the self-therapy front, can you talk about the investment needed, how you plan to scale that over time as you get important de-risking data in the next year or so?

All right. Thank you. That was the first question on 3667, and then I pass it on to Paul. Regarding the compounds from Pfizer, that's JAK1, TIK2. I think there's been some data with it showing this profile of JAK1 TIK2. However, in our case, 36-TK7, our molecule is a selective TIK2 inhibitor, and I think that will play a significant different profile, particularly around some of the safety questions that that one has to take into consideration here. But at the same time, there's an element of specificity in dermatomyositis in blocking interferon alpha. And that's not very clear how an additional JAK inhibition will add into it. Whether the compound from Pfizer will have the right risk benefit profile will have to be judged based on the results of the data. In our case, 36-67, we have shown in psoriasis that we have a clearly active compound demonstrating, again, in line with the TIK2 inhibition. In addition, we have seen evidence of pharmacodynamic activity at the doses that we have used in phase one. These were demonstrated in ex vivo assays. And the dose that we are electing to test and move forward has demonstrated these positive profile on pharmacodynamic engagement. but also safety and tolerability profile. So overall, we feel quite positive, particularly about the selectivity of Arctic2 and the likelihood of success in the syndication. And based on that, we're proceeding with our Phase 2 study. With that, I'll pass it on to Paul.

Well, with regard to the investment in the CAR-T over time, there are two elements to this. Our collaboration with Lonza offers us a That's a very stable existing platform which is scalable where we don't need to deploy hundreds of millions of dollars before we can even start working in the market. So it's a collaboration with Lonza. During development, we will focus on, we have to, of course, cover the investment for clinical trials, the development of the product. But as the platform is stable and functions very well at the moment, we have validated with volunteers but also with patients now. We think that that provides us a competitive time in order to get with new CAR-Ts to the market. We will have a scaled system in hospitals where we can have a very competitive way of doing clinical trials, very attractive for hospitals to collaborate in that. So the combination with the existing Lonza platform where we can build ourselves on, as well as the capabilities we've built step-by-step in the different indications, will give us a functioning instrument to run several clinical trials in parallel. I think the speed which we can take here, as well as the collaboration with Lonza, will give us a very good cost-effective way of getting to clinical trials in this space.

Great. Thanks, guys.

Thank you. We will now take our next question. Please stand by. Your next question comes from the line of Charlie from Bernstein. Please go ahead. Your line is open.

Hi there. I'm Charlie from Bernstein. Thanks for taking my questions. So firstly, on the TIC2, I'm interested to hear what other indications you're discussing internally. and if you'd wait for this phase two readout before starting any other trials. And I'm also wondering if you think it makes a difference to go for a different indication in phase two versus the competition for the selective tick twos, if they can then use you as a proof of concept. And then secondly, I've noticed that your year-on-year spend for Toledo has sort of halved in the R&D line. So should we read anything into this in terms of your confidence in the program? Thanks very much.

Thank you, Charlie. I'll take all three questions. So on the TIK2, in order to decide the way forward, we have actually taken a step back and taken a look at the regulatory environment, particularly as it pertains to psoriasis and the fact that TIK2 is a member of the JAK family. And we had questions whether the FDA is going to be quite liberal in interpreting this connection between TIK2 and JAK1. We felt that going into psoriasis is going to be a bit hasty, and we would rather wait for the PDUFA date, which is upcoming towards the end of September for the BMS compound. We were evaluating ulcers of colitis as another indication, and you've seen data from Ducra, which were not positive, and that's giving us pause. We're discussing still internally with our teams, but also externally with experts. to see whether there is a way forward, whether we do understand why TIK2 inhibitors did not perform in that indication. There could be other reason for Ducra in particular that might not essentially read out for the rest of the TIK2 inhibitors, but we're still evaluating that process. Then we looked at indications where there's good rationale for essentially based on mechanism of action. good rationale for success, and we came out with essentially dermatomyositis, which is interferon-driven disease, and we have clear data from our compound of our blockade of interferon-alpha. Another indication that is on our radar screen still is lupus, and we were very happy to see the recent data from Ducrevacibinib showing positive lupus data. So in the context of evaluating our overall investment in the pipeline, as we've been talking about, we will be discussing moving forward with lupus with 3067. It's on the agenda. We will not necessarily having to wait for the results of dermatomyositis before we move forward, but those were options that will be on the table for us to discuss. Talking about the Toledo program, I think it's no secret that we're evaluating this, as you've heard. we need to take stock of the data that we had. We had one compound in particular move forward with clinical studies that were small in nature, but they generated data that have mixed results. If you remember with 3970, the 623 inhibitor, we had positive results in psoriasis, but they were not competitive. There were some encouraging data on objective measures on all sorts of colitis as well. but the exposures that we achieved with that molecule were not good enough to test the hypothesis. We have a series of other molecules that have been in late-stage discovery, and we're trying to evaluate whether we will have enough of a therapeutic index to go forward, whether selectivity for SIG2 versus SIG3 is the way to go. And we should be able to speak more to it later in the year when we discuss further our R&D a platform, but I think it's fair to say that we're not going full steam ahead as we were before. We slowed down to be able to fully evaluate this and take the appropriate decision in light of the totality of the platform. Having said that, I still think we are the leaders in understanding the SICK2-3 or actually the total SICK inhibition and their role in inflammation. and I think we will be in a better position to bring one to patients if there is a positive risk benefit that we conclude from this. So I think you're gonna have to be a little bit more patient with us, then we will come back with more details and rationale for the way forward. Thank you.

Thank you. We will take our next question. Please stand by. And your next question comes from the line of James Gordon from JP Morgan. Please go ahead. Your line is open.

Hello, James Gordon from JP Morgan. Thanks for taking the questions. A couple of questions, please. First one was dry silica. So I saw you took up this year's guide, but you haven't increased the EU peak sales. So is it the case that your longer-term sales expectations haven't changed at all? It's just consensus with being overly cautious in the initial modelling? Or is the possibility that the peak sales could be higher now? So how are you thinking about that? The second question was on the long-term collaboration in CAR-C. How do we think about modeling the profitability? So let's say there's 100 million euros of sales. How much of that actually could end up as profit for Galapagos versus what actually goes to long-term? Can you help us think about how to model that properly? And then third and final question is for the October 5th R&D event. In terms of what we'll actually be able to hear at the event, is there going to be significant new clinical data? Is it more about digging into things that you're planning to start? and might you have been licensed any further assets by then that you're going to talk about? Can you elaborate a bit on what we're going to find out at that event, please?

I think we got the first two of your questions. The third one we could not understand.

The third one was the CMD. Is there going to be significant new clinical data, or is it more about what trials you'll start, or maybe talking about further assets that you're going to enlicense? What new things should we look forward to at the R&D event?

Okay. Can I take a couple of those questions, Paul? Absolutely.

So first question, James, on your peak sales, on our peak sales expectation. I think it's a bit too early after a great quarter and an upgrade of our guidance for the full year by 10 million to then immediately the peak out there, which is in 2027. So I think that's still a bit too early. But we are obviously very pleased with what we're seeing in terms of the performance this year, both in qualitative sense in terms of how it's perceived in the marketplace and quantitatively in terms of what we are seeing in terms of . So happy with that outcome. On Lonza, on how to model that, actually at this stage we're not giving out details on the distribution of share and royalties between us and Lonza. But what I did say as part of the announcement in June is that we believe that including the royalty that we will pay to Lonza, we believe that we have the distribution of share and royalties between us and Lonza. But what I did say as part of the announcement in June is that we believe that including the royalty that we will pay to Lonza, We believe that we have a very differentiated and very competitive cost of goods position with our sell point approach. And I think a good opportunity in the market to compete with others with centralized manufacturing on a cost point of view. So I think that's not exactly the answer I know that you would love to have in terms of details, but that's I think as far as we're okay to go right now. And then last point on the capital markets day, I think it's going to be a very interesting day. I think we're going to go really across the company in terms of giving perspective on where the strategy of the company is going in terms of indication choices. We're going to give insights in our cell platform, cell therapy platform with also some external speakers. We're going to give some insights into our thoughts around dermatomyositis. We're going to also do a deep dive on GI Celica and the in-market performance of GI Celica. So I think it's going to be an extremely interesting and rich day. Let's say the big data set that's up and coming from Crohn's obviously is coming in the beginning of next year. Therefore, that will not yet be available on the October 5th when we do the capital markets day.

Thank you. Thank you.

Thank you. We will now take our next question. Please stand by. Your next question comes from the line of Matthew Harrison from Morgan Stanley. Please go ahead. Your line is open.

Great. Thanks for taking the questions. I was wondering if you could just give us a little bit of a view on how far you are through the portfolio review. Obviously, you discontinued four compounds here. Just how broad should we be thinking about and how much more work do you have to do at this point to sort of understand where you are? And I guess secondarily, obviously, you've made the pivot into oncology. Should we be thinking about pivots into additional therapeutic areas or do you think the therapeutic areas that we know about now are set?

Yeah, let me say we have the internal review where we look internally, but we have also a very extensive external review on what business opportunities we can bring in at the moment. So it goes in parallel. We're looking strategically what are the assets and the portfolio prioritization internally, as well as looking at additional potential short-term acquisitions as the market now is very Many biotech companies are looking for partnerships now, and it's a great opportunity for us to evaluate that. We'll mainly focus at the moment on oncology and inflammation. In the past, we have said we are looking at select infectious disease opportunities if they would be there, but oncology and inflammation will be the key. and we'll evaluate internally fibrosis assets and see whether there are still compounds which are valuable and worth in a capital allocation. Where we are is like, let's say we are in the middle of the review. We are in the middle of the review, and one by one, this is the first reporting to you, and on the capital markets, they will be able to give you further insights on long-term strategy, both on oncology, inflammation, other assets in the company, as hopefully by then, but maybe not yet, next opportunities in acquisitions or licensing.

Thank you. We will now go to our next question. Please stand by. Your next question comes from the line of Phil Nadio from Cowan. Please go ahead. Your line is open.

Thanks for taking our question. Our question is on Jaisalco. Could you go into maybe a bit more detail about what drove the strong quarter-over-quarter growth? Was it specific indications you see versus RA or specific geographic areas? And then second, you mentioned the EU PRAC review coming out later this year. What is Galapagos' opinion on the potential scenarios for the conclusion of that review, and how could they impact Giselec's long-term potential? Thanks.

Hi, thank you. I'm speaking with Maureen. So I'll take the first question on Giselec and the quarter, and then I think I'll pass then for some conclusions on PRAC and Article 22 to Valid for some considerations there. So Yes, it's been a strong quarter. You've seen the acceleration. And actually, this comes from the different drivers indeed. So the launch of QC has contributed, especially Germany and the Netherlands are the first countries that had the reimbursement immediately after EMA approval at the end of last year. But of course, these are early days for the indication, so it's a very strong contribution. But of course, at a different level now to compare with Array, which is on the market now a year and a half. The other part of acceleration has come by the full activation of the geography. So we had countries like Italy and Spain, which have typically long reimbursement timelines. So they came really in online at the end of last year and still with a timeline which is very competitive. We benchmarked against the fastest JAX into national and regional reimbursement in those countries, and we really come very strong against those benchmarks. So that's been pleasant to see, and that's coming from strong stakeholder engagement planning across units and in the countries in the past two years, two, three years, when we started the pre-launch, so that's coming to fruition. Also, we've seen an acceleration in Germany, which is, of course, the largest country, I would say with the full integration after the transition from the Gilead teams, we've seen that also coming strongly through, also with better customer engagement after the lockdown period with COVID. So that to say that there's a strong dynamic we see, so that also brought us with confidence to increase the target for this year, seeing this dynamic to continue for the future. or the regulatory situation, Vanida, pass it to you. Yeah, thanks, Michele.

Look, it's difficult for us to comment really on the potential outcomes. This is a procedure that it has to take its course. We're working and collaborating with EMA and answering their questions. As you can imagine, none of this was a surprise. These are adverse events of special interest that we've been monitoring for years and been in discussion with the health authorities about them for some time. But at the same time, you know, PRAC has to go through their process, and we expect to have feedback by the end of the year. But before then, it will be really very difficult for us to speculate on potential outcomes. Thanks.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We'll now take the next question. Please stand by. And the next question comes from the line of Jaron van den Bosche from KBC Securities. Please go ahead, your line is open.

Yeah, thank you for taking our question. Congrats on the very strong performance. Maybe two quick questions. You know, with the expansion into more BD activities to the cash burn future, will that still be on target as was communicated in the past? And I'm now looking at 2024 and beyond. And then the other question is more on the CAR-T situation. where obviously by going through this decentralized approach, there'll be a lot of advantages that were discussed. Maybe could you say who would be the legal manufacturer of those materials? Would that be the hospital of Halapagos? And how will you manage the GMP requirements? Which percentage of hospitals do you see this or is the majority of hospitals that are using CAR-Cs to your knowledge, also ready for the GFP setting.

Let me take maybe the first question, Joon, on the BD activities and the implications for the longer-term cash burn. So, as a reminder of what we've shown in the past and is still very valid, was an overview of our R&D spend and our commercial spend. And for everyone on the phone, there was about 350, 150 in terms of distribution. And we anticipate still that Jaiselica breakeven can be achieved in 2024, resulting then in the R&D envelope that we were highlighting on those slides. Now, in all fairness, obviously, and I think I've made it clear several times that if we do meaningful BD and if we increase our expenses because of that, that envelope might change. It might obviously change. There's no full commitment to say the envelope is the envelope and we're not going to go beyond it because we want to make sure that we invest behind the right programs and we'll take that accordingly. More to follow on that front. Obviously, we'll give precise guidance for 2023 and then later on for 2024. And if BD evolves, those numbers will obviously also evolve, but we'll make sure we'll put good money after good projects.

Paul, you want to take, or should I take the question? Yeah, I can take the, as you say, It's a very attractive manufacturing proposal to decentralize, especially for the benefit of patients. The marketing authorization holder will be Galapagos, and we will be responsible for the release of the product. We will be responsible for the GMP requirements and training. at the hospitals and we'll have, because the system allows us to do that, we can do a centralized release based on the information we receive from the instruments around the world to check on quality and be able to release that. So this is the strong proposal of CellPoint. It's not just the local manufacturing, but it includes a fully integrated data system and quality control system as well as quality release that this will allow us, within the timeframe we can do it today, within three, four hours, to give a release after the product has been completed manufacturing. That is a very strong proposal from a time, but also from a GMP. We'll have to train, and that's what we do already. People in the hospitals who work with us on this manufacturing are trained. and will be inspected and there will be a quality system which manages all of that. But it's our responsibility in the end as marketing authorization holder, we are responsible for the product which the patients will receive.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Dane Leon from Raymond Games. Please go ahead. Your line is open.

Thank you for taking the questions. As we look ahead to the R&D day in October, how much can you just preview for us about your ability to unveil what the real compound library is at Galapagos and possibilities with targets that are not currently in your stated portfolio and the ability to go into new or novel indications? And the basis for this question is obviously early days for you, Paul, but, you know, the salt-inducable kinase portfolio has been many years in the making, and it still feels like to the majority of investors there's no proof of concept there, and it's a very high risk. And then TIC2 and the CAR T space are very competitive. So I think where the valuation of the company currently is within the eyes of investors, there still needs to be differentiated assets brought out of the internal compound library. And if not, and if they don't exist, then really there needs to be a more aggressive move on the BD front. you know, putting it all together, I guess, one, what's your conviction that there's still differentiated assets that are yet to be unveiled in the pipeline that we might see in October? And then secondly, what's your updated view on additional external asset acquisitions? Thank you.

Well, we'll give a full update on the status of the internal pipeline as we will have finished a strategic review. We can give some insights, significant insights on where we are going and certain new indications we'll pursue and especially also with our new capabilities in biological, in CAR T, we will be able to give you some insights on what the capabilities are to go into next We still have to decide how much we disclose from a competitive perspective, but you will see the capabilities. We'll be able to show some of the first results of at least from the live testing. We'll give you very deep insight in why we think that the CAR-T point of care is really differentiated, and that both from an efficacy, hopefully starting, we can't show efficacy data yet because we are not long enough in the study, but we can show the first biomarkers and the first safety results and whatever we have, and that will give you a good insight. Then we can give you timelines on by when, because with the CAR-T capabilities, we can go very fast on the next-gen CAR-Ts, and we can both bring in products from outside, and there is a lot of interest at the moment from people who are approaching us to bring additional compounds, which are not in our pipeline today, but in partnership to the market, and what we can bring from inside. And we'll also have a good view on what we can bring from the inside small molecule space at that moment. It's always difficult to provide prospects on business development opportunities if they are not concluded. So if we conclude them, we'll be able to bring them. But if you're not concluded, we can give an indication in what space we are looking, and we'll give a good strategy review But very clearly focus on extreme to an accelerated pipeline value creation over the next few years. That is the goal. Hopefully we can give you confidence in our strategy that we'll be able to deliver. Bart, anything to add from your side? Thank you. Thank you.

we will now take our last question please stand by and your last question today comes from the line of Rosie Turner from Jefferies please go ahead your line is open hi good morning good afternoon and thank you very much for taking my question and just one more on 36 67 if I may and just thinking about the border kind of market dynamics and endermitomyositis, sorry. Just thinking about how that plays out, because I think we've got ultimyrus in phase three, albeit not reading out till 2024, and the same, I think we've got an IG study coming from CSL also in the indication. So I'm just wondering where you see kind of TIK2s fitting in within the treatment paradigm, and then just if you could give us any potential in terms of the size of the indication in terms of kind of total revenue size? Thank you.

So maybe I'll tackle the first part and then Michele maybe you take on the second one around the commercial element. When we evaluated the space, we see a large unmet medical need. Currently what's approved on the market is IV. There's no oral treatment. And we believe that the mechanism of action for TIK2 inhibitor, particularly with clear effects on inhibiting interferon alpha pathways, should give us a very good likelihood of success in that space. I think commenting on other competitors who are moving into phase three, we haven't really seen very convincing phase two data, so sometimes companies take risk and move straight into larger indications. And we'll remain to see whether this is going to provide the right risk benefit profile at the end of those studies. But the studies that we had available and we looked at with positive data in terms of clinical efficacy that we can compare to, we don't think that we would be at a disadvantage and we think we have a very good likelihood of success there. We have to run the study and at the end of it, see if we have a positive risk benefit profile, but that's the 1st step that we need to do. And then we will, we will take it from there and I'll pass it on to Mikaela for the commercial.

Yeah, so this is an area of higher net need as Valid indicated. So, also the current standard of care is quite, quite limited. So that offers interesting price possibilities. I would say that now having a plan for the timing of this launch might be early. But what I can say about that is that the that's an area to fully build. So there's a high potential for market building with all the diagnose and treatment rates to be set and also to have the follow-up of the existing drugs which are not customer-friendly, patient-friendly as well in terms of use. So also the oral component will play a big role into that. We need to have a further view then profile and the competition there to come with more solid numbers that I'll be able to share.

Great. Thank you very much.

Thank you so much. Thank you. I will now hand the call back over to Sophie for closing remarks.

Thanks very much. That's all we have time for on today's call. Please feel free to reach out to the IR team if you still have questions. And we hope to welcome you at our R&D update on October 5th, which we will have in New York as an in-person event. Thank you all for participating and have a great rest of your day.