Galapagos NV

welcome all to the audio webcast of Galapagos' Q1 2024 results. I'm Sofie van Heersel, 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 companies, 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 Ted Houston, CFO and COO. Paul will reflect on the first quarter of 2024 and present a corporate update. Ted will provide an operational update and go over the financial results. He will also discuss the outlook for 2024 and present concluding remarks. 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 Ted, joined by Jeevan Shetty, head of development oncology. And with that, I'll now turn it over to Paul.

And thank you all for joining for today's webcast. I would like to take a minute to start with our foundation, our vision and mission, which we presented shortly after I joined Galapagos in 2022, and which informs all we do. We aim to transform patient outcomes through life-changing science and innovation for more years of life and quality of life, and our vision is to eventually reach patients around the world. To that aim, We accelerate transformational innovation through the pursuit of groundbreaking science and collaborations with industry and scientific partners. Since I joined a little over two years ago, we went through a very important company transformation. And with the recent transfer of Giseleca business to Alpha Sigma, we have transformed Galapagos into a pure play biotech with a revitalized pipeline and put in place the tools we need to meet our future growth ambitions. Today, we are focused on driving value creation in our key therapeutic areas of immunology and oncology, where significant unmet medical needs remain for patients. Our strategy is to spearhead our efforts with indications that have breakthrough designation potential in oncology and in immunology. And we are building a broad R&D pipeline of potential best-in-class cell therapies and small molecule drugs. We put in place strong leadership with the track record of delivering transformative drugs to patients around the globe. We take a collaborative approach combining internal and external innovation. And our strategy is supported by a very strong cash position of 3.6 billion euros as of the 31st of March 2024. I'm pleased to present our new management team to you. We assembled a team of experienced world-class leaders across our therapeutic areas and platforms with top talent from companies such as J&J, Kite, Milteni, JSK, and BMS. Combined, the team has brought well over 30 drugs to market. We strongly believe that we have the capabilities in place to drive value creation from here. We are building our differentiated platform technologies to bring to bring medicines to patients across the globe, working on small molecules, cell therapy, and biologics. Thanks to the acquisition of Abound and CellPoint in 2022, we added cell therapy and biologics to our capabilities. In cell therapy, we have an innovative, scalable, decentralized manufacturing platform that enables us to deliver fresh CAR T therapies close to patients, and we have a unique R&D engine to discover and develop armed multi-targeting CAR-Ts for hematology and solid tumors. We have a strong legacy of small molecule research and development in immunology, and we have now expanded our small molecule efforts to precision oncology. The teams are progressing our discovery and development efforts across multiple modalities, focusing on finding groundbreaking solutions for high medical needs with the aim to accelerate time to patients. Here you see our pipeline in our two therapeutic areas, oncology and immunology. We aim to deliver best-in-class therapeutics. In oncology, we are progressing our Phase I-II CAR-T programs, 5-1-0-1 in NHL and 5-2-0-1 in CLL and Richter's transformation, as well as our BCMA-directed multiple myeloma program with 5-3-0-1. In our early research, we have over 10 discovery programs across CAR T and small molecules in both heme and solid tumors. In immunology, we are progressing our two phase two studies with 3667 in lupus and dermatomyositis. And we have over five discovery programs across various inflammatory and autoimmune indications. As we continue to broaden our pipeline, We continuously look for differentiated technologies that enable us to reach more patients with high needs in an innovative way. Decentralized CAR-T cell therapy is a key example of that. CAR-T is one of the most remarkable advances in cancer therapy in the last several decades. Nonetheless, we see today that only 10-30% of eligible patients receive this therapy. Access is restricted for a number of reasons that go hand in hand with the fact that these products are produced in large and costly GMP facilities in a centralized way. Centralized manufacturing faces significant logistics challenges, including chiro-preservation of cells to allow for shipment. We address the limitation of existing CAR-T therapies with our decentralized manufacturing model. We have an exclusive global license with Lonza for the Cocoon manufacturing platform. for the decentralized delivery of CAR T cells in hematological tumors. We are able to deliver fresh FIT cells with a median seven-day vein-to-vein time. This allows for greater physician oversight and for production model near the patient that is globally scalable. As mentioned, currently we have three clinical trials running on the cocoon with very encouraging efficacy and safety results in critically ill patients with NHL, CLL, and Richter's Transformation. We're also actively rolling out a decentralized CAR-T network, both in Europe and the U.S. In the U.S., we collaborate with Landmark Bio for the Boston area and with Thermo Fisher for the Bay Area. And we are in discussions with other parties for additional centers. In Europe, we plan to add additional sites to the five that we currently have up and running in three different countries. We expanded our operations in Pittsburgh, Pennsylvania. As you remember, this is the site which we added with the acquisition of Abound Bio in 2022. And we opened an office in Princeton, New Jersey, where we are adding key capabilities in strategy, regulatory operations, and quality. I would like to highlight our extensive network to rebuild I would like to highlight our extensive work to rebuild and expand our earlier stage pipeline, where we're making important progress throughout our therapeutic areas in both small molecules and cell therapy. We have over 15 programs in discovery across oncology and immunology, and we expect to deliver the first preclinical candidates this year and start first in human studies in 2025. I would now like to hand it over to Tad for the financial comments. and operational updates.

Thank you, Paul, and thanks, everyone, for joining today. Let's take a look at the financial results for the first quarter. As a reminder, we transferred the Giseleca business to Alpha Sigma, and the transaction closed on January 31st of this year. As a result, the Giseleca results moved to discontinued operations. For our continued operations, revenue remained flat year over year, and mainly consists of the linear recognition of the platform for the Gilead collaboration. We see an increase in R&D costs as compared to last year, which is mainly driven by our investments in oncology, both in CAR T and small molecules. We record a net profit driven by fair valued adjustments, foreign exchange, as well as 25 million euros in interest income. We also reported net profit from discontinued operations of €67 million, mainly driven by the one-time gain of €53 million for the Giseleca transaction with Alpha Sigma. Now over to our 2024 guidance. You may have seen that we report an operational cash burn of €125 million for the first quarter of 2024. This is on the higher end due to the phased transition of services for Jaisalica to Alpha Sigma, as announced last year, as well as timing of interest income and tax credits. We expect that our operational cash burn will continue to improve in future quarters, and we therefore reconfirm our full-year cash burn guidance of 280 to 320 million euro. Our cash balance at Q1 2024 amounted at 3.6 billion euro. With streamlined operations and a strong balance sheet, we are confident that we have the organizational setup and firepower to execute on R&D and collaboration opportunities. Now turning to our outlook for 2024, we anticipate important regulatory progress with our CAR T trials in the United States. Mid this year, we plan to submit the IND for our NHL trial, building on the tech transfer to our first US site, Landmark Bio. In the second half of the year, we aim to submit an additional IND for 5201 in CLL and Richter's transformation. We will share further data on the safety, efficacy, and durability of our ongoing CAR T programs. We hope that this will confirm the data with our decentralized CAR-T platform that we have observed thus far. We are preparing to expand our Atalanta trial in NHL to the U.S. to initiate the Phase II Euplasia trial and CLL and Richter's transformation in Europe, as well as expand our Phase I to Papillo trial in Europe. Operationally, we are working to add additional sites for our decentralized CAR-T manufacturing network both in the U.S. and in Europe. We're also exploring additional partnerships for our CAR-T network across the globe. We also aim to execute on additional licensing agreements and acquisitions, as well as research collaborations. Our business development efforts serve as an overarching purpose of accelerating breakthrough solutions to patients in need. Let me conclude by coming back to the strong fundamentals that we have put in place to build a global innovative biotech company and the clear path that we have towards value creation. We are progressing our early stage pipeline, building on our renewed discovery portfolio based on best-in-class targets towards best-in-class medicines. While we push forward internal programs, we are also very active in business development discussions to broaden our portfolio. We continue to execute on our scientific progress in our key therapeutic areas of immunology and oncology. We invested and we continue to invest in strengthening the team in key positions globally. We benefit from a very strong balance sheet, and we commit to staying disciplined in our use of cash to focus our investments to maximize value. And we want to thank our investors for the continued support as we continue to deliver on our strategy to generate sustainable long-term value for shareholders.