Galapagos NV (NASDAQ:GLPG) Q1 2024 Earnings Call Transcript

Galapagos NV (NASDAQ:GLPG) Q1 2024 Earnings Call Transcript May 4, 2024

Galapagos NV  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Sofie Van Gijsel: Welcome all to the audio webcast of Galapagos’ Q1 2024 Results. I’m Sofie Van Gijsel, 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 Thad Huston, CFO and COO. Paul will reflect on the first quarter of 2024 and present the corporate update. Thad 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 Thad, joined by Jeevan Shetty, Head of Development Oncology. And with that, I’ll now turn it over to Paul.

Paul Stoffels: Eve, 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 the vision is to eventually reach patients around the world. To that aim, we accelerate transformation 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 Jyseleca business to Alfasigma, 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 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 a 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 EUR 3.6 billion 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, [Moteni] GSK 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 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 unmet medical needs with the aim to accelerate time to patients. Here you see our pipeline in 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, 5101 in NHL and 5201 in CLL and Richter’s transformation, as well as our BCMA-directed multiple myeloma program with 5301.

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 II 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 unmet 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 cryopreservation 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, we have — 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 are also actively rolling out our 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 AboundBio 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 — sorry. I would like to highlight our extensive work to rebuild and expand our earlier-stage pipeline, where we’re making important progress throughout the 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 Thad for the financial and operational update.

Thad Huston: 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 Jyseleca business to Alfasigma and the transaction closed on January 31 of this year. As a result, the Jyseleca 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 cost as compared to last year, which is mainly driven by our investments in oncology, both in CAR-T and small molecules. We recorded a net profit driven by fair value adjustments, foreign exchange as well as EUR 25 million in interest income.

We also reported net profit from discontinued operations of EUR 67 million, mainly driven by the onetime gain of EUR 53 million for the Jyseleca transaction with Alfasigma. Now over to our 2024 guidance. You may have seen that we report an operational cash burn of EUR 125 million for the first quarter of 2024. This is on the higher end due to the phased transition of services for Jyseleca to Alfasigma, 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 EUR 280 million to EUR 320 million. Our cash balance in Q1 2024 amounted to EUR 3.6 billion. 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 U.S. 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 EUPLAGIA trial in CLL and Richter’s transformation in Europe, as well as expand our Phase I/II PAPILIO 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 are 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 their continued support as we continue to deliver on our strategy to generate sustainable long-term value for shareholders.

Sofie Van Gijsel: Thank you. That concludes today’s presentation portion of the conference call. I would now like to ask the operator to hand it over for Q&A.

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Q&A Session

Operator: [Operator Instructions]. And now we’re going to take our first question. It comes from the line of Xian Deng from UBS.

Xian Deng: Just one, please. As you mentioned, the tech transfer is due — sorry, in the U.S., is due in H1 this year. So I was just wondering, do you think this is the gating factor for a rapid — let’s say, a rapid increase in progression of enrollment for the trial? And once you have all those centers set up, do you think we can expect to see a rapid enrollment increase and potentially a very quick progression to pivotal, let’s say, dose expansion phase? Or do you think this is more of, let’s say, strategic allocation of resources and capital? Please.

Jeevan Shetty: Thank you for the question. I can certainly start. Clearly, the gated step with regard to the tech transfer, this goes hand-in-hand with the IND for NHL and CLL. And we plan for that from mid-2024. And in quick succession to that will be the IND for CLL. With regard to the tech transfers, clearly, the tech transfers are important to the point that you make regarding the patient recruitment. And these steps go hand-in-hand with regard to the recruitment which is already ongoing in our clinical program in Europe, but for it to be initiated and accelerate in the U.S. With regard to the capital allocation?

Thad Huston: Yes, we have qualified Landmark Bio in the — just recently, and that site is ready. So that puts us well positioned for the IND filing midyear. We’re also now in the process of getting Thermo Fisher also for the Bay Area in the second half. and we’re going to be adding additional sites. So we’re very focused on expanding the number of sites, both in the U.S. and Europe, to help us build out our platform to support all of our clinical studies.

Operator: [Operator Instructions] The next question comes from the line of Philip Nadeau from TD Cowen.

Philip Nadeau: Congrats on the progress. Just one from us. In terms of 5101, 5201 and 5301, when could we see the next data? We understand you’re continuing to enroll patients, but any specific plans to present updated results from those programs?

Jeevan Shetty: Thank you for your question. With regard to the first two studies, we will be presenting data in upcoming hematology conferences this year, a combination of new data and also updated durability data. With regard to your reference to the multiple myeloma study, the program has just opened very recently and just started recruitment. So a little bit early with regard to that, but there will be a continuous stream of data over the 2024 and beyond.

Operator: The next question comes from the line of Brian Abrahams from RBC Capital Markets.

Nevin Varghese: This is Nevin on for Brian. Just a follow-up on that question. So how are you thinking about advancing 5301 in multiple myeloma, especially in light of some of the other competitor products that are moving up in the treatment paradigm, and some of the other bispecifics that are expected to launch in the space as well? And then how much additional value with the decentralized manufacturing process offer to multiple myeloma treatment versus either NHL or CLL?

Paul Stoffels: Well, the multiple myeloma program is in Phase I, dose-finding. We are learning about the seven-day vein-to-vein process, which we can also apply here and look about what type of efficacy and durability we can generate with that. Pending that, we’ll decide going forward with additional studies, but that is ongoing as we speak in Europe. And hopefully, we’ll have more data towards the end of the year or in beginning of — quarter of next year on concluding. We have seen, in both with the 5101 and 5201, is that the fresh cells provide significant good efficacy but also safety. And we do the learning exercise from the 5301 here to see whether the fresh cells approach and close to patients can generate a benefit for patients, both safety, efficacy but also durability. And then we’ll decide next steps.

Operator: [Operator Instructions] The next question comes from the line of Judah Frommer from Morgan Stanley.

Judah Frommer: Yes. Can you hear me okay?

Paul Stoffels: Yes.

Judah Frommer: I just wanted to get your thoughts on maybe some commentary coming out of other CAR-T players. Gilead has discussed expanding toward the community setting given capacity constraints, and Bristol has expanded its partnership with Cellares and their Cell Shuttle system. So just curious if you see these as confirming the need for point of care CAR-T. And does this invite incremental competition? And if so, do you feel that you’re in the lead with the Cocoon system?

Paul Stoffels: Well, I think with the Cocoon system, we can provide several benefits. It’s really scalable on a global basis, where you can go every corner of the world, but also every corner of Europe and the U.S. is possible. Then second, there is still a very high unmet medical need because of access at the moment in many parts of the U.S. as well as in Europe. And I think we can provide access with a really scalable model to patients. I think that is a clear complementary platform which can be used to provide CAR-T. As the indications expand and also the applications expand, like solid tumors, as you see the first results emerging from that, the need for capacity is going to be even bigger going forward. And that’s where we think we are the first with a solid system to go decentralized, close to the patient.

We bring benefit on seven-days vein-to-vein and can treat people with very high medical need and short life expectancy, which we have seen in our current trials, and hopefully combine that with capacity; but also combine it with the benefit of the safety and the efficacy, what we have seen already so far. To be confirmed in Phase II studies, but we see a lot of benefits in the platform to be able to be available, we give good results, short life — solving short life expectancy challenges and the broadening need for capacity growing NHL — in — sorry, in hemato and solid tumors.

Jeevan Shetty: And just to add to that, the platforms that you’ve shared, i.e., Cellares with BMS and the others. Really, we are quite differentiated from that by virtue of the fact that we’re delivering fresh product, fresh cells in fresh product out. And we believe that the translational data that we are publishing and continue to publish show clear differentiation, and we’ll continue to do so as the years go on, and we continue to share data.