Earnings call: Galapagos reports solid Q3 progress, eyes IND studies

Galapagos NV (NASDAQ:GLPG) has announced its third-quarter financial results, revealing a strong cash position and progress across its clinical development pipeline. The company has confirmed its cash burn guidance and highlighted significant advancements in its oncology and immunology programs, including the preparation for multiple Investigational New Drug (IND) applications.

Key Takeaways

• Galapagos ended Q3 with EUR 3.3 billion in cash and maintained cash burn guidance of EUR 370-410 million for the year.
• FDA IND clearance was received for GLPG5101, with U.S. patient recruitment for the Phase II ATALANTA study in non-Hodgkin lymphoma to begin by year-end.
• The company is advancing over 15 programs, targeting at least four IND-enabling studies in 2025.
• Strategic collaborations with Blood Centers of America and Adaptimmune are key to expanding the cell therapy manufacturing network.
• Significant progress in CAR-T program includes validation of manufacturing processes across U.S. and European sites.

Company Outlook

• Galapagos plans to submit an IND for GLPG5201 in early 2025 and is advancing a next-generation bispecific CAR-T candidate into IND-enabling studies.
• The company is pursuing business development opportunities, particularly in oncology and immunology, with potential deals under discussion.
• Next financial results call is scheduled for February 13, 2024.

Bearish Highlights

• The company faces a crowded market for CAR-T therapies in autoimmune diseases, proceeding with caution.

Bullish Highlights

• Management is confident in the strength of its CAR-T data and potential for expedited market entry.
• The TYK2 inhibitor program is progressing well, with Phase II studies in dermatomyositis and lupus, and data expected by 2025-2026.

Misses

• There were no specific financial misses mentioned in the earnings call.

Q&A Highlights

• Management discussed the validation of the CAR-T manufacturing process and the expansion of the U.S. manufacturing footprint.
• The company is in active discussions for potential business development deals but did not provide specific timelines for closure.

In summary, Galapagos NV remains focused on advancing its pipeline with robust clinical development and strategic collaborations. The company’s strong cash position supports its research and development efforts, with multiple IND-enabling studies planned for the near future. Despite the competitive landscape for CAR-T therapies, Galapagos is confident in its unique approach and is actively seeking to enhance its portfolio through business development initiatives. Investors are advised to look forward to the next financial results call in February 2024 for further updates.

InvestingPro Insights

Galapagos NV’s (GLPG) recent financial results and strategic developments are complemented by several key insights from InvestingPro. The company’s strong cash position, highlighted in the earnings report, is reinforced by an InvestingPro Tip indicating that GLPG “holds more cash than debt on its balance sheet.” This financial stability is crucial for supporting the company’s ambitious clinical development pipeline and multiple planned IND-enabling studies.

Despite the company’s robust cash reserves, InvestingPro Data shows a market capitalization of $1.78 billion, which may suggest that the market is not fully valuing the company’s assets and potential. This could present an opportunity for investors, especially considering that the stock is trading at a price-to-book ratio of 0.56, indicating it may be undervalued relative to its net assets.

Another InvestingPro Tip notes that GLPG’s “RSI suggests the stock is in oversold territory,” which aligns with the reported 10.16% price decline over the past week. This recent dip could potentially offer an entry point for investors who believe in the company’s long-term prospects, particularly given the progress in its oncology and immunology programs.

It’s worth noting that InvestingPro offers 12 additional tips for GLPG, providing a more comprehensive analysis for investors looking to delve deeper into the company’s financial health and market position.

Full transcript – Galapagos NV ADR (GLPG) Q3 2024:

Operator: Good day, and thank you for standing by. Welcome to the Galapagos Q3 2024 Financial Results Audio Webcast. 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, and welcome to the audio webcast of Galapagos’ Q3 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 downloads and replay later today. We 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 are Dr. Paul Stoffels, CEO and Chair; and Thad Huston, CFO and COO. Paul will present the Q3 key takeaways, and Thad will provide a financial update. We will also discuss the anticipated milestones and present concluding remarks. Please follow the presentation on your screen as we go through the call. We estimate that the prepared remarks will take approximately 20 minutes. We will then open the line for Q&A with Paul and Thad who will also be joined by Dr. Jeevan Shetty, Head of Development Oncology; and Dr. Wulf Bocher, Head of Immunology. And with that, I’ll now turn over to Paul.

Paul Stoffels: Thank you, Sofie, and good afternoon, everyone. I would like to take a moment to share the strong foundation that we are building and how we have set up Galapagos for value creation. Today, we are a pure-play biotech with a renewed R&D strategy to accelerate and bring innovative medicines to patients. We are moving forward faster with the focused, differentiated and expanding R&D pipeline and competitive technology platforms. We’re also making important regulatory and operational progress with our decentralized CAR-T network in Europe and the U.S. This slide summarizes our efforts to build a robust product pipeline that will enable us to accelerate future growth and drive value creation for all stakeholders. In doing so, we will focus on our key therapeutic areas of oncology and immunology to advance our R&D pipeline of potential best-in-class cell therapies and small molecule drugs. Today, we are developing four clinical candidates for 11 indications, and we have more than 15 preclinical programs. For further expansion and progress of our pipeline, we take a collaborative approach combining internal and external innovation. And finally, our strategy is supported by a strong cash position of EUR3.3 billion at the end of September 2024. In the third quarter of this year, we delivered on several important milestones. Let’s start with the regulatory achievements. We are very pleased to have received the IND clearance from the FDA for GLPG5101, for which we have generated encouraging results in the Phase I/II ATALANTA study in Europe. We now plan to enroll our first patient in the U.S. in the Phase II expansion part of ATALANTA study in non-Hodgkin lymphoma before year-end. Obtaining the IND clearance for our seven day vein-to-vein fresh CAR-T decentralized manufacturing process was a crucial achievement for expanding the development of our cell therapies in the U.S. In Europe, we resumed recruitment for the GLPG5301 Phase I/II study in multiple myeloma following the announcement during our half year results of a study pause. We are confident that we have put the right measures in place to resume the study. We are making significant progress with our proprietary pipeline that includes more than 15 programs, and we have selected two early-stage pipeline candidates for clinical development. I will provide more information on this in the following slides. We continued the enrollment for the GLPG3667 Phase II studies in dermatomyositis and lupus, with top line data expected in 2025 and 2026, respectively. We also selected the first decentralized manufacturing unit, Excellos in San Diego within the nation-wide network of Blood Centers of America. This is an important step in the expansion of the footprint of our cell therapy manufacturing network across the U.S. Let’s come back to the key achievements on the regulatory front. The FDA’s IND clearance of the ATALANTA study for GLPG5101 in patients with non-Hodgkin lymphoma produced on a decentralized manufacturing platform marking an essential step towards realizing our vision of transforming patient outcomes through life-changing science and innovation. As a brief reminder, our decentralized cell therapy platform is a novel point-of-care solution that offers the potential for efficient medium seven day vein-to-vein time and avoids complex logistics, thereby addressing important limitations of current CAR-T treatments. The proprietary platform consists of our end-to-end workflow management and monitoring software system, a decentralized functionally closed automated manufacturing platform for cell therapies and the proprietary quality control testing and release strategy. Together, this allows for greater physician oversight and for production model near the patient that is globally scalable. Currently, we have three clinical trials running on the cell therapy platform. With IND cleared, we can now start recruiting U.S. patients into the Phase II expansion cohort of the ATALANTA study and we are actively initiating clinical trial sites in Boston region and we plan to start enrolling patients with non-Hodgkin’s lymphoma in the study before year-end. We will leverage the learnings from GLPG5101 prior to the submission of the GLPG5201 IND for the EUPLAGIA study in CLL, which we will now target to submit in early 2025. Before we move over to our pipeline overview, we wanted to highlight a recent publication in blood advances that analyze several large CAR-T clinical trials. The analysis points to vein-to-vein time as an important predictor of patient outcomes, where reducing vein-to-vein time can substantially improve life expectancy by up to 3.2 years. The paper states that aiming for short manufacturing product release shipping and infusion times may be key to further improve outcomes for patient treatment with CAR-T. We believe that these data underscore the importance of our efforts in this field. Let’s look at our clinical pipeline. In oncology, we are progressing our Phase I/II CAR-T program, GLPG5101 in NHL. As you know, ATALANTA is a basket trial in a number of indications, which you see listed here on the slide. We are also progressing GLPG5201 in CLL and Richter’s transformation. And as mentioned earlier, we have resumed recruitment into the Phase I/II GLPG5301 study in multiple myeloma. I’m also pleased to announce that we will present new data from the ATALANTA and EUPLAGIA studies at the American Society of Hematology Annual Meeting in December. We added TCR T cell therapy to our pipeline following the clinical collaboration agreement with Adaptimmune that was announced at the end of May. The agreement gives Galapagos the option to exclusively license Adaptimmune’s next-generation TCR T therapy, uza-cel, targeting MAGE-A4 for head and neck cancer and potentially future solid tumor indications. Initial in-vitro results suggest that uza-cel developed by Adaptimmune and produced on Galapagos decentralized manufacturing platform yields fresh fit early phenotype T cells. These cells could potentially improve efficacy and durability compared to the uza-cel centrally manufactured on Adaptimmune’s platform. Together with Adaptimmune, we will present these preclinical data at ASH. In immunology, we are progressing our Phase II study with GLPG3667 in dermatomyositis and lupus with top line results expected in 2025 and 2026, respectively. As we work to advance our programs in development, we are also investing in our discovery portfolio to identify future programs. We are making important progress in all our therapeutic areas. We have more than 15 internal programs in discovery across oncology and immunology with cell therapies and small molecules. From this discovery portfolio, we selected the differentiated next-generation armed bispecific CAR-T candidate in hemato-oncology. In addition, we selected the potential best-in-class small molecule candidate in immunology, targeting clinical development in ’25 ’26. We also continue to scout for external innovation to further build our early-stage pipeline. In 2025, we expect to initiate at least four IND or CTA-enabling studies and at least one first in human study. From 2026 onwards, our aim is to fuel the clinical pipeline with at least two new clinical assets annually across cell therapy and small molecules. I now will pass it over to Thad for the financial update.

Thad Huston: Thank you, Paul, and thanks, everyone for joining today. Let’s look at the financial results for the third quarter of 2024. During this quarter, we have worked on strengthening the foundation for our future growth. We continue to keep our focus on priority programs while investing in our pipeline and building our global cell therapy network. For operations, revenue remained fairly stable year-over-year and consists mainly of the linear recognition of the platform for the Gilead (NASDAQ:GILD) collaboration. As explained in previous earnings calls, we see an increase in R&D costs as compared to last year. This is mainly driven by our investments in oncology, both in cell therapy and in small molecules and includes the expense recognition of collaborations with BridGene and Adaptimmune signed in the first half of the year. Over the first nine months of the year, we recorded a net profit of EUR49 million, driven by fair value adjustments in foreign exchange as well as EUR71 million in interest income. We also reported a net profit from discontinued operations of EUR69 million, mainly driven by the one-time gain for the Jyseleca transaction with Alfasigma as announced earlier this year. Now over to our 2024 guidance. We reconfirm our full year cash burn guidance of EUR370 million to EUR410 million for 2024, including the business development transactions closed earlier this year. We report a net decrease in our cash position of EUR346 million for the first nine months of 2024. This decrease is composed of EUR321 million of operational cash burn including EUR80 million related to business development activity executed in the first half of 2024. The cash out related to the Jyseleca transaction with Alfasigma and an equity investment in Q1 as well as financial transactions, including the timing of interest income, our cash balance at the end of Q3 amounts to EUR3.3 billion, supporting the build-out of our pipeline. I would also like to mention the collaboration that we closed a few months ago with Blood Centers of America as a partner for our cell therapy platform in the U.S. This collaboration significantly advances the expansion strategy using BCA’s nationwide network to manufacture our cell therapy products close to the patient. As part of the collaboration agreement, we selected Excellos in the San Diego area as our first BCA manufacturing unit to produce GLPG5101 for the ATALANTA clinical trial sites in the region. Turning to our key achievements and anticipated milestones. We received clearance for the IND application of the ATALANTA study of GLPG5101 and NHL. Our goal is to activate clinical trial sites and start enrolling patients in the Phase II dose expansion study in the U.S. before year-end. We target to submit an IND for our second CD19 CAR-T candidate GLPG5201 in early 2025 for the EUPLAGIA study in CLL and Richter’s transformation. Following the submission of a CTA to the European Medical Agency for the Phase II dose expansion of GLPG5201 and CLL and Richter’s transformation, we plan to start enrolling patients in 2025. We have resumed recruitment into the PAPILIO Phase I, Phase II GLPG5301 study in multiple myeloma. We are very proud that at ASH later this year, we will present new data from the ATALANTA and EUPLAGIA studies. Together with our partner Adaptimmune, we will also present preclinical data for the TCR T cell therapy candidate, uza-cel produce on Galapagos’ decentralized manufacturing platform. We continue enrollment in the Phase II studies with GLPG3667 in dermatomyositis and lupus. We further advanced our early-stage proprietary pipeline by progressing a next-generation armed bispecific CAR-T candidate and a potential best-in-class small molecule candidate in immunology into IND-enabling studies. We are targeting clinical development in the 2025 to 2026 timeframe. We are accelerating our pipeline of more than 15 programs in oncology and immunology with the objective to launch at least four IND/CTA-enabling studies in 2025 across different modalities and indications. Following the announcements earlier this year of collaboration agreements with Thermo Fisher (NYSE:TMO), Blood Centers of America and recently Excellos, we continue to work on opening additional sites for our decentralized cell therapy manufacturing platform, both in the United States and in Europe. Earlier this year, we signed agreements with BridGene and Adaptimmune, and we continue to explore additional partnerships, research collaborations, licensing agreements and acquisitions. Our business development efforts are focused on accelerating breakthrough medicines for patients in need. As already mentioned in the previous slide, we are building a future on strong partnerships. In the last couple of years, we closed partnerships to build our cell therapy capabilities, entered into research collaborations and licensing agreements and execute on acquisitions and equity investments. We continue to focus on strategic business development to bolster our pipeline and optimize our operations. Let me conclude by coming back to the strong fundamentals that we have put in place to build a global innovative biotech and a clear path that we have toward value creation. We are progressing our early-stage pipeline and building on our renewed discovery portfolio based on best-in-class targets to develop best-in-class medicines. While we push forward our internal programs, we remain active in business development, we continue to execute on our scientific progress in our key therapeutic areas of oncology and immunology and most notably our CAR-T programs with GLPG5101 and GLPG5201. We have invested and continue to invest in strengthening our team in key positions globally. Finally, we have the benefit of a strong balance sheet, and we commit to staying disciplined in our use of cash to focus our investments to maximize value. We want to thank our investors for their continued support as we deliver on our strategy to achieve sustainable value for shareholders. I also want to take this opportunity to thank Sofie for her many contributions to Galapagos over the past several years as she embarks on a new opportunity. Thank you, Sofie.

Sofie Van Gijsel: Thanks so much, Thad, and thank you, Paul. Greatly appreciate it. That concludes the presentation portion of today’s audio conference call. I would now like to ask the operator to open the line for Q&A.

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Xian Deng from UBS. Please go ahead. Your line is open.

Xian Deng: |Thank you so much for taking my question. Just one, please. On the BCMA CAR-T 5301 in multiple myeloma, just wondering — given now you have received trial enrollment, just wondering what’s your conclusion for the case of Parkinsonism phase. And also just wondering, whether you could share any thoughts on the potential change in future enrollment criteria related to that, please? That’s my question. And best of luck, Sofie in your future endeavor. Thank you.

Paul Stoffels: Jeevan?

Jeevan Shetty: Yeah. Thank you very much for your question. I really appreciate it. I think it’s important to put in the context that BCMA-targeted CAR-T therapies are actually pre-disposed to leading to Parkinsonism as a consequence of the expression of BCMA targets within the basal ganglia, substantia nigra. And this is clearly defined across all CAR-T therapies that are currently on the market. And clearly, we’ve looked at this, and we’ve learned from this. I can’t divulge too much in the way of details regarding the patient, but the case had atypical features. What we did is a very deep due diligence across the patient characteristics as well as the literature (ph) as well as seeking significant external expertise. And we have incorporated this into the protocol. But what I will say without going into the details is that we’ve instituted much more expansive discussion between the medical monitor and the investigator. And we’re very confident that based on the steps that we’ve taken that we can move forward and to address these patients — very ill patients with our platform, clearly, with the benefit of our seven day vein-to-vein fresh cells and fresh product type.

Xian Deng: Thank you.

Operator: Thank you. We will now move on to our next question. Our comes from the line of Judah Frommer from Morgan Stanley. Please go ahead. Your line is open.

Judah Frommer: Yeah. Hi. Thanks for taking the question. Congrats on the progress and best of luck to Sofie as well. I was just hoping you could share a little bit more color on the data you’ll be presenting at ASH for EUPLAGIA and ATALANTA? Any detail on the nature of the data? And will we get that update only at ASH or will there be abstracts released next week? Thanks.

Jeevan Shetty: Thank you very much for the question. We are clearly limited by the ASH embargo and we can’t really disclose any details regarding the studies themselves, abstracts are embargoed until Tuesday, November 5, at 9:00 a.m. So I encourage you to look at this, and we look forward to proactively sharing this data when the embargo is lifted. Thank you.

Judah Frommer: Thanks.

Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Alexander Kelly from TD Cowen. Please go ahead. Your line is open.

Alexander Kelly: Hi. Thanks so much for taking my question. Just curious if you could walk us through your approach to BD next year. What types of deals are you open to and what would be the ideal asset or assets in terms of stage, modality, target and indication? Thank you.

Thad Huston: Thank you for the question. We continually look to broaden our portfolio through BD. We think that there’s a tremendous opportunity given our cash position and the opportunities we have. We’re very focused on the fields of oncology and immunology. We do look at precision oncology as a particular area of interest as well as potential opportunities to broaden our portfolio in CAR-T as well.

Alexander Kelly: Thank you.

Thad Huston: Thank you.

Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Shan Hama from Jefferies. Please go ahead. Your line is open.

Shan Hama: Hi. Thank you. Is there any scope for your CAR-T programs, particularly 5101 to potentially enter the market earlier than 2028, and I guess, similarly, how confident are you in being granted breakthrough therapy designation to actually support that potential earlier market entry? Thank you.

Paul Stoffels: We just got our IND approved in the U.S. We are planning to include the first patient in the study before the year-end and expand in the course of next year to other centers in the U.S. today, the first centers will be in Boston, driven by the Landmark Bio site. So we will follow the scientific process here by doing our next phase in the expansion study of ATALANTA, discuss the data with the regulators, decide on the pivotal designs, and we’ll be able to update you as soon as we are in that space. We’re very confident on the strength of the data and what we have seen so far and hopefully what you have learned from our previous disclosures on the data that efficacy and safety looks very good. We are evaluating multiple indications in the Phase II expansion study and we’ll decide on indication and size of studies competitor in the course of next year as we go through evaluating the Phase II expansion studies, and that will determine ultimate timelines whether we can launch in ’28 or whether we could make it faster, but we have to follow the scientific regulatory process here.

Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Brian Abrahams from RBC Capital Markets. Please go ahead. Your line is open.

Nevin Varghese: Hi, everyone. This is Nevin on for Brian. Just a question on 5101. So have you — since getting the IND cleared, have you run any test runs and what is the vein-to-vein time, the quality of the CAR-T product look like? And have there been any particular barriers to manufacturing or administering the CAR-T therapy that’s specific to the U.S. clinical infrastructure versus in the EU or was there any specific feedback that U.S. regulators brought up with regards to the platform versus the European counterpart?

Jeevan Shetty: What I can see — and thank you for the question. What I can say is that we don’t have any concerns regarding the median seven day vein-to-vein time that continues to be intact. What I will say about — I think your question is directed towards the feedback from the FDA. Clearly, this is a major milestone for us as a company and actually for the CAR-T community to be able to deliver this. We’ve got very productive interactions with the FDA and gained some really important insights. And so with regard to that, I don’t — we didn’t have any specific changes in terms of the approach. The approach is consistent. That is very important. It’s consistent by design, whether in Europe or in the U.S. And based on the really constructive inputs and feedback that we got from the FDA. We’re in a very robust position to follow on from the IND and similarly across Europe, too.

Paul Stoffels: In addition to that, we work with Landmark Bio, which is a very professional organization with the capabilities to make CAR-Ts. And so the whole process of transferring the production is intensive validation of the production setup, but then also of the validation and of the process on the cocoon and making sure that we get to the same process outcome — that the process leads to the same product in the outcome in Europe as in the U.S. And we successfully succeeded in that. So that will — that — it’s complex. It takes a lot of work, but at the same time, once it’s validated can get going. And we are now looking forward to building it out in other sites in the U.S. in San Francisco, San Diego, as Thad earlier mentioned. So we are very confident we will be able to deliver the product in a similar way as in Europe.

Nevin Varghese: Got it. Thank you so much.

Operator: |Thank you. We will now move on to our next question. Our next question comes from the line of Jacob Mekhael from KBC Securities. Please go ahead. Your line is open.

Jacob Mekhael: Hi, there and thanks for taking my question. I have one on the new bispecific CAR-T that you have chosen to advance into IND-enabling studies. Just curious to learn more about your strategy there and whether you will be going after an indication without an approved CAR-T?

Paul Stoffels: Well, we know that the shortcoming of a CD19 is the — CD19 escape, and that could lead to resistance early on treatment with CD9 CAR-T. So our team did a very good basic scientific work and came up with a bispecific CAR-T, which with — an armed bispecific CAR-T, which the preclinical data shows that it is ready to progress into preclinical evaluation and getting into the clinic. We will talk more about that in an R&D day, which we are — which we’ll set up next year. on the details of that science, which is behind there. But for the moment, it’s progressing towards with the preclinical studies for IND and start of the first in human in the course of next year.

Jacob Mekhael: Thank you.

Operator: Thank you. We will now move on to our next question. Our next question comes from the line of Jason Gerberry from Bank of America Securities. Please go ahead. Your line is open.

Unidentified Participant: Hello. This is Chi (ph) on for Jason. Thanks for taking our question. I have a question on the early pipeline. You mentioned advancing new programs into the clinic next couple of years, which include next-generation CAR-T for hemo (ph) and small molecule for immunology. I did not hear mention of CAR-T for autoimmune. So curious, are you no longer prioritizing CAR-T for autoimmune? Can you talk about the thinking there? And I guess, broadly, your approach for program prioritization as you move your next batch of candidates into the clinic? Thanks so much.

Paul Stoffels: Let me first answer on the CAR-T early stage. We are — just to be clear, we are progressing early-stage CAR-Ts both in hemato-oncology but also in solid tumors. We have several programs in both addressing multi-targeting armoring and doing extensive preclinical work getting to the selection of the next-gen CAR-Ts to be put on the cocoon and apply the same seven day vein-to-vein fresh cells and use the benefits we learned there from the use of high memory content cells in order to have the good efficacy. For the immunology, I would like to give it to Wulf, if you can answer that? Yeah. I’m going to answer the question since Wulf is on the line and that can’t be unmuted. Yes, we are still interested in that space, although with CAR-Ts, we know the field is very crowded and we are looking at different mechanisms for B-cell depletion and moving forward in the space. But we are still interested, but very carefully choosing when to step in with best-in-class type of product.

Unidentified Participant: Thanks so much.

Operator: Thank you. [Operator Instructions] We will now move on to our next question. Our next question comes from the line of Manos Mastorakis from Deutsche Bank. Please go ahead. Your line is open.

Manos Mastorakis: Hi. Thank you for the question. Manos Mastorakis from Deutsche Bank. So could you please give us a little bit more color on the TYK2 program and the timelines? Is there a slippage there on the timelines? And if so, just what might be the reason behind it and how do you feel about the probably the success in these two indications? Thank you.

Paul Stoffels: Wulf, can we try again? Yeah. Okay. We are progressing very well with the proof of concept and the Phase II studies in dermatomyositis and lupus. The details on the recruitment, we will not disclose, but we are confident that, respectively, ’25 ’26, we’ll be able to come up with the data. On the mechanism, we have chosen — particularly the TYK2 because the interferon are the key drivers of the pathogenesis in both diseases and their inhibition has been clinically validated by the antibodies anifrolumab and also [indiscernible]. And so that mode of action, we think that are very much focused on the interferons is — can be a specific — providing, especially in these diseases, a competitive profile. And so the studies are going well, and we will report the progress in the course of next year and the data end of ’25 early ’26.

Wulf Bocher: Can you hear me now? Sorry.

Paul Stoffels: Yeah. Now, we can hear you. I apologize.

Wulf Bocher: I apologize. I had to dial back in. Is there anything open left — left open?

Paul Stoffels: Yeah, the mechanism of action and IL-10 versus the interferon, why don’t you explain that in more detail as the lead scientist here? Yeah.

Wulf Bocher: Thank you for the question and sorry for the technical flaws. Our TYK2 inhibitor is similar to the front runners — is highly selective and potent, but it is also differentiated mechanistically because it doesn’t — it does preserve the IL-10 pathway, which is an important immune regulatory negative feedback loop to the immune system, also signaling through TYK2, our in vitro profiling compared to the front runner, allosteric TYK2 inhibitors, the BMS compound as well as the Takeda compound codes that both of them show a dose and exposure dependent partial inhibition of the IL-10 signaling pathway, which is not the case for 3667. And IL-10 is a key component in the pathogenesis of many autoimmune diseases. It’s critical for regulatory T cell differentiation. It’s a key effect of cytokine on the regulatory path, and we selected diseases, which are not only interferon-driven but also connected to a regulatory T cell deficiency functional as well as numerically which is why we hope to learn from the ongoing studies, whether this IL-10 differentiation is of clinical relevance. So this we hope to learn from the Phase II data readouts. Does that answer the question?

Paul Stoffels: Yes.

Manos Mastorakis: Yeah. Thank you.

Operator: Thank you. We will move on to our next question. Our next question comes from the line of Shan Hama from Jefferies. Please go ahead. Your line is open.

Shan Hama: Hi. Thank you. Just a follow-up from me. In terms of capital allocation for business development, how much weight would you put on the internal pipeline versus external innovation? So is there a more important key focus at the moment? Thank you.

Thad Huston: Yeah. I’d say, I mean we’re very focused on, obviously, our internal pipeline and developing that. But given our capital position, we do think that allocating a substantial amount of that to business develop makes a lot of sense to broaden our portfolio. So we do look at opportunities to bring in significant innovation.

Operator: Thank you. We will move on to our next question. Please stand by. Our next question comes from the line of Faisal Khurshid from Leerink Partners. Please go ahead. Your line is open.

Faisal Khurshid: Hi, guys. Thanks for taking the question. Just to clarify, do you expect to deliver on any additional BD within the year? And if so, what type of deal structure or stage of development are you considering? Thank you.

Thad Huston: Yeah. I would say, it’s hard to predict whether we have a deal closed by the end of the year or not, but we are in active discussions with different parties. There’s a number of targets that we’re very interested in. And we’ll update you when we can.

Paul Stoffels: And we follow the principle of focus on clinical assets, which can deliver a differentiated profile in oncology and immunology, but also with the potential for an accelerated development, accelerated approval focusing on very high unmet medical need and selecting very carefully the medicine which we could deliver significantly before the end of the decade.

Operator: Thank you. [Operator Instructions] We will now move on to our next question. Our next question comes from the line of Sebastiaan Van der Schoot from VLK. Please go ahead. Your line is open.

Sebastiaan van der Schoot: Hi, team. I was wondering, I understand that you first focus on the Boston area with the CAR-T approach. But can you give some insights into what steps are that are still required to activate the other manufacturing sites? And then also give some insights into how the contracts with the U.S. manufacturing sites are structured? Is it a cut on the royalty payment? Or are they in the end take per product delivered?

Thad Huston: Yeah. Let me take that. Obviously, the tech transfer process takes a bit of time to get one site established, Landmark Bio has been validated. And of course, we’re now ready to enroll patients into that study in the U.S., which is a major milestone. We do have other sites like Thermo Fisher and now with BCA, with Excellos and San Diego, we essentially structured those deals to basically pay for their services and of course, per product provided. So it’s basically the CDMO service essentially. We do think that we’ll have Thermo Fisher, we’re actively working on the tech transfer and we’ll have that site up early next year as well.

Sebastiaan van der Schoot: Great. Thank you.

Thad Huston: Thank you.

Operator: Thank you. Since there are no further questions, this concludes today’s earnings call. Please feel free to reach out to the Galapagos IR team if you still have questions. Galapagos’ next financial results call will be the full year 2024 results on February 13. Thank you all for participating and have a great rest of your day.

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