Galapagos NV

thank you all for joining us today as we report Galapagos' nine-month 2025 financial results. Last evening, we issued a press release outlining these results. This release, along with today's webcast presentation, can be found on the Galapagos Investor website. Before we begin, I would like to remind everyone that we will be making forward-looking statements. These forward-looking statements include remarks concerning future developments of our company and our pipeline and possible changes in the industry and competitive environment. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those indicated by these statements and are accurate only as of the date of this recording, November 6, 2025. Galapagos is not under any obligation to update statements regarding the future or to conform to these statements in relation to actual results unless required by law. You are cautioned not to place any undue reliance on these statements. Joining us on today's call from the executive team are Henry Gosselbroek, Chief Executive Officer, Aaron Cox, Chief Financial Officer, Suen Kwan, Chief Business Officer, and Dan Grossman. Chief Strategy Officer of the company, all of whom will be available during the Q&A session. With all of that, let me now turn the call over to Henry Gosselbroek, CEO of Galapagos.

Thank you, Glenn, and thank you all for joining us today. It has been a very active time here at Galapagos as we have worked tirelessly toward advancing the transformation of our company. This transformation has been ongoing for several years, and I firmly believe we have a bright future ahead of us. Early this year, we announced our decision to separate the company into two entities, with Galapagos advancing its self-therapy programs and the planned launch of a spin co that would focus on business development and be funded with approximately 2.45 billion euros in existing cash. However, in May, it became apparent that the spinoff could not be executed as planned, and the board took swift and decisive action toward a different path to realize value and I was honored to be named CEO. The board gave me a clear mandate to analyze strategic alternatives for our existing businesses, including cell therapy. In addition, I was asked to further refine the strategy for deploying our cash resources into transformative business development and rebuilding our pipeline. We moved quickly, brought on advisors, and commenced a thorough strategic review and sale process to identify potential buyers or investors with the expertise and resources to take the cell therapy business forward. We were highly motivated to identify a buyer or investor who could not only support the ongoing investment requirements in the business, but also honor the efforts of our employees who have put their blood, sweat, and tears into the cell therapy business over the past several years. However, after a five-month process, there were no viable proposals presented that would reasonably support the business going forward. We offer to divest the business for minimal upfront consideration. And where appropriate, we even offer to provide capital support to potential buyers, but no party was able to provide committed financing to enable a viable acquisition of the business. One key reason is that several hundreds of millions of euros would be required for any such deal, given the significant ongoing investment requirements, not only in the business, but also to stand behind the obligations to our employees. After this comprehensive review of strategic alternatives and given these ongoing investment requirements, coupled with evolving market dynamics and taking into account the interests of all relevant stakeholders, the board unanimously agreed to form an intention to wind down the self-therapy business. Given the impact on our employees and ongoing operations, this was a difficult decision, but I firmly believe it was the right decision given our circumstances. Now that the strategic review process has concluded, we are actively consulting with the Works Councils in Belgium and the Netherlands to seek their advice in order to implement this wind down. During this ongoing consultation process regarding the intended wind down, we would consider any viable proposals require all or a part of the cell therapy activities if such a proposal emerges during the wind down process. In parallel to all this activity, we have assembled what I believe to be a world-class team focused on executing our business development strategy. Our deal funnel has been building steadily, and I'm confident that we can identify and execute on opportunities that can bring exciting new opportunities to Galapagos in our pipeline. I will share more detail on our strategy in today's presentation. As part of our ongoing transformation, we have also welcomed four new board members over the past six months. I am delighted to be working with Jane, Dawn, Neil, and Devang on the board going forward. And I would like to again thank Peter, Simon, Elizabeth, Susanne, and Andy for all their valuable contributions during their time on our board. As I mentioned, our intention to wind down the cell therapy business is subject to the conclusion of consultations with work councils in Belgium and the Netherlands, which is standard practice in Europe. During this period, Galapagos will continue to operate the business. If the wind-on is ultimately implemented, we anticipate that up to approximately 365 employees would be impacted across our offices in Europe, the US, and China. Also, we would plan to close Galapagos sites in Leiden, Basel, Princeton, Pittsburgh, and Shanghai. In this scenario, we would effectively proceed with a full exit of our cell therapy activities, and we would expect to incur the costs detailed on the slide, which will be discussed in more detail during Erin's review of financials later on this call. We are deeply grateful to our dedicated employees, investigators, patients, shareholders, and partners for their continued commitment and support. We will stand behind our obligations as an employer to treat our employees fairly throughout all of this. The remaining Galapagos organization will be repositioned for long-term growth through transformational business development and would maintain a dedicated presence at our headquarters in Mechelen, Belgium. We hope to complete the Works Council process quickly as we aim to provide more clarity to our employees and stakeholders as soon as possible. Although it is difficult to predict the exact duration of this process, we currently expect it to be concluded in the first quarter of 2026. I wanted to spend a few minutes on the last remaining legacy R&D program, our TIC-2 program. Our development team has done an excellent job progressing the phase three enabling studies and we expect to see data from two studies by early 26, ahead of our original expectations. The studies are now fully enrolled, and the remaining spend related to this program is moderating. GLPG3667 is a differentiated oral TIK2 inhibitor currently in two phase three enabling studies for SLE and dermatomyositis. At the recent ACR conference, we presented new in vitro pharmacological data suggesting additional differentiation of 3667 from two other TIK2 inhibitors. 3667 demonstrated inhibition of the interferon alpha and IL-23 pathways with no measurable impact on TIK2 independent pathways. Additionally, 3667 showed no inhibition of IL-10. These findings support our belief in the program's potential, and we are looking forward to reporting data from the two fully enrolled trials in early 2026, which will guide us toward the next steps to maximize value for this program. Now let's review the other assets we have at Galapagos. Our significant scientific successes over our 25 plus year history have enabled Galapagos to attract significant capital. And today we have the benefit of a significant cash balance, as well as a portfolio of other attractive assets that can drive additional shareholder value. Our cash balance of approximately 3 billion euros represents approximately 46 euros per share. This cash balance generates significant interest income. Through the first nine months of this year alone, we received approximately 77 million euros. In addition, we are receiving an attractive stream of royalties and earnouts from Gilead and Alpha Sigma on their sales of Gizellica, the JAK program developed here at Galapagos. The income related to Jaisalga has been approximately 15 to 20 million euros annually, and it is expected to continue into the mid 2030s with potential upside. In addition, we expect to receive tax receivables of approximately 20 to 35 million euros per year over the next three years, with additional opportunities for credits beyond that. We also have stakes in multiple private biotech companies, such as ThirdArk, Frontier, and Onco3R. plus other private companies that haven't been disclosed. Last, but certainly not least, we own our building in Leiden. It's a fabulous building, easily the nicest lab and office building I've ever worked in, a state-of-the-art building in which we invested over 70 million euros for construction and build-out. It opened in 2022, and it's a great asset. If you look at this portfolio in total, I believe we could see the potential for several hundreds of millions of additional value on top of our cash balance from this portfolio. Let's go back to the ongoing transformation of the company. I am incredibly pleased that we have been able to attract new leadership talent to the company that, in my opinion, represents the team with the best business development expertise in our industry. This team has been through hundreds of M&A and business development transactions as principals and advisors. I won't go into their individual and very impressive bios, but they are summarized on the slide. Aside from their bios, having worked closely with each of them, they are not only uniquely talented, but they are wonderful leaders with strong values, and all are excited to be part of our transformation and drive significant value for patients and shareholders going forward. I am very proud to work with this talented group every day as we execute our mission and vision. In addition to our executive talent, we have also assembled a fantastic group of outside advisors that have joined our strategic advisory board. These four individuals have brought numerous drugs to patients, and we are collaborating closely with them as we prioritize the many potential BD transactions in front of us and diligence individual opportunities. Let's jump into our business development strategy. Let me start with what Galapagos brings to the table as we pursue business development. we see several key strengths that provide us a unique advantage. First, we've built a team to execute creative BD deals. Second, we have significant capital to invest in promising programs and science. Third, we can be incredibly flexible in our approach as we are not constrained by an existing pipeline. For example, we can enable external teams or companies to pursue their programs with our capital. Finally, We have a unique partnership with Gilead that I believe also represents a unique asset for us that I will discuss some more in a minute. We will be financially disciplined and focused on value creation while pursuing programs we believe can make a clear difference for patients. We've identified some key focus areas for our activities. First off, we will focus on what we believe have been meaningfully clinically de-risked and differentiated opportunities. We are looking for opportunities that can substantially enhance the standard of care in a disease and have clear patient impact. We will initially prioritize areas where there's a strategic synergy with Gilead. Next slide, please. Now let me turn to our existing partnership with Gilead. We've been getting a lot of questions on why we believe it's in our best interest to work with Gilead on business development opportunities, so we wanted to address that here. Let's start with the obvious. Gilead owns 25% of Galapagos and has an existing collaboration agreement, the OLGA, as we call it, that allows Gilead to opt into U.S. rights of proof of concept assets at Galapagos at relatively favorable terms. These terms were originally envisioned for programs that came out of our original discovery platform, but they also apply to business development opportunities we would bring into the company at this stage. For most assets we might consider bringing in, Gilead's option to acquire US rights for $150 million upfront would likely represent too much value leakage to make a deal attractive for us. However, Gilead has expressed a willingness to renegotiate these terms, and we share a joint perspective that by working together, we can create win-win deal opportunities that create more value than each of us could drive individually. What does that look like? Gilead has expressed a willingness to contribute capital to our BD activities, and they are also bringing their capabilities to the table, such as their technical diligence team. By working with them, we might be able to find unique value creation opportunities where on a combined basis, we might be able to unlock more value in a portfolio than a single party would be able to. And finally, Gilead's commercial expertise will bring additional credibility to our efforts. Our partnership also allows for creative deals that could drive structural and financial benefits that Gilead may not be able to achieve on their own. I've known some of the key leaders at Gilead for many years, and I'm quite pleased with the close collaborative working relationship we have strengthened over the past several months. In conclusion, I'm confident we can find win-win opportunities that will create value for Galapagos' shareholders and Gilead. Let's explore how working with Gilead may open opportunities that would otherwise not be available to us. There are many deal structures possible. However, we thought it would be helpful to share just three illustrative examples. Starting on the left side, we can partner with Gilead to jointly acquire or license an opportunity. For example, these deals could potentially involve us acquiring public stock. In the middle, there could be opportunities where we at Galapagos may see value in one asset and Gilead may see value in another asset at the same company, thus enhancing our ability to structure a value-creating deal for a multi-asset company. And finally, on the right, our cash balance makes us a very attractive merger partner, recognizing we would of course require receiving fair value for our portfolio of assets in any business combination. So how do we operationalize our strategy? We will be flexible on ideas, but financial discipline will be key. And we will balance intrinsic risk of each opportunity with overall portfolio risk. Said in another way, if we dedicate a large portion of our capital to one opportunity, we must have very high confidence in that opportunity to create value. For any significant transaction, we believe we can renegotiate our existing agreement with Gilead to enable win-win deals for both. Of course, Nothing prevents us from doing transactions on our own to the extent that they could drive value over the long term. However, I hope that's been clear why we believe working with Gilead can broaden our set of opportunities and create shareholder value. As we execute on our strategy, we believe we can work to eliminate our current trading discount and open our deal aperture even more. Now let me address a few other important topics. As I mentioned earlier during this call, the transformation of Galapagos is well underway. Looking ahead, and if the intention to wind down is ultimately implemented, Galapagos would be a much leaner and strategically focused organization. We will maintain our headquarters in Belgium, leveraging the experience and talented teams in place there across a number of functions. Many investors have asked us whether we will return capital to shareholders. While our goal is ultimately to drive value for our shareholders, it's important to recognize that any return of capital would require alignment with Gilead, given their 25% ownership and the terms of our existing partnership agreement with them. In addition, even if permitted, Belgian law imposes certain limitations on capital returns to shareholders. Given we do not have any distributable profits available at the current time, the ability to distribute would require a resolution at an EGM with at least 50% of shares present at the meeting and at least 75% approval. So again, while this could be an interesting alternative down the road, for now we are focused on using our capital for business development opportunities. With that overview, I would now like to turn the call over to Aaron Cox, our CFO, to review our nine months financial results. Aaron.

Thanks Henry, and hello everyone. In the press release issued last night, we detailed our nine-month financial results through the quarter ended September 30th. Total operating loss from continuing operations for the first nine months of 2025 amounted to 462.2 million euros, compared to an operating loss of 125.6 million euros for the first nine months of 2024. This operating loss was negatively impacted by an impairment on the cell therapy business of 204.8 million euros as a result of the strategic alternatives process for the cell therapy business. Additionally, there was also a 135.5 million euro impact related to the strategic reorganization announced in January 2025. This 135.5 million euros is comprised of severance cost of 47.5 million euros, costs for early termination of collaborations of 45.5 million euros, impairment on fixed assets related to small molecules activities of 9.5 million euros, deal costs of 21.4 million euros, accelerated non-cash cost recognition of subscription rights plans related to good leavers of 9.8 million euros, and other operating expenses of 1.8 million euros. Net other financial income for the first nine months of 2025 amounted to 30.4 million euros compared to net other financial income of 71.7 million euros for the first nine months of 2024. Interest income amounted to 31.4 million euros for the first nine months of 2025 compared to 70.6 million euros of interest income for the first nine months of 2024 due to a decrease in the interest rates and a shift from investments in term deposits generating financial income to investments in money market funds generating fair value adjustments. Notably, fair value gains and interest income derived from cash, cash equivalents, and current financial investments, excluding any currency exchange rate impact amounted to 77.2 million euros for the first nine months of 2025. Financial investments, cash, and cash equivalents totaled 3.05 billion euros on September 30, 2025, as compared to 3.32 billion euros on December 31, 2024. Our cash and cash equivalents and current financial investments included 2.16 billion held in U.S. dollars versus 726.9 million on December 31st, 2024. These U.S. dollars were translated to euros at an exchange rate of 1.174. As we announced with our first half 2025 results, we continue to hold approximately 60 percent of our cash in U.S. dollars and 40 percent in euros. As I mentioned, cash in investments as of 9-30-2025 was 3.05 billion euros. representing 46 euros per share. Looking forward, we anticipate ending 2025 with approximately 2.975 to 3.025 billion euros in cash, cash equivalents, and financial investments, excluding any business development activities and currency fluctuations. If the intention to wind down is confirmed and implemented following the Works Council processes, we would expect to incur the following cash impacts related to our cell therapy business. 100 to 125 million euros of operating cash impact from Q4 2025 through 2026, with 50 to 75 million euros of this being in 2026, and 150 to 200 million euros of one-time restructuring cash cost in 2026. Lastly, if the intention to wind down is implemented and completed, we would expect to be cash flow neutral to positive by the end of 2026, excluding any business development activities and currency fluctuations. Now let me turn it back to Henry to wrap up.