Good day and thank you for standing by. Welcome to the Galapagos Full Year 2024 Financial Results and Business Update 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 first speaker today Sri Ramaswami. Please go ahead. Srikant Ramaswami

Thank you, operator. Good afternoon to all of you who are on the call from Europe and good morning to all of you in the United States. Thank you all for joining us for Galapagos' full year 2024 financial results and business update conference call. Last night we issued a press release outlining these results. The press release along with today's webcast presentation can be found on the Galapagos website. Before we begin, I would like to remind everyone that we will be making forward-looking statements on the call. These forward-looking statements include remarks concerning future developments of our company and our pipeline and possible changes in the industry and the competitive environment. Actual results may differ materially from those indicated by these statements and are accurate only as of the date of this recording February 13, 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. Joining us on today's call from Galapagos' senior management team are Dr. Paul Stoffels, Chair and Chief Executive Officer; and Thad Huston, Chief Operating and Chief Financial Officer. With that introduction, let me now turn the call over to Dr. Stoffels. Paul?

Thank you, Sri, and thank you all for joining us today. 2024 was a productive and transformative year for Galapagos in which we made significant progress streamlining our business operations and advancing our leadership in cell therapy in oncology. One of our key accomplishments last year was the progress we made advancing GLPG5101, our flagship CD19 CAR-T clinical development program in multiple hard-to-treat NHL indications. We were particularly pleased to receive FDA's IND clearance to begin clinical studies in the U.S. and with the compelling new results from the ATALANTA study we presented at the American Society of Hematology Annual Meeting in December. I will discuss those results in greater detail later on this call. Throughout 2024, we focused on building our leadership position in cell therapy where we executed a number of key partnerships and collaborations in support of those goals with companies such as Lonza on our decentralized platform, Thermo Fisher for the development of an ultra-rapid PCR sterility test together with miDiagnostics and Excellos part of Blood Centers of America to broaden our DMU network in the U.S. Separately in 2024 we also signed an agreement with Adaptimmune for TCR T-cell therapy in solid tumors. Finally, we completed the transfer of the Jyseleca business to Alfasigma, which provided us with savings of approximately EUR 200 million and for which we remain eligible for royalties on European sales. Based on this strong foundation, we are continuing to evolve our strategy for building Galapagos as a global leader in cell therapy. Toward that end we are excited to start the New Year with a focus on accelerating value creation by executing on our plan to separate into two publicly-traded entities Galapagos and SpinCo. SpinCo a newly created Belgian company will invest to build a pipeline of innovative medicines through…

Thanks, Paul. We remain very excited by the opportunities we can create by separating Galapagos into two entities. Paul has reviewed the benefits for Galapagos, as an independent company that can now fully own its programs and platform. But now, let's look at how we plan to create value from SpinCo. Over the past few years there have been significant advances in science, technology and clinical development of new medicines. Unfortunately, the capital markets have been tight over this time period, leaving many companies struggling for financing. For companies with capital to deploy such as SpinCo, we believe this creates multiple opportunities to build value. Here you can see, the initial actions that are planned for setting up SpinCo for success. We expect to complete the separation around midyear for SpinCo and to prepare for listing on Euronext and NASDAQ. In the coming months, during the separation, SpinCo will appoint a seasoned executive team and independent nonexecutive directors, with proven track records in biotech, company building and strategic transaction execution. A prospectus will be made publicly available, at least one month prior to the spin-off and all Galapagos shareholders are to receive SpinCo shares on a pro rata basis, proportional to their ownership of Galapagos shares. Turning now to our financial results. For our full year 2024, financial results our total revenues are €276 million, which includes €35 million of supply revenues related to Jyseleca and €241 million in collaboration revenues. Research and development expenses were €335 million, which is a 39% increase year-over-year, driven by our expansion of oncology CAR-T. G&A and sales and marketing expenses were flat at €134 million. We had a net profit for the year of €74 million, driven by €185 million from fair value adjustments, currency exchange, and interest income as well as the…

Thank you. [Operator Instructions] And now we're going to take our first question and it comes from the line of Xian Deng from UBS. Your line is open, please ask your question.

Hi, and thank you very much. Thank you for taking my question. And this is regarding to 5101 and also 5201. Thank you very much for the very useful data review for 5101 and make sense of why you want to expand that. But just wondering, given you're also deprioritizing 5201, just wondering if you could remind us what's the difference between the two CD19 contract for those two CAR-Ts. I'm just wondering why are you -- if you could maybe elaborate a bit more why you are deprioritizing 5201? Thank you very much.

Paul Stoffels here. Let me explain. We were running 5201 and 5101 in parallel for clinical trials in Phase 1/2. And we saw excellent efficacy and safety for both of them. And we think and we believe very much that this is driven by fresh cells, high-content memory cells, which do the job there to make that kind of outcome. But the main reasoning then is for us to simplify is that building a DMU, decentralized manufacturing network in the world for running two CD19s is quite steep. And so by not duplicating the product transfer and validation about all the DMUs we're setting up, we could focus much more on accelerating our pipeline on our main assets. And so adding the CLL and Richter transformation to the 5101 will accelerate the two indications most likely to the market. And that's why reprioritizing the two indications on the 5101. We have already the agreement of the FDA on the Richter transformation, that's already done. We are completing work on the CLL to also include that in the IND to kick that off as soon as possible in the U.S. So it is really accelerating by simplifying, and really believing that the fresh cells do the job in making the difference in the CD19 space.

Thank you.

Thank you. Now we're going to take the next question. And the question comes from the line of Phil Nadeau from TD Cowen. Your line is open. Please ask your question.

Good morning. Thanks for taking our question. Just a follow-up on the last one and then another question on the separation. Just in terms of 5101 versus 5201, were there any differences in terms of manufacturing process or characteristics between the two programs? That's the first question. And then second in terms of the separation transaction, what is rate limiting at this point? Is it hiring of the management team? Or are there other logistical or legal steps that are really gating? Thanks.

Jeevan Shetty, oncology. In answer to your first question, in terms of the issues regarding manufacturing, they are the same, the fundamentals of fresh cells and fresh product out seven-day vein-to-vein resulting in a superior product. The vectors are different. But however, the basis of our decision was made on the very significant and compelling data from 5101 and the issue regarding complexity. With regard to the second question, Thad?

Yes. Thad Huston, here. I think clearly we are in the process of a number of different elements related to the separation. Valeria could also add to that including the hiring of a management team and that process is underway. Obviously, there's a number of different legal steps as well.

This is Valeria. So I think as with any listing on NASDAQ and on Euronext, we're preparing diligently for the listing and that will be subject to the review of FSMA and SEC. And in addition prior to the spin-off, the spin and the separation will be subject to the shareholders' approval at an extraordinary general meeting of shareholders that will take place at midyear with required approval being obtained we can be listing a few days thereafter.

For the fact that the non-core of the Galapagos Board is working very hard to recruit seasoned CEO and several executives as well as an independent non-executive director team for the Board. So that is actually ongoing, and we plan to have several people on board by the time we spin off.

Perfect. Thanks for taking our questions.

Thanks Phil.

Thank you. Now we're going to take our next question. And the question comes from the line of Brian Abrahams from RBC Capital Markets. Your line is open. Please ask your question.

Thanks very much. Good morning and good afternoon. Thanks for taking my questions. Maybe another one on 5201. Can you just help us understand, I guess, how far along you guys were on the IND filing process when you made the decision to prioritize 5101? And I guess, what gives you the most confidence that 5101 will look similar to the promising data you've generated from 5201 in CLL? And then secondly, just wondering, if you could give us the latest update on the types of assets that the SpinCo may be looking for? Thanks.

Yes. While we are confident that the 5201, 5101 are pretty similar we see similar efficacy safety activity also the expansion, if we do the manufacturing and then the administration in the expansion we see a very significant expansion happening in the patients similar to the 5101 and with the 5201. So that's where we don't think the vector is doing the drive of the difference, the vector we won't make the difference. We are comfortable that the way we make the cells is going to drive the difference. And the main reason to do this is to, as I said earlier is to align on a simplification of the DMU network. We're going we are required by the authorities to do a validation and doing equivalent studies between all of the DMU sites in the world. If you do that, it's a cumbersome and very work-intensive process. Running two processes next to each other in the same DMUs means we have to double that, and that would delay the overall progress of our company, if we had to parallel process those at this moment in time in a significant way across the world. We are running in Europe too already in parallel that is the 5101 and the 5301, the BCMA target in Europe adding a third one to the network would be a very significant challenge to really bring that into pivotal studies as we want to start those next year. And that's why we concluded, to offer optimization and efficiency let's focus on one key CD19 than do the BCMA in early stage and learn whether it is a competitive product. But then third, also start focusing on our next-generation assets which are in progress and maybe John can talk a little bit more about that just to highlight a few things about that, because that's also important in our portfolio why we make this prioritization. John?

Thanks, Paulus. My name is John Mellors. I'm the Head of Cell Therapy Discovery and Early Development at Galapagos. And I'm pleased to let the audience know that, we are working very hard around the clock to develop next-generation CAR-T cell therapies that include multi-targeting of cancer-associated antigens and arming to prevent suppression of CAR-T cells by the cancer microenvironment. We have four main objectives in NHL in myeloma in lung cancer and in ovarian cancer. And our first product has been approved for clinical development and will enter proof-of-concept studies by the end of the year and that's a multi-targeting CAR-T for NHL and ALL. For myeloma, we intend to target the space that follows BCMA targeting therapy. And for lung cancer, we are targeting a validated clinical target plus an additional target and for ovarian cancer two targets in combination. And let me just emphasize that each of these indications are high unmet medical needs and we believe we can have an impact and by impact, I mean, more frequent responses deeper responses and longer duration of response with our arming and multi-targeting strategy. Thank you.

And just confirming here that the first asset is internally ready to get into clinical trials and that is being prepared as John was saying, before the year-end. So I think that's also one of the big objectives for the year is progressing the first asset of our next-generation into the clinic.

Yes. Brian, let me take, this Thad here the SpinCo question. First of all, I want to say that we're really excited about the creation of SpinCo. SpinCo will clearly have more greater flexibility and access to acquire assets with significant potential without having the need to fit in the Galapagos strategy. So there's a lot more broad opportunities to do deals. And, of course, partnering with Gilead and working closely with them with well-capitalized organization they can really compete for the highest quality targets across the biotech space. And the types of assets I think we're identifying are clearly to find a pipeline of innovative medicines that really have the potential to treat diseases with significant unmet need across any different types of indications with a focus on virology immunology and oncology.

Thanks so much.

Thank you.

Thank you. Now we're going to take our next question and it comes from line of Faisal Khurshid from Leerink Partners. Your line is open. Please ask your question.

Hi. Good morning, guys. Thanks for taking the call. I just want to ask as you're kind of preparing for pivotal development on 5101, can you talk a little bit about what the potential indication and kind of trial strategy looks like there? And then also as a potential approval could be a few years away now what is the US-based manufacturing footprint look like? And what is your progress towards getting that into place? Thank you.

Yes. Thank you very much. Jeevan Shetty, again. With regard to the indications that we have planned, you know that we've shared data at ASH regarding the ATALANTA study in the indications of mantle cell, mantle zone lymphoma as well as NHL. We intend to expand that into a number of other indications Burkitt's lymphoma in particular primary CNS lymphoma as well as high-risk diffuse large B-cell lymphoma. So areas where the unmet need is significant and where the seven-day vein-to-vein time fresh cells in fresh product out have significant contributions to the outcome for patients. We will be led by the data that we see in our Phase II. And clearly we will communicate more comprehensively as the data emerges. But our tenants are really significant unmet need that benefit from our platform.

And on the manufacturing side, we have obviously the decentralized manufacturing structure. So it's a model where of course we want to have validated sites like we have our initial site with Landmark Bio in the Boston area so it can cover the Boston area major hospitals which we're also partnering with. But we're also looking to have regional sites in kind of high density areas throughout the US East Coast, West Coast, South and North of the US, and so trying to get the right coverage as we go adding sites by site. Like we said Paul in his remarks we had Blood Centers of America, for example, with the West Coast coverage as one site and continuing to add those over time.

To start with first of all we did target on the high -- where the high density of oncologists are in these very specialty areas. And then for commercial we'll broaden out into other sites as we want to cover the whole of the US. But we at this moment all of our DMUs are focused on getting the maximum number of patients in the indications we are looking for. So there is like a two-step where complete the studies these sites are ready for commercial when we can start but we'll work further over the year to determine where other sites will be.

Got it. And are the regulatory requirements different between having these manufacturing sites with the clinical trial as opposed to commercial use?

Well there are some additional requirements for pivotal which we are preparing for and we are comfortable that we are ready for that by next year when we start the clinical trials. Today it's a very high standard. We have to meet of course because we provide biologicals and human cells. And so we -- there is not much difference but it all has to do in the end with also further automating the quality release testing and further demonstrating comparability and equivalents across the different sites. So as we go we will strengthen that. But today we already meet a fairly high level of requirement close to commercial.

Got it. Thanks for taking my question.

Thank you. [Operator Instructions] And now we're going to take our next question. And the question comes from the line of Judah Frommer from Morgan Stanley. Your line is open. Please ask your question.

Hi. Thanks for taking the question. Just curious if you could share any indication of interest from potential external partners for manufacturing on the decentralized manufacturing units at this point? Or is that something that you haven't necessarily have conversations on yet?

Yes, we have inbound questions from external partners to get on our platform. Of course, we are making sure that we are first build up ready to go with our clinical trials. But for example, the collaboration with Adaptimmune started on -- with the interest on our platform. We validated that TCR-T if you produce on our platform has a similar kind of features as when we do with the CAR-Ts for the hematological testing. And there we are progressing with Adaptimmune to next stage and starting clinicals I think 18, 24 months from now. But that is one of the examples, but we have multiple others which we are evaluating. And there are two things there for us. It's one we can partner on the platform, but we can also strategically partnering on co-development with partners. And that would be our main interest is looking at people who are interested to have to where we can access, where we can strategically partner on the drug on the cell therapy combined with the platform. So -- and our teams are very active in having those discussions.

And just wanted to add, in addition to this is the fact that, as a cell therapy leader we lead also hematology and oncology in these partnerships. For example, Adaptimmune is a head and neck indication solid tumor indication with significant unmet need and that is the form of the collaborations that we're having as well.

Yes I think it's really exciting for us to also look at this post separation and have the flexibility to partner with many different types of companies that have maybe manufacturing limitations or just capacity constraints or don't have the capital to potentially invest in having a unique differentiated platform that we have.

And there's one particular region in the world, which is very underserved and that's Asia. And so there we get requests from governments as well on CDMOs to partner on the platform to provide access in those regions. That's somewhat further off, but you see the fact that we have a scalable decentralize manufacturing capacity or capability with Cocoons and good results, it is very attractive for other parts of the world including those regions who don't have access and still have very high medical need in this space.

Okay. Thanks.

Thank you. Now we'll proceed with the next question. And it comes from the line of Jason Gerberry from Bank of America Securities. Your line is open. Please ask your question.

Hey, this is Chi on for Jason. Thanks for taking our question. I have a question on 5301. So, based on the press release, it looks to me that you're taking a harder look at whether you want to advance 5301 further in development in multiple myeloma. Is it because of the competitive dynamics in the BCMA CAR-T space or complexity of setting up a DMU network for a second CAR-T or a bit of both? Maybe can you talk about the analysis that you're specifically looking at in the Phase I study on the PAPILIO study? And what criteria you want to see 5301 meet in order for you to advance the asset in the pivotal trial? And if I may ask a quick follow-up on the indication pursuit plan for 5101, are you prioritizing one or two lead indications as you think about capital preservation in 2026 and beyond? Thanks so much.

Thank you very much. Jeevan Shetty, again. I'll take the first part of the question. With regard to the PAPILIO study, it is very clear what the competitive environment actually looks like with regard to the incumbents. So we know what parameters we need to beat or be equivalent to in both safety and efficacy. And so that is very clear. And really our determination will be based on the benefit risk ratio and the safety and efficacy in particular. I have to add that we are making very good progress with the PAPILIO study. Clearly, we're recruiting well and we will share data at an upcoming hematology conference. The internal determination will be based on how competitive we are with the incumbent. But progress overall is good.

Yeah. With regard to the -- we'll wait to determine for the DMUs there on where the first data are and the expansion of that and the expansion to other parts of the world. For 5101, you asked on the prioritization. What is remarkable is that with the KOLs we talk in the clinics and they see this high unmet medical need NHL indications. All of the indications we are listed, the majority of them are interested to all of the KOLs we work with today. And that is -- that's where we don't prioritize at the moment the indications. We give access to the physicians to participate with the patients in these expansion cohorts which we are making and that gives us the insight later this year on what are -- what will you take as priorities going into the pivotal studies for registration. But so far, these indications we list on our slide you have seen during the presentation, those are all open or one by one they will all be open for inclusion. And there are specialty centers, but most of the people are interested in the majority of the ones we have there.

Thanks so much.

Thank you. Now we're going to take our next question. And the question comes line of Sean McCutcheon from Raymond James. Your line is open. Please ask your question.

Hi, guys. Thanks for the question. So for the 2028 cash runway guidance, can you speak to maybe what milestones programs and potentially further efficiency measures are contemplated within that guidance? Thanks.

Yes. Thad here. Good question. So we look ahead obviously we're going through a pretty significant restructuring of the business that Paul mentioned as well, reducing our overall head count by about 40%, focusing in cell therapy and we brought our burn rate down excluding business development from €293 million in 2024 to a range where we're saying of about €175 million to €225 million per year. We can certainly work towards the lower end of that range, depending on some of the choices. We're initially investing to build out the DMU network that investment will kind of move down over time, but then we'll have the clinical investment that will pick up. And so that's why I would give kind of this range. We're saying the range is kind of taking us to 2028 because that's assuming midyear with approximately $500 million at separation. So we do see that we'll have runway there. We also have a number of milestones and key inflection points obviously going into pivotal in 2026. Obviously completing the pivotal studies for 5101, we'll also see the readout from 5301, we'll have 5701 and as also mentioned, we'll have some of our internal next-generation platforms going into the clinic and we anticipate that we'll have a multiple number of programs between now and 2028 that will enter to the clinic. And in addition, we're also looking to do potentially partnership deals on the platform and we see tremendous opportunity there. So there's a number of key milestones and a number of really exciting things that will help us get to that 2028 first launch hopefully.

Thank you. Now we're going to take our next question. And the question comes from line of Jacob Mekhael from KBC Securities. Your line is open. Please ask your question.

Hi there, and thanks for taking my question. I just had one on the ATALANTA one study in the US. When do you expect to dose the first patient? And maybe can you please provide some insight behind this small delay there?

Yes. Jeevan here again. Thank you very much for the question. In Europe, the patient recruitment is ongoing with the US clearly with the FDA, IND application secured and also the inclusion of the leading cancer centers in Boston being engaged. We're working really pretty hard towards enrolling the first patient into the study. We -- so we're very confident that we will be able to recruit the patient imminently. There are clearly some procedural and operational components in the final stages of starting the trial that we are working towards, but we're very confident that we will have our first patient very soon.

All right. Thank you very much.

Thank you. [Operator Instructions] And now we're going to take our next question. And the question comes from the line of Sebastiaan Van der Schoot from Van Lanschot Kempen. Your line is open. Please ask your question.

Hi. Good morning, team. Thanks for taking my questions. I was hoping that you could expand on the differences between the decentralized and centralized manufacturing. But then from the standpoint of the regulator compared to previous CAR-T trials in the registrational setting, do you expect any differences in terms of patient number or follow-up to demonstrate consistency between the different numbers of the DMUs?

Well, I'll start with your last remark. We -- because we are on -- we are on comparative and validation trials are on the different DMUs, we come with the same product out of that manufacturing site like large companies do. We do the same type of validation, where large companies do that centrally in their sites. We do that across sites. And we follow the principle of split samples, where we validate that across different DMUS and validate that all of these DMUs function the same. So we have to comply with the high standards of central manufacturing in order to deliver these CAR-T cells. And that's where we don't assume any different indications from different regions in the world. We go for one -- we go for indication-by-indication combining U.S. and European patients.

Yeah. I'd just add generally though, I mean we have significant benefits for our decentralized manufacturing model. And that's where we think that again the regulatory pathway that Paul mentioned it has to be applied. But I think the delivery of fresh cells we obviously see this unique clinical benefit but there's also a number of logistical benefits and cost benefits, that we also see with our delivery and our model.

Okay. Thank you. And if I may just one more question regarding the deal in terms of uza-cel, can you remind us of those deal terms? And then you also mentioned that you are looking for similar partnerships in the future can you expand on that?

Yeah. So we did the uza-cel deal, where we essentially have an option agreement on uza-cel. We're doing head and neck cancer, as an initial indication. It was I believe $100 million option at least initial payment, but we have the option to go up to three different indications including ovarian and some others, and where essentially we're testing the product on the Cocoon and the platform and then where we could opt in and basically take over the commercialization and development rights.

Okay. Got it. Thank you very much.

Thank you.

There are no further questions for today. I would now like to hand the conference over to your speaker Sri Ramaswami, for any closing remarks.

Again, thank you, all for joining us today. The team will be in Boston, presenting at the TD Cowen Healthcare Conference on Tuesday, March four at 1:50 PM, Eastern Time. And the following week, we'll be in Miami, participating at the Barclays Healthcare Conference. Please reach out, if you're interested in connecting with us in person at these events. Have a wonderful day. And we look forward to seeing some of you in March.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.