Yahoo Finance Galapagos NV (NASDAQ:GLPG) Q3 2023 Earnings Call Transcript
Galapagos NV (NASDAQ:GLPG) Q3 2023 Earnings Call Transcript November 5, 2023
Operator: Good day, and thank you for standing by. Welcome to the Galapagos Q3 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sofie Van Gijsel. Please go ahead.
Sofie Van Gijsel: Thank you, operator, and welcome all to the audio webcast of Galapagos Q3 2023 results. I'm Sofie Van Gijsel, Investor Relations representing the reporting team at Galapagos. This recorded webcast is accessible via the Galapagos website home page 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 Dr. Paul Stoffels, CEO and Chairman; Thad Huston, CFO and COO; and Dr. Jeevan Shetty, Head, Clinical Development Oncology. Paul will give an introduction and provide a strategic overview. Thad will then go over the operational and financial results, and Jeevan will discuss our CAR-T programs. You will see a presentation on screen. We estimate that the prepared remarks will take about 25 minutes. Then we'll open it up to Q&A with Paul, Thad and Jeevan, joined by Michele Manto, Chief Commercial Officer; and Dr. Daniele D'Ambrosio, Head of Immunology. And with that, I'll now turn it over to Paul.
Paul Stoffels: Thank you, Sofie, and thank you all for joining today. I would like to start by taking a moment to remind you of our vision and mission to bring transformational medicines to patients around the world. This drives everything we do at Galapagos. Over the past year, we have taken key strategic steps in our transformation into an innovative biotech, first, with the implementation of our new operating model and the new approach to research and development to accelerate innovation and strengthen our pipeline; and now with the intended changes related to our Jyseleca business. We reached the critical moment, and we have chosen what we believe is the best option for patients, our people and Jyseleca. Now let me walk through the key terms of the deal announced on Monday.
Galapagos intends to transfer the entire Jyseleca business to Alfasigma, including the European and U.K. marketing authorization, sales, marketing and also government (ph) development activities as well as approximately 400 employees across our European operations. Alfasigma is a profitable, privately owned pharmaceutical company in Italy, ranking among the top five with revenues over EUR1.2 billion in 2022. In the contemplated transaction, Galapagos will receive EUR50 million upfront and is entitled to sales-based milestones of up to EUR120 million. In addition, Alfasigma will pay royalties in the mid-single to mid-double digits to Galapagos. Galapagos will pay up to EUR40 million in development costs to Alfasigma before June 2025. We also announced that we plan to adjust our remaining workforce and streamline our operations to align with the renewed focus on innovation.
This is expected to impact approximately 100 positions. This will allow us to focus on innovation and accelerate our pipeline of best-in-class transformational medicines in our core areas of immunology and oncology. The completion of the intended transaction is subject to the execution of a definitive agreement and customary conditions, including regulatory approvals and consultations with work councils. With the signing of the letter of intent to transfer the Jyseleca business to Alfasigma, we completed our process of exploring strategic options for Jyseleca, as announced at the half year earnings call in August. So let's have a look at our pipeline focused on immunology and oncology. For our immunology franchise, Jyseleca is grayed out given by the planned transfer.
We are progressing our TYK2 in dermatomyositis and SLE. And we aim to start a patient study with our CD19 CAR-T candidate, 5101, in severe refractory lupus early next year. Meanwhile, we are working on multiple exciting preclinical targets that we are eager to push forward if we see a best-in-class potential. In oncology, we made good progress with the CD19 CAR-T programs and plan to start the BCMA CAR-T program in multiple myeloma in the coming weeks. Together with our research team, we are working on next-gen CAR-Ts as we are evaluating the new opportunities in this space. Today's earnings call, we will focus on important progress that we are making with our oncology programs. We are very pleased that we'll have the opportunity to present three posters at ASH in December.
The data in the abstract released yesterday underline that our CAR-T programs manufactured at point-of-care are delivering on their promise. In today's presentation, we will discuss the encouraging data in CLL and NHL observed with our product candidates, 5201 and 5101, as well as the clinical study design of 5301, our third CAR-T program manufactured at point of care. Importantly, we initiated a tech transfer following the agreement with the Boston-based Landmark Bio. This is a key milestone in the geographical expansion of our unique point-of-care production technology and the start of clinical development of our CAR-T programs in the U.S. In parallel, we continue discussions with multiple centers in Europe and the U.S. to further build our point-of-care manufacturing network.
In addition, we continue to strengthen our capabilities in oncology with key hires, amongst others, in the regulatory, clinical, PD and strategic marketing. I would like to take a moment to highlight the strong fundamentals that we put in place over the last 18 months. We renewed our discovery portfolio and are working hard on accelerating our early-stage pipeline. We continue to broaden our late-stage pipeline, pushing forward our internal programs and scouting for business development opportunities. We are making important progress with our CAR-T programs and are actively expanding our point-of-care footprint with our Cocoon Platform. With the transfer of Jyseleca, we can further streamline our organization. And to support our innovation, we aim to approximately add 100 expert roles over the course of next year.
And we commit to stay disciplined in our use of cash to focus our investments and to maximize them. Summarizing, we have been executing on our company transformation and now have clear path outlined for value creation. Now I hand it over to Thad who will provide an operational and financial update.
Thad Huston: Thank you, Paul. Let's first go over the key financial year-to-date. Going to our P&L, we reported a net profit of EUR54 million in the first nine months of 2023, in part driven by higher revenue recognition for filgotinib. This is driven by collaboration revenues that increased mainly due to the collaboration agreement with Gilead for the filgotinib development amounting to EUR186 million in the first nine months of 2023 compared to EUR167 million for the same period last year; and by Jyseleca sales coming in at EUR82 million year-to-date, plus a sales milestone of EUR1 million and EUR7 million in royalties for Jyseleca. We also saw a reduction in total operating costs of EUR72 million were down 13% versus the prior year, which can be attributed to lower R&D expenses and a reduction of EUR20 million of SG&A expenses.
Additionally, we received higher interest income as a return on our capital in the first nine months of 2023. Let's now look at the Jyseleca end-market performance for the quarter. Sales remained flat at EUR28 million versus the previous quarter. Year-to-date, we booked EUR82 million in sales, and we are confirming our re-set guidance of EUR100 million to EUR120 million. Now a few words on our cash position and guidance. Our cash and cash equivalents are EUR3.8 billion at the end of Q3 2023. Our operational cash burn for the first nine months of 2023 reached EUR344 million. We confirm our full year cash burn range of EUR380 million to EUR420 million. This is explained by an increase in interest income and grants coming in the fourth quarter.
Over the full calendar year, we expect approximately 3% return on our outstanding cash balance. With the intended transfer of Jyseleca announced earlier this week, we will realize significant savings well over EUR100 million in 2024 and annualized savings of EUR150 million to EUR200 million as of 2025. We continue to be disciplined and remain focused on managing our resources effectively. This brings us to our business development efforts. We are actively pursuing multiple deals in oncology and immunology. Our approach is highly selective, and please be assured that we are laser-focused on partnering and M&A to accelerate our pipeline. And with this, I will hand it over to Dr. Jeevan Shetty, our Head of Clinical Development in Oncology, to walk us through our CAR-T programs and results.
Jeevan Shetty: Thank you, Thad. Good morning to you all. Many thanks for your time. My name is Jeevan Shetty. I'm the Head of Oncology here at Galapagos. I'm really very excited to be able to share the significant data review on today in a number of really difficult-to-treat cancers. We are sharing data whilst respecting the ASH embargo. Please be assured that more data will be available in San Diego. I wish to just remind the audience of the key differentiated features of the Galapagos point-of-care platform. Galapagos uses first-principles thinking, focusing on simplification and streamlining of every aspect of the current centralized production we see on the left, weaknesses that actually lead to critically ill patients not getting the life-saving treatment that they need in time.
Our innovative system consists of end-to-end automation on clinical systems, a comprehensive real-time monitoring both centrally and remotely through our xCellit platform and 24-hour clinical and manufacturing support. The seven day vein-to-vein time and fresh-to-fresh cells is really at the heart of our platform. Galapagos aims to make CAR-T therapies globally available to patients not readily served with the current central manufacturing process. On the top half of the slide, one sees the seamless and continuous CAR-T production with the innovative QC review through the integrated Galapagos xCellit platform. In the lower half of the slide, one sees the conditioning regimen being given at day minus six to day minus four. This is given in parallel to the manufacturing of our CAR-T products.
This is unique to our system, a testament really to our confidence in our reliable manufacturing process and critical to deliver a seven day vein-to-vein time. Through our unique platform, Galapagos delivers a life-changing service to patients and a step-change experience for clinicians and providers. I wish to spend a moment on high-risk CLL and Richter's transformation, which is the focus of our first study that I will present. Chronic lymphocytic leukemia is a disease for which there is currently no cure. It is one of the common hematological malignancies in the Western world. The disease progresses from asymptomatic disease to symptomatic and then undergoes transformation to a much, much more aggressive histology. Richter's transformation is fatal.
As you can see, the disease has a dismal prognosis of a median overall survival of only five to eight months. Time is of the essence. With the Galapagos decentralized platform being close to the patients and the seven day vein-to-vein time, we can address this rapidly progressive disease with speed and with effectiveness. From an epidemiological perspective, the underserved high-risk CLL population represents 2,100 new patients in the U.S. and 1,800 patients in the EU5. The Richter's transformation population represents a similar patient number with 1,900 patients in the U.S. and 2,000 in the EU5. This is a disease with no effective options, a fatal prognosis. We can finally offer some hope for these patients.
Paul Stoffels: Jeevan, stay close to the microphone because apparently, it's not very clear.
Jeevan Shetty: I now turn to our important study focusing on high-risk CLL and Richter's transformation, the EUPLAGIA study. The design of our EUPLAGIA study incorporates all the unique components of the Galapagos platform, i.e., concurrent conditioning, seamless CAR-T production and innovative IT and QC technology, ensuring release at the day of harvest and infusion. This is truly transformational. As you can see, the study population treats patients with relapsed/refractory CLL with more than or equal to two prior lines of therapy, CD19-positive CLL patients. Significantly, the trial allows patients with Richter's transformation and also transplant-eligible patients. The study was designed to explore three dose levels. Looking now at the baseline characteristics of the EUPLAGIA study population, we see that they are really consistent with the population of risk of unfavorable outcome, shown here by age and by gender.
Furthermore, the advanced nature of the disease in our study is evidenced by, number one, the prior lines of treatment, prior BTK inhibitors and venetoclax and prior hematopoietic stem cell transplant and also the disease characteristics; number two, TP53 mutation and the high rate of unmutated IGHV that you see. Turning now to safety. We see a good safety profile with our product. It is well tolerated. There is no Grade 3 CRS. Only six patients experienced low-grade CRS, Grade 1 and Grade 2. There were no ICANS reported, no deaths occurred. Most treatment-emergent adverse events were Grade 1 and Grade 2. And most observed Grade 3 and 4 adverse events were all huge origin and all well managed with standard point-of-care. I turn now to the efficacy.
We have observed excellent efficacy with our drug in patients with relapsed/refractory CLL with or without Richter's transformation. Objective response was assessed as per iwCLL for patients with CLL, and Richter's transformation was observed as per the Lugano classification. 11 out of the 12 patients, including patients responding to the treatment, resulted in an objective response of 92%. 75% of patients reached a complete response as their best response. A further clear observation is the 83% complete response at dose level 2. This compelling data has transformed our decision on our recommended Phase II dose RP2D of 100 million cells. At the time of analysis, nine out of 11 patients, 82% of the responders, had an ongoing response. The duration was up to nine months post infusion, which is the latest available response assessment at the time of the abstract submission.
Further follow-up is clearly ongoing. Focusing on the Richter's transformation subset, seven of the 12 enrolled patients in the EUPLAGIA study were diagnosed with Richter's transformation. All but one patient with Richter's transformation responded to treatment, a rate of 86%. And five out of the sox responding patients achieved a complete response, 83%. So to conclude, though a small patient number, the efficacy, together with the safety, has excited experts in the field and confirms our desire to accelerate this program to bring this therapy to patients as soon as possible. The next steps for EUPLAGIA are genuinely exciting. As I alluded to earlier, with the 83% CRR at a rate of dose level 2, the class-leading safety and the ratification by experts, both internally and externally, we will proceed with dose level 2.
We will initiate the Phase II expansion cohort for the two populations we have described. Critically, we have initiated the tech transfer to the first U.S. site, Landmark Bio, in Boston, as mentioned by Paul. Do remember our poster at ASH on the 9th of December. Turning now to the NHL program. With our decentralized manufacturing and short wait time, we strongly believe accessibility and efficacy of CAR-T therapy can be improved and serve the sickest NHL patients with the most aggressive disease. This has informed our thinking on future NHL subgroups that we will pursue. Disease is currently underserved by the approved CD19 CAR-T therapies. Additionally, even with approved products available, we identify persistent unmet need in indications where less CAR-T products are actually available as a result of manufacturing slot shortages through the centralized model that exists.
This is the design of our ATALANTA study based on our unique Galapagos platform, a Phase I/II trial in patients with non-Hodgkin lymphoma, consisting of diffuse large B-cell lymphoma, mantle cell lymphoma, marginal zone lymphoma and follicular lymphoma. The study population requires patients with relapsed or refractory disease after two or more prior lines of therapy with the inclusion of transplant ineligible patients in addition to primary refractory diffuse large B-cell patients also being included. With regard to prior lines of therapy, we allowed the same patient population that would be eligible in the improved CAR-T products. However, as a consequence of our seven day vein-to-vein time, our study allows a patient with potentially more aggressive disease to be included in our trial.
Here, too, we will appraise three dose levels. Baseline characteristics of the ATALANTA study is typical of the patient population and representative of the heavily pretreated patients in the study. We see encouraging safety data for our product in the ATALANTA study. With ICANS, there were six patients who experienced a Grade 1 ICANS and only one case of Grade 3 CRS. All others were Grade 1 to Grade 2. There were two deaths in the study. One was with the patient experiencing intra-abdominal hemorrhage. This patient has been previously diagnosed with only thromboembolic disease and was already on low-molecular-weight heparin. The second was a patient who has urosepsis and have come to this six months after infusion. We observed very encouraging efficacy in our therapy in patients with multiple subtypes of relapsed or refractory disease.
In our data set, 13 patients were evaluable for response at the time of analysis and 11 patients responded to treatment, resulting in an objective response of 85%. One can also observe complete response rate of 83% at dose level 2. 69% of our patients reached a complete response and the best response in the all patient population. This is the data at the time of abstract submission. The study is clearly ongoing, and we'll continue to collect more data with longer follow-up times. We now have the first patient in the ongoing response for over a year, and we will be presenting more of these patients at ASH. As with EUPLAGIA, the next steps for ATALANTA are similarly exciting. We will expand an indication with the benefit of -- in indications that will benefit from the short vein-to-vein time.
We will implement dose level 3. And as mentioned previously by Paul, we will complete the tech transfer to the first U.S. site, Landmark Bio in Boston. Given the encouraging safety and efficacy we are presented in CLL and NHL using our innovative and reliable platform, we're moving ahead with addressing the unmet need in multiple myeloma in the PAPILIO study. Whilst, of course, there are commercially available BCMA therapies, there is limited access to these products, and this population remains severely underserved. Here is the study design and the patient population we are proceeding with. We expect our first patient to enroll any time certainly this month. The data from the 26 patients that were enrolled in the EUPLAGIA and the ATALANTA studies that we've shared with you today demonstrate that the point-of-care CAR-T manufacturing with short vein-to-vein time is feasible.
Our CAR-T therapies are administered as fresh products with a median base wait time of seven days. We've shown 100% manufacturing success. All patients that underwent leukapheresis were dosed and they all received fresh CAR-T products. In our trials, the clinical responses were supported by high in vivo expansion of the CAR-T cells and durable persistence post-infusion. This was observed across the dose levels that we tested. Furthermore, our novel point-of-care manufacturing models and early phenotype of the less-differentiated CAR-T cells is preserved in the CAR-T product. This really strengthens our belief that our manufacturing process contributes to better CAR-T product. And that leads us to believe it is not so much the number of cells that are infused, but more of the quality of the cells.
We believe we have a very innovative platform for the future of CAR-T therapies that could serve patients around the world, patients with little time and a few options. Thank you. I hand back to Paul.
Paul Stoffels: Thank you, Jeevan. Let's look now at the remainder of 2023. As presented today, we are making excellent progress with 5101 and 5201 in NHL and CLL. And as Jeevan just presented, we reported encouraging safety and efficacy data. At ASH, we'll be able to share more clinical data, including the expansion cohorts Phase I/II results of our NHL study. Also in oncology, we aim to submit an IND for 5101 in NHL, our CD19 CAR-T candidate, in the first half of 2024. As mentioned, we aim to start the Phase Ib in multiple myeloma with a BCMA CAR-T candidate, 5301, and expect to dose the first patient later in November. We also submitted the clinical trial application in Europe for our CD19 CAR-T candidate, 5101, in refractory SLE and expect the first patient in the first quarter next year.
Finally, we are actively pursuing multiple business development opportunities and remain very focused on executing multiple deals. Our transformation continues, and we have a clear path forward for value creation for all stakeholders. We are accelerating our early-stage pipeline, building on our new discovery portfolio based on best-in-class targets for best-in-class medicines. While we push forward internal programs, we are in active BD discussions with the aim to expand our innovative pipeline very soon. And we are streamlining our organization with the aim to implement a focused, rightsized organization. While we are very well capitalized, we commit to staying disciplined in our use of cash to focus our investments to maximize value. We delivered on our commitment to take action and firmly believe that we are executing on our strategy, unlocking value for shareholders.
Thank you all for your support and interest in Galapagos. Let's now open the line for Q&A.
Sofie Van Gijsel: Thank you, Paul. 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.
Operator: Thank you. [Operator Instructions] We will now take the first question. It comes from the line of Xian Deng from UBS. Please go ahead.
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