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.